Fiduciary Protection in Retirement Plans

Fiduciary protection is fundamentally important to enhancing returns in retirement plans. The Employee Retirement Income Security Act (ERISA) is a federal law that is enforced by the Department of Labor (DOL). ERISA section 3(38) allows employers or retirement plan sponsors to delegate their personal responsibility and liability for selecting and monitoring a plan's menu of investment options to a designated ERISA 3(38) investment manager who is obligated to act as a fiduciary in the truest sense of what ERISA requires: "an entity that legally must act with the sole purpose of benefiting the plan participants and beneficiaries." This is an appealing option for companies who are not comfortable with taking on the fiduciary risks inherent in this role, especially in light of new DOL regulations on fee disclosures. By assuming the fiduciary role, a 3(38) investment manager can reduce the legwork and burdens that usually fall upon the company.

Step 12FiduciaryDepartment of LaborDOLEmployee Retirement Income Security ActERISA3(38)Plan SponsorPlan Participants