Certified Plan Sponsor Professional (CPSP) Practice Exam

What is the responsibility of a 3(21) plan fiduciary?

1. Directly managing all investment funds.

2. Providing investment advice but not managing assets.

3. Having complete authority over plan design.

4. Ensuring compliance with federal regulations.

The correct answer is: Providing investment advice but not managing assets.

A 3(21) plan fiduciary is defined under the Employee Retirement Income Security Act (ERISA) and typically provides investment advice to plan sponsors or participants without having the authority to manage the assets themselves. This means that the fiduciary is responsible for making recommendations regarding investments but does not execute trades or handle the actual asset management. This role is significant because it allows the fiduciary to influence investment decisions based on their expertise, advising plan sponsors on appropriate investment options aligned with the plan's goals and participant needs. However, the fiduciary does not take on the full responsibility of managing the assets, which is a key distinction from 3(38) fiduciaries, who do have full discretion over the management of plan assets. In this context, while ensuring compliance with federal regulations and having authority over plan design are important aspects of plan management, they do not specifically define the responsibilities of a 3(21) fiduciary. Similarly, directly managing investment funds is outside the scope of their role. Therefore, providing investment advice without the authority to manage assets accurately describes the responsibilities of a 3(21) plan fiduciary.