Broker Check
Fiduciary Codes - 3(16) / 3(21) / 3(38)

Fiduciary Codes - 3(16) / 3(21) / 3(38)

| January 24, 2019

What do all these numbers mean for me as the plan sponsor?

3(16), 3(21), and 3(38) refer to sections of the Employee Retirement Income Security Act (ERISA). ERISA is the law that describes the rules and regulations that come with the fiduciary title. Both the 3(21) and 3(38) address the fiduciary liability that is involved in the investments inside the 401k plan. The difference between these is the discretion that the plan sponsor is giving to the financial advisor on the plan. 3(38) is the code that gives the advisor discretion over the plan investments and 3(21) does not give the advisor that discretion. We are seeing a trend towards using a 3(38) investment fiduciary because typically the plan sponsor would want the advisor to be able to make the changes to the investment lineup proactively. Level Four Advisory Services can serve in both capacities 3(21) vs 3(38) depending on what the client is looking for.

3(16) is a code that is used in relationship to the administrative responsibility of the plan. In other words, the 3(16) Fiduciary would be responsible for the day–to–day operations of the plan. This would include sending required disclosures and notices to participants, and many other functions that are sometimes overwhelming to plan sponsors. We are seeing a trend in the marketplace to offer a service that would allow the plan sponsor to work with a 3rd party to satisfy many of these requirements and offload some of the tasks.