According to the Texas-based consulting firm Roland/Criss, it’s not surprising that the demand for outsourcing fiduciary duties by plan sponsors is high. The questions are whether the proposed vendor is qualified to take on ERISA 3(16) duties and whether there is a conflict of interest if that vendor provides other services to the plan.
Under ERISA there is no inherent problem with relying on experienced providers to advise and sometimes take over duties that inexperienced and untrained plan sponsors must discharge. But problems can occur when outsourcing 3(16) duties to current vendors, since conflicts may occur when that vendor must act in the best interest of the plan participants in four areas:
• Governance
• Administration
• Investments
• Controls
Turning over the keys to a third party can be fraught with hidden dangers — witness the Matthew Hutcheson case. Marcia Wagner provided a guide to selecting and monitoring 3(16) fiduciaries last summer in Plan Consultant magazine.
