Simplifying Retirement Plan Management: The Value of 3(21) and 3(38) Advisors

Graham Mull, CFP®, MBA

In the realm of retirement plan oversight, the roles of 3(21) and 3(38) advisors stand out for their critical contributions to fiduciary responsibility and risk management. Understanding these roles and leveraging our expertise as a 3(21)or 3(38) advisor is key to enhancing your retirement plan's effectiveness while mitigating fiduciary liability.

3(21) vs. 3(38)Advisors: A Quick Overview

  •  3(21)Investment Advisors provide recommendations on the plan's investment options, sharing fiduciary responsibility with the plan sponsor. As the plan sponsor, you maintain ultimate control over the investment decisions but benefit from their expert guidance.
  •  3(38)Investment Managers take on full fiduciary responsibility for selecting, monitoring, and replacing the plan’s investment options. Hiring a 3(38) advisor means delegating the decision-making process entirely, offering you, the plan sponsor, a higher level of risk mitigation.

Reducing Fiduciary Liability: Why It Matters

Fiduciary liability in retirement plan management involves the risk of legal and financial repercussions if the plan fails to adhere to the standards of conduct prescribed by law. We help mitigate this risk in different ways:


  • Expertise and Oversight: Our knowledge of the investment landscape and regulatory requirements helps ensure that the plan's investments are selected and managed with due diligence, reducing the likelihood of breaches that could lead to litigation or penalties.
  • Shared or Transferred Responsibility: By engaging Foundation Wealth & Tax Advisors as a 3(21) advisor, you share the burden of fiduciary responsibility, gaining access to their expertise for making informed decisions. Opting for us serving your plan as a 3(38) advisor transfers the responsibility (and associated liability) of investment decisions entirely, offering greater protection against fiduciary risks.


The Importance of Minimizing Fiduciary Liability

Minimizing fiduciary liability is crucial for several reasons:


  • Protects Plan Sponsors: Reducing the risk of legal challenges or financial penalties protects the financial health of your organization and safeguards your reputation.
  • Enhances Plan Integrity: A well-managed plan that adheres to fiduciary standards is more likely to meet the retirement goals of your employees, boosting their confidence in the plan and in you as an employer.
  • Ensures Compliance: With ever-evolving regulations, having a dedicated professional ensures your plan complies with current laws—protecting it from potential liabilities.


The choice between a 3(21) and a 3(38) advisor depends on how directly you wish to be involved in your plan's investment decisions and the level of fiduciary risk you're prepared to manage. Both options provide valuable support in managing fiduciary duties, but a 3(38) advisor offers the highest degree of liability reduction. Regardless of your choice, leveraging our expertise is a strategic move towards securing a robust, compliant retirement plan that serves the best interests of your participants while minimizing your company’s risk.


Engaging with a trusted advisor can be a game-changer in navigating the complexities of retirement plan management, and, at Foundation Wealth & Tax, we're here to help you as a plan sponsor reduce your fiduciary liability and guide you every step of the way.


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