Dark Constellation

Here’s Why You Should Consider Using a 3(38) Investment Manager

The DOL has devoted significant time in recent years to the monitoring and investigating of defined contribution plans. While investigations have been triggered by a number of various scenarios, including Form 5500 violations, disclosure errors and employee complaints, the resulting inquiries have resulted in extensive examinations into how plan fiduciaries have sidestepped their fiduciary oversight and responsibilities.

At the crux of these investigations is the inherent duty and responsibility of a plan fiduciary — which, under ERISA — is one who not only exercises control or authority over the plan management and assets but does so in the best interest of the plan’s participants and their beneficiaries.

It’s imperative that retirement plan administrators understand the full scope of their roles and the related responsibilities of the oversight of their organization’s retirement plan in order to understand the risks involved with the plan and to manage them effectively. And without specific knowledge and understanding of ERISA guidelines and fiduciary expectations as well as investment management savvy and prudence, this can prove to be a formidable challenge for organizational leaders.

Enter: 3(38) Investment Managers.

With growing compliance requirements and stricter oversight, plan administrators can mitigate their fiduciary risk by shifting responsibility for investment decisions to the 3(38) investment manager — a licensed professional with the knowledge and understanding of investment best practices, controls and risk scenarios. This core advantage lessens risk at the hands of the administrator, though the administrator does maintain a fiduciary responsibility to monitor the 3(38) investment manager.

With today’s organizations grappling with increasing regulatory oversight, market instability, and growing litigation surrounding retirement plans, the need for professional guidance is greater than ever. By leveraging a 3(38) investment manager, organizations are able to streamline the operational and administrative obligations associated with running a retirement plan as well as rely on experienced investment professionals to create a thoughtful investment line-up for their plan participants.

For more information on this topic, download our whitepaper, which details 3(38) fiduciary responsibilities and considerations and lays forth details as to why the addition of a 3(38) investment manager can help to mitigate risk and lead to a smooth, efficient investment management process.

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