Skip to content
Retirement

Understanding 3-21 and 3-38-Fiduciary-Services

The Baldwin Group
|
Updated: August 20, 2025
|
2 minute read

3(21) and 3(38) Fiduciary Services

Plan sponsors are required by ERISA to provide an investment lineup for participants that has been prudently selected and monitored to minimize and control risk. To ease this burden, a retirement plan advisor may act as an ERISA 3(21) investment fiduciary with regards to the selection, monitoring and replacement of plan investments or as an ERISA 3(38) fiduciary with full discretion regarding the selection, monitoring and replacement of plan investments.

A retirement plan advisor can serve in either a 3(21) or 3(38) fiduciary capacity, and in some cases, both capacities. The needs and desires of the plan sponsor typically dictate the specific arrangement, which is predicated upon the subject of risk mitigation versus risk avoidance. Some plan sponsors want assistance with their fiduciary responsibilities but want to maintain discretion and control of their plans’ investment menus. Others want to shift responsibilities to a third party due to their lack of expertise, and concern regarding liability exposure.

Differences

Any individual is a fiduciary under Section 3(21) if he or she exercises any authority or control over the management of the plan or the management or disposition of its assets; if he or she renders investment advice for a fee (or has any authority or responsibility to do so); or if he or she has any discretionary responsibility in the administration of the retirement plan.

Section 3(38) defines “investment manager” as a fiduciary due to their responsibility to manage the plan’s assets. ERISA provides that a plan sponsor can delegate the responsibility of selecting, monitoring and replacing investments to a 3(38) investment manager/fiduciary. A 3(38) fiduciary may only be a bank, an insurance company, or a registered investment advisor (RIA) subject to the Investment Advisers Act of 1940.

Similarities

Anyone can call himself or herself a fiduciary, but a fiduciary is determined not only by title, but by actions, as well. Both 3(21) and 3(38) advisors accept fiduciary responsibility and adhere to ERISA §404(a)’s duty to serve solely in the interest of plan participants. In addition, both have to meet the “prudent person” standard of care. Plan sponsors retain the responsibility to select and monitor the advisor, regardless of their advisor’s fiduciary status. Plan sponsors should consider the advisor’s experience, skill, and level of expertise. 

Working with a retirement plan advisor as your 3(21) or 3(38) fiduciary has great potential to limit your exposure to fiduciary liability, while reducing the time and expertise required to perform the plan’s ongoing investment monitoring and selection duties. Most of the responsibility for (and virtually all responsibility in the case of 3(38) engagement) investment-related decisions is shifted to the advisor, giving the plan sponsor greater confidence and time to focus on other aspects of its business.

This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any regulation, company, industry or security mentioned. The information provided while not guaranteed to accuracy or completeness has been obtained from sources believed to be reliable. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated. FSC.2024.58

FSC.2024.62


Tags in this resource

Related Insights

Stay in the know

Our experts monitor your industry and global events to provide meaningful insights and help break down what you need to know, potential impacts, and how you should respond.

Recreational Vehicles
Are ATVs and UTVs Street Legal?
If you own an ATV or a UTV, you already know how fun and versatile they are—perfect for trails, hauling...
Home and Property
Does Home Insurance Cover Tree Removal?
You don’t think much about the trees in your yard — until one crashes onto your fence or driveway. Whether...
Life
How Much Does Life Insurance Cost?
When it comes to protecting the people you love, life insurance is one of the most important financial tools available....
Recreational Vehicles
Your Go-To Guide to RV Insurance
Whether you're planning your first RV trip or living life on the road full-time, making sense of RV insurance is...
Individual Health
How Much Does Urgent Care Cost Without Insurance?
When you don’t have insurance, figuring out how much urgent care costs can feel like a guessing game. Whether it’s...
Let's make it possible

Partner with us to build solutions that align with your business, individual, or employee needs and open new possibilities for your future.

Connect with us