Understanding Fiduciary Roles Under ERISA
An Overview of Fiduciary Responsibilities as Defined by the Employee Retirement Income Security Act of 1974 (ERISA)
Under ERISA, fiduciary responsibility is based not just on title—but on function. Anyone who exercises control or authority over a plan, its assets, or its management decisions may be considered a fiduciary, even if not formally named.
Who Is an ERISA Fiduciary?
Fiduciaries can be explicitly named in a plan document or identified by the duties they perform. ERISA defines two primary types:
Named Fiduciary
This is typically the plan sponsor (employer) and is designated in the plan’s governing documents. The named fiduciary holds principal responsibility for managing and overseeing the retirement plan.
Functional Fiduciary
A functional fiduciary is someone who:
Exercises discretion over the plan’s management or assets
Renders investment advice for compensation
Has discretionary authority over plan administration
In short, if someone acts like a fiduciary, they are a fiduciary—regardless of their title.
1. Section 3(16) Fiduciary: The Administrator
This fiduciary is responsible for plan administration, including reporting, disclosures, and regulatory filings. If no 3(16) fiduciary is formally designated, the employer becomes the default administrator.
⚠️ Note: A 3(16) fiduciary is distinct from a third-party administrator (TPA). TPAs do not assume fiduciary responsibility unless explicitly stated.
2. Section 3(21) Fiduciary: The Investment Co-Fiduciary
A 3(21) fiduciary provides non-discretionary investment advice. They make recommendations that the plan sponsor may choose to follow. While sponsors can rely on this advice, courts require that they:
Evaluate the advisor’s qualifications
Provide accurate, complete information
Ensure that relying on the advice is reasonable and appropriate
Plan sponsors retain final decision-making authority when working with a 3(21) fiduciary.
3. Section 3(38) Fiduciary: The Investment Manager
A 3(38) fiduciary assumes full discretionary control over plan investments. This role offers the highest level of fiduciary protection under ERISA.
The 3(38) fiduciary can:
Add or remove investment options without prior approval
Execute investment changes on behalf of the plan
By appointing a 3(38), the plan sponsor transfers liability for investment decisions to the fiduciary manager—although they must still conduct initial and ongoing due diligence.
Are Financial Advisors Fiduciaries?
Not all financial advisors are fiduciaries. Some operate under broker-dealer or insurance models and provide non-fiduciary advice, which may be influenced by commissions or product incentives.
At MVM Advisors, we are a Registered Investment Advisor (RIA) and are held to a fiduciary standard. Depending on your needs, MVM can serve as a:
3(21) Co-Fiduciary offering investment advice
3(38) Discretionary Fiduciary managing plan investments
Please note: MVM does not provide tax, accounting, or legal advice. We work in collaboration with your qualified professionals to build a compliant, coordinated strategy.
Ready to move from reactive to strategic?
Start with a complimentary discovery meeting — no pressure, just possibilities.
