Of Counsel Michelle Capezza shared insights with Fiduciary News about the complexities of ERISA fiduciary roles and the distinction between 3(21) advisors and 3(38) investment managers. A 3(21) co-fiduciary advisor provides non-discretionary advice in partnership with the plan committee, who retains the responsibility to make investment decisions, while the 3(38) model delegates true discretion to a 3(38) manager, limiting the committee's responsibility to the prudent selection and oversight of that manager.
Elaborating on the nature of the 3(38) model, Michelle says, "In order to retain the boundaries of fiduciary responsibility and maintain the fiduciary protection that the hiring of a 3(38) investment manager is meant to provide, the committee members should not be actively engaged with, or influencing, the decisions of the 3(38) investment manager, nor should they provide the 3(38) investment manager with a pre-curated plan investment option menu to manage that was in effect selected by the plan sponsor and fiduciaries."
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