I am not much of a gambler, but I used to watch poker on TV during its recent boom. Only then, did I understand that a straight couldn’t beat a flush or a full house.
When it comes to retirement plans these days, plan sponsors may know a straight from a flush, but they are confused between a 3(16) administrator, a limited scope 3(21) fiduciary, a full scope 3(21) fiduciary, and a 3(38) fiduciary.
While the proliferation of these fiduciary services is welcome to an industry where many plan sponsors aren’t doing a good job of handling their fiduciary responsibility, the problem is that the numbers are confusing the people that it’s supposed to help, the plan sponsors.
The problem is that the 3(38) investment manager does offer the plan sponsors the most protection in the fiduciary process, but the confusing jargon may make the plan sponsor think a 3(21) fiduciary offers the same protection, which it doesn’t. In addition, people are being tricky with labels, where now I hear that some people are trying to advertise a limited scope 3(38) fiduciary, which really doesn’t exist because the 3(38) fiduciary has nothing that limits its scope in handling the fiduciary process.
So anyone in the field of ERISA fiduciaries need to explain the difference between the different levels of ERISA fiduciaries so a plan sponsor understand what type of fiduciary service they are buying. Well, that will be next week’s article.