Today, the number 3(16) has become a marketing term. It's focus is generally around a list of services that service providers will now provide an employer who is generally the fiduciary named in the retirement plan document, identified as the Plan Administrator. The default is the employer unless an outside person or entity is named as the Plan Administrator, as expressed in Section 3(16) of ERISA.
Section 402(a)(1) requires that every benefit plan be established by a written document, and that document is required to name one or more fiduciaries who jointly or severally have authority to manage the administration and operation of the plan. Section 402(a)(2) states for the purposes of this title, the term "named fiduciary means the fiduciary named in the plan document, which is generally the named Plan Administrator. Anyone can be a named fiduciary with broad or specific designated responsibilities.
The Plan Administrator, as the primary named fiduciary of the plan, has the ultimately responsibility for management of the plan, including administration and operations. This is the fiduciary named in the document who is required to file government documents, and will be the fiduciary named in any letter or request from any government agency. The employer retains this responsibility unless it allocates its responsibility to another person or entity willing to accept such role.
Many service providers today are offering "3(16) fiduciary services" as a way to increase revenue. These services are generally focused on a set of tasks and the employer retains full fiduciary responsibility for management and compliance of the plan. In many cases, the employer does not clearly understand the responsibilities they still have for management of the plan.
There is a huge difference in those that offer 3(16) fiduciary services verses FCG serving as the Plan Administrator.
Employers are required to understand the difference in services that are being provided and more important, what responsibilities are being retained, whether transparent or not. Service agreements should be reviewed for exclusionary or limiting language, which is risk to the employer and the company executives that sign the agreements on behalf of the employer.
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