Outsourcing 3(16) Fiduciary Services

by Pamela A. Brooks, CPFA, Senior Client Manager

Many plan sponsors know they have to monitor their investments and record their documentation process, but few plan sponsors realize the full scope of their fiduciary responsibilities.  Demonstrating control and authority over a qualified retirement plans is a fiduciary responsibility.  Investment monitoring along with plan administration is included within that responsibility, yet many times plan administration items are overlooked.

There may also be complications or consequences when plan sponsors do not follow their plan document, or fail to submit contributions in a timely manner.  Some organizations do not have the resources to assign staff to the role of Plan Administrator, so the President or CFO may be acting in this capacity along with their many other roles at their company.

The role of a Plan Administrator covers many responsibilities, such as:

Eligibility Determination – Determining exact eligibility and entry dates for all new participants;

Participant Disclosure Services – Ensuring delivery of all required plan notices, disclosures and enrollment materials;

Plan Administration Oversight – Including reviewing vesting, hardship withdrawals, monitoring and administration of loan processes, and ensuring timely contributions;

Government Reporting – Preparation and filing of 5500’s and any required extensions

These duties require administration knowledge, time and expertise.  While plan administrators may think they have the capabilities and knowledge, they may be falling short of what is required for responsible handling of the task.  Many plan sponsors would benefit from engaging an experienced Third Party Administrator‘s 3(16) Fiduciary Services.  Plan Sponsors can retain a 3/16 Plan Administrator and outsource their Plan Administration role, thereby minimizing their fiduciary liability.

Contracting these services allows the 3/16 Plan Administrator to become a named fiduciary on the plan. These services allow the 3/16 to assume the administrative fiduciary responsibilities that plan sponsors carry.  It also allows for administrative efficiencies and can free up plan sponsors to address some of their many other responsibilities. This fiduciary service can be used in conjunction with 3/38 Advisory Services, further minimizing the Plan Sponsor Fiduciary risks.

If you have any questions, please contact us. We’ll be glad to help!


This information is intended to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. This information does not constitute a specific recommendation or advice and should not be used as the sole factor in selecting a provider for your plan. The final selection of a service provider is the responsibility of the plan sponsor.