Navigating Fiduciary Duties with a 3(38) Investment Manager

Understanding the fiduciary responsibilities tied to ERISA (Employee Retirement Income Security Act) can sometimes feel like threading a needle. You might think, “Hey, if I hire a 3(38) investment manager, I can just sit back and relax, right?” But let’s clear the air right now—hiring a 3(38) investment manager doesn’t completely absolve a plan sponsor of fiduciary duties. So, what does that mean for you?

Let’s break it down. A 3(38) investment manager takes on significant responsibilities for selecting and managing investments. That’s a big deal. But it’s essential to remember that while they take on many investment-related tasks, the plan sponsor still has obligations that remain firmly in their lap.

What Stays with the Sponsor?

So, what responsibilities remain with you as a plan sponsor? First off, you’re still on the hook to hire a qualified and competent investment manager. And let’s be honest, that’s no small feat! It’s not just about checking off a box; you’ve got to ensure that the manager you choose has the right experience, credentials, and track record to meet the plan's needs.

Now, here’s the kicker—you aren’t off the hook after hiring this 3(38) manager. You also have to periodically review their performance. Think of it as a “check-up” for your investments. It’s your job to ensure that the investment manager adheres to the investment policy and achieves the returns you expect for your participants.

The Bigger Picture

And don’t forget about oversight! As a plan sponsor, you’re responsible for the overall operation of the retirement plan. This means ensuring compliance with ERISA and other laws. Imagine if a key part of your plan was out of whack—yikes! You want to prevent that from happening and protect your participants’ interests.

If you’re scratching your head and wondering, “How do I juggle all these responsibilities?”, you’re not alone. Many plan sponsors feel this way, especially with the complexities of investments these days. But here’s the good news: understanding these responsibilities is the first step toward effective plan management.

Being a plan sponsor is like being the captain of a ship. You can have a fantastic crew and a reliable first mate (in this case, your 3(38) manager), but you’re still the one who must steer the ship. After all, you’re ultimately responsible for the journey and ensuring everyone—your participants—gets to their destination safely.

Final Thoughts

In summary, hiring an ERISA Section 3(38) investment manager provides a powerful resource for plan sponsors, but it’s not a ticket to complete freedom from fiduciary duties. By understanding what remains with you, you can navigate the waters of fiduciary obligations with more confidence. So, remember, while delegation of specific tasks is part of the game, you’re still very much in play!