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What is a 3(16) and 3(38) Fiduciary for 401(k) Plans?

You may have noticed that Saveday, as part of our bundled services, acts as an ERISA 3(16) and 3(38) plan fiduciary for eligible 401(k) plans. This sounds great, but you’re probably wondering – what does that mean?

In short, these services mean that employers can enjoy more time focusing on running their business while simultaneously reducing their fiduciary liability. Of course, it isn’t that easy. Here’s a breakdown of what it means to be a 3(16) and 3(38) fiduciary and how it relates to 401(k) plans.

Fiduciary Responsibilities

One of the most important aspects of offering a 401(k) plan and becoming a plan sponsor is the fiduciary duties that come along with it, such as managing the plan’s investments and administrative tasks. As a fiduciary, plan sponsors are obligated to act in the best interest of another party, and failure to do so can leave sponsors personally liable for any losses to the plan. 

It is risky for sponsors to take on this duty on their own, which is why many businesses and organizations outsource their plan’s administration and investment management to professionals, in turn reducing (but not eliminating) their fiduciary liability. 

When outsourcing fiduciary services for a 401(k) plan, there are typically three different types of fiduciaries – 3(16), 3(21), and 3(38). Each of these fiduciaries may take on different responsibilities and in turn different levels of liability. 

3(16) Fiduciary

The main responsibility of 3(16) fiduciary is to handle administrative tasks and keep the plan in compliance with ERISA. Administrative tasks can include communicating disclosures to plan participants, filing Form 5500, and approving or disapproving loan distributions. 

Unless outsourced, these responsibilities are taken on by the plan sponsor, which can be particularly time-consuming for smaller businesses that don’t have the resources to manage these tasks. 

3(21) Fiduciary 

3(21) fiduciaries typically include consultants and investment advisors. These advisors can advise plan sponsors on some or all aspects of plan investments and can help sponsors make informed decisions regarding their plan’s investments. These fiduciaries can also advise participants on their plan investments. 

Since these fiduciaries only advise, it’s important for plan sponsors to understand that they are ultimately responsible and liable for their plan’s investments. 

3(38) Fiduciary

Also known as an investment manager, 3(38) fiduciaries take on full control of a plan’s investments, making the investment decisions and selections. As a result, they assume all liability of the plan’s investments and are liable for a plan’s losses.

Although a 3(38) fiduciary takes on the liability of the investments, it is still up to plan sponsors to perform due diligence when selecting one, as well as monitor their performance.

Whether an employer outsources these services or chooses a provider that includes these services in their plan, plan sponsors are never 100% free from liability. Sponsors should still perform due diligence when selecting a 3(16) and 3(38) fiduciary and be aware of items that may require their attention.

For more information on ERISA fiduciary duties, you can visit the DOL website or

Saveday acts as the 3(16) and 3(38) fiduciary for eligible 401(k) plans, handling the plan’s administration, compliance, investments, and more at no cost to the employer. Contact us today to learn more about our 401(k) plans, and get signed up within 15 minutes.

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