401k advisorQ: Hi Erick, we are considering outsourcing some of our ERISA 3(16) administrative fiduciary responsibilities. What are some things to keep in mind? – Jon in Van Nuys, CA

A: Hi Jon!

Many plan sponsors already outsource administrative duties to their recordkeeper (such as hardship approvals and preparation of 5500 forms) in a non-fiduciary capacity. Some are now looking to outsource not only the work, but also the fiduciary discretion or control, to minimize workloads and/or reduce ERISA liability. Given the scope of responsibilities, a provider’s technological capabilities and knowledge, skill and experience with plan administration is very important. Connectivity to the recordkeeper (when the 3(16) fiduciary is unrelated) also matters to ensure a quality service experience for plan participants. To further explore governance models that delegate some level of fiduciary responsibility to external providers, check out “Defined Contribution Plan Governance Models: A Guide for Plan Sponsors,” published by the Defined Contribution Institutional Investment Association.

I do have some strategies to address this issue for my clients so reach out and I’ll share what I’m doing.

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Disclosures, Sources, and Footnotes

RP-865-0823 Tracking #1-05377959

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.