A 3(38) investment manager takes two responsibilities off your committee's list: it chooses the plan's investments and it monitors and replaces them over time.
A discretionary trustee can take the whole list. Beyond the investments, it holds the plan's assets, sees that money owed to the plan arrives and is applied correctly, and refuses directions that would violate ERISA or the plan document.
Sponsors know the 3(21) and the 3(38) because the industry has spent a decade explaining them. Almost nobody shows the full list of responsibilities a plan carries or where the rest of it sits. Here is that list, how each role measures against it, and why the biggest items do not move with a 3(38) appointment.
Why the Difference Matters
When money moves into a retirement plan, someone is legally responsible for making sure all of it arrives. If a payroll file goes out short, a contribution posts late, or revenue sharing never makes it back, the question that decides who answers for it is who held that duty in writing.
It's easy to assume your providers have it covered.
Until an outside fiduciary formally accepts a responsibility, though, it stays inside your company, with the officers or committee members named to fill each role.
These assignments are spread across plan documents, trust agreements, and service contracts your committee may never have read side by side. The gaps are where responsibility quietly stays with you.
So we built the side-by-side fiduciary reference above: the four roles, duty by duty, so your committee can see who holds what.
The Six Responsibilities Every 401(k) Plan Carries
Strip away the section numbers and a 401(k) plan carries six core fiduciary responsibilities:
- Choose the plan's investments
- Monitor and replace them over time
- Hold and safeguard plan assets
- See that plan money is received and applied
- Oversee the plan's service providers and their fees
- Document every fiduciary decision
The list is a working summary, not a statutory checklist. The first five come straight from ERISA's trust and prudence rules, and the sixth is how a committee proves the others happened.
Each item has a default owner. ERISA starts from one rule: with limited exceptions, all plan assets must be held in trust, and the trustee has exclusive authority and discretion to manage and control them.
In a self-trusteed plan, where company officers serve as trustee, the asset-side items sit with those officers personally. The rest sits with the committee your plan document names.
Measure every provider you hire against this list: which items it formally accepts in writing, and which stay behind.
How Each Fiduciary Role Measures Against the List
A 3(21) investment advisor recommends. It takes nothing off the list, because your committee still makes every decision, and accountability follows decisions. That input has real value, but it is advice, not a transfer.
A 3(38) investment manager takes the first two items. It decides which investments the plan offers and answers for those decisions as a fiduciary. ERISA requires a 3(38) to be a registered investment adviser, a bank, or an insurance company, and it must acknowledge in writing that it is a fiduciary to the plan. Hiring a 3(38) does not touch the other four items. Your plan's trustee still holds the assets and collects the money, and your committee still oversees providers and documents decisions.
A directed trustee takes one item: it holds and safeguards the plan's assets. It acts only on proper directions from a named fiduciary, usually your committee, so every decision about the assets still belongs to you.
A discretionary trustee is named in the plan or trust document, or appointed by a named fiduciary, and takes the trustee's full authority over plan assets, with the exact scope set in the trust agreement. That authority can reach every item on the list, including, where the documents assign it, oversight of the plan's other providers such as the recordkeeper and any 3(16) administrator.
A 3(38) cannot cover the list because of how ERISA defines the role. The statute says an investment manager is a fiduciary other than a trustee, so hiring a 3(38) does not put a trustee in place. The trustee-level duties stay where they were unless the plan expressly delegates a specific one.
Measured against the fiduciary resonsibility list:
- 3(21) advisor: leaves all six items with your committee.
- Directed trustee: leaves five.
- 3(38) manager: leaves four.
- Discretionary trustee: can reduce your committee's job to overseeing the trustee itself.
Who Is Responsible for Collecting Plan Contributions?
The trustee, unless the plan documents expressly hand that duty to someone else.
The Department of Labor said so in Field Assistance Bulletin 2008-01, and the Supreme Court said the same in Central States v. Central Transport: collecting what the plan is owed is a trustee responsibility, and a trust agreement cannot simply disclaim it.
The duty cannot fall through the cracks either. If no trustee or investment manager was ever expressly given the job, the DOL's position is that the fiduciary who hired the trustees can be liable for the uncollected money, because making the assignment was that fiduciary's responsibility.
When Deferrals Become Plan Assets
The timing rules show why this is real work:
- The general rule. Participant deferrals become plan assets on the earliest date they can reasonably be segregated from the employer's general assets.
- The outer limit. For a 401(k) plan, never later than the 15th business day of the following month. That is an outer limit, not a grace period, and a deposit can be late well before it.
- The safe harbor. Plans with fewer than 100 participants at the start of the plan year have a clearer target: deposits made within 7 business days of payroll fall inside a Department of Labor safe harbor.
Someone has to watch every payroll cycle, confirm the money arrived in full, and chase it when it did not.
Why Your 3(38) Does Not Have This Job
A discretionary trustee takes that duty on as part of the trustee role. A 3(38) does not take it by default.
Collection leaves the trustee only when the plan expressly makes the trustee a directed trustee for contributions or expressly delegates collection to an investment manager. Unless your documents make that specific delegation, the duty stays at the trustee level.
Revenue sharing needs the same attention: when a fund rebates part of its expense ratio to the plan, someone must confirm that money arrives and is applied correctly, with the same discipline your committee applies to what it reviews each quarter.
Where Liability Moves, and What Your Committee Keeps
The Stakes Are Personal
Under ERISA section 409, a fiduciary who breaches a responsibility is personally liable to restore the plan's losses.
And fiduciary status is functional, not a matter of titles: the Supreme Court in Mertens described ERISA's fiduciary definition in terms of control and authority over the plan. Liability follows whoever holds or actually exercises that control.
What Moves When You Delegate
Written acceptance is what moves liability. When an investment manager is properly appointed, ERISA says no trustee is liable for the manager's acts or omissions on the assets it manages.
When a discretionary trustee is appointed, full trustee responsibility for the assets moves to it. Each provider answers for the items it accepted in writing.
What Your Committee Always Keeps
The duty to choose and to monitor never moves:
- Prudent selection. Department of Labor guidance tells sponsors to select fiduciaries prudently.
- Ongoing review. Review whatever you hired at reasonable intervals. The Supreme Court in Tibble v. Edison held that the duty to monitor plan investments is a continuing one.
- Co-fiduciary exposure. Your committee can stay exposed if it knows of another fiduciary's breach and does nothing about it.
Oversight is the job your committee keeps, and it belongs in a written record of committee decisions. Delegation shrinks the work, not the need to show how you did it.
The Practical Takeaway
Titles tell you very little here. What matters is which of the six responsibilities a provider accepts in writing. A 3(38) is a genuine transfer of the two investment items, and for many plans it is the right one.
A discretionary trustee is the only role built to take the entire list, including the asset-side duties, and it narrows your committee's work to overseeing one provider.
The harder question is what your own documents say. Until your committee maps who holds each of the six items, the answer is an assumption, and the real assignments may differ from what the room has quietly settled on. That is easier to work through with a structured reference than from memory.
What You Can Control
Underneath the section numbers, this is about process and defensibility.
Your committee cannot control markets, legislation, or what an old service contract covered. What it can control is whether every item on the list is assigned deliberately, in writing, to a party that accepted it.
The real test is whether your committee could explain, at any moment, to anyone who asked, who is responsible for every dollar that moves through the plan.
From Knowing to Confirming
Knowing the difference between these roles is one thing. Confirming how the six responsibilities are assigned in your own plan is another. There are two ways to close that gap: have a second set of eyes walk through your documents with you, or map it with your committee yourselves first.
If You Want a Clearer View of Your Plan
We can take a brief look at your plan document, trust agreement, and fiduciary service contracts with you, mapping who holds each of the six responsibilities and where the gaps sit.
Schedule a brief fiduciary role review with First Hill Trust.
Rather Work through This Internally?
Start with the Fiduciary Role Comparison Guide. It gives your committee the side-by-side view of all four roles and a mapping worksheet you can run in a single meeting.
