Outsourcing parts of a retirement plan’s fiduciary responsibilities can help Plan Sponsors access expertise and reduce their day-to-day workload, but it does not remove their overall accountability. Even when outside providers handle investment management, administration, or compliance tasks, the employer still has a duty to carefully select those providers and regularly monitor their performance.
In a recent article, Julie Doran Stewart emphasizes that delegation should never be mistaken for full relief from responsibility. As she explains, Plan Sponsors must understand that “they can never completely absolve themselves of all fiduciary responsibility,” because they always remain responsible for choosing and overseeing the providers they hire.
Stewart also highlights the importance of clearly defining what each outsourced provider actually does and documenting that structure. Whether a plan uses a 3(21) adviser, a 3(38) investment manager, or a 3(16) administrator, sponsors still need to review services, benchmark providers periodically, and maintain a clear oversight process—because “the Plan Sponsor always retains that requirement to select, monitor and, ultimately, replace if required.”
“Plan Sponsors need to have a really good understanding that they can never completely absolve themselves of all fiduciary responsibility because they always have the requirement to select and monitor whomever they have outsourced that responsibility to."
Interested in learning more? Read the full PlanSponsor article here.
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