3(16) Services
When Outsourcing of Fiduciary Responsibilities Makes Sense
Every plan under ERISA has at least one thing in common. The need for a plan “administrator” that is responsible for the wellbeing of the plan. There has been substantial regulation over the past few years intended to improve a participant’s understanding of the fees and expenses associated with being part of a company’s 401(k) plan. As the plan administrator, while you are relying on the services of your Retirement Experts (i.e., Investment Platform/Recordkeeper, Financial Advisor, and Retirement Consultant), you are ultimately responsible for ensuring that all deadlines for disclosure mailings are met, 5500s are signed and submitted, copies of the Summary Plan Description are handed out timely to new participants, etc.
Sounds like it could be a lot of work!
For those plan sponsors looking to transfer some or all of these responsibilities onto a third party, there is a solution. It is called a 3(16) fiduciary. The name stems from Section 3(16) of ERISA that describes what a plan fiduciary is and what he is ultimately responsible for.
Most plans DO NOT require the services of a 3(16) fiduciary since they have only one location, most employees are not on the road, census data is manageable, there is not huge turnover throughout the year, and its Retirement Experts provide all the necessary services and support.
For those Plan Sponsors still overwhelmed by the process and looking to explore whether a 3(16) fiduciary is beneficial, The Benefit Practice has partnered with a nationally known compliance firm whose only function is to provide plan sponsors with this 3(16) coverage. Depending on the requirements of the Plan Sponsor the services offered could include but not limited to:
- Maintenance of Plan Document
- Signing of Form 5500
- Establishing Fiduciary Committee Charter
- Confirming appropriate insurance coverage
- Monitoring timeliness of employee deferrals
- Monitoring eligibility criteria
- Signing off on loans and distributions
- Ensuring RMDs are paid out
- Ensuring investment platform distributed fee disclosures
- Maintaining a document storage system
- Reviewing 404(c) status
- Preparing a quarterly fiduciary report
- Monitoring and acting in accordance with the Plan document
- Monitoring and supporting the annual financial audit
- Verifing census information throughout the year and comprehensive end of year review
- Reviewing and approving all compliance tests
In addition, for those Plan Sponsors requiring the distribution and mailing throughout the year of plan documentation, disclosure notices, and other communication material these services are also available at an additional cost.
Please contact us to discuss whether 3(16) services are appropriate for your plan.
