Is There A Problem With Your ERISA 3(38) Agreement?

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There have been a lot of discussions on fiduciary
responsibilities and risks for qualified retirement plans. Many of the larger
insurance company providers have offered a ‘fiduciary warranty’ to their
clients. These warranties have been found to be of little or no value and
nothing more than a marketing gimmick. The plan sponsor remains responsible for
their plan.

Now there is a movement to offer ERISA 3(38) investment
manager services. With this agreement the plan sponsor transfers the
responsibility to choose, monitor and replace the investment choices in their
plan. This agreement is a signed and binding contract between plan sponsor and
the investment manager. In most cases this is the prudent and a fiduciary duty
for the plan sponsor.

The problem may arise with the Investment Policy
Statement (IPS). If the ERISA 3(38) Investment Manager signs the IPS there is
no problem. However, if the plan sponsor signs the IPS there may be evidence
that the plan sponsor retains the fiduciary responsibility and the risks.

The courts are full of similar cases. Be careful what you

Please comment or call to discuss how this affects you and your company.

  • Service Provider Fee Disclosures Under ERISA (
  • What Plan Sponsors Should expect. (
  • Small 401(k) Plan Litigation and the Nuisance Value (
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