With increased regulatory pressure from the Department of Labor, and seemingly ever-growing responsibilities for retirement plan sponsors, it’s no wonder that “turnkey” fiduciary solutions are popping up everywhere.

But what risks do these newfangled “fiduciaries” bring to their plan sponsor clients?

The answer lies in the complex responsibilities and liabilities of the fiduciary role. First and foremost, ERISA intends for a retirement plan’s sponsor to act in the best interest of the plan’s participants. This means making thoughtful, informed decisions in each of the four areas of fiduciary duty:

It is true that plan sponsors often do not have the training or background to be fluent with concepts in each of these areas, so, as a practical measure, they are turning to fiduciary “experts” to help guide them – or, in some cases, alleviate them from many of their fiduciary responsibilities.

The movement toward outsourcing fiduciary responsibility is not the problem. ERISA actually intended for plan sponsors to lean on vendors who are experts in their respective fields, to “designate other persons to carry out fiduciary responsibilities…under the plan” [ERISA Section 405(c)(1)].

The issue is that the market of qualified outsourced fiduciary providers is becoming increasingly murky. Banks, recordkeepers, and even investment advisors are claiming to fulfill the primary fiduciary role defined in ERISA Section 3(16), which absorbs the largest amount of legal and fiduciary responsibility on behalf of a plan sponsor.

Of concern is that this new 3(16) role often times conflicts with these vendors’ existing roles with the plan, a strict “no-no” under ERISA laws.

While these entities tout “governance, risk and compliance” strategies to apply on behalf of their plan sponsor clients, many have minimal history serving in a comprehensive 3(16) role. ERISA’s stringent requirements for correct documentation and evaluation of vendors and processes mandates an unbiased, independent 3(16) provider whose sole focus is to protect retirement plan participants’ assets, not just opening up a new revenue source for the vendor.

So, the answer is, almost anyone nowadays can call themselves a fiduciary vendor, but to legally act as a comprehensive 3(16) fiduciary requires quite a bit more than a mere title change.