3(38) vs 3(21) Fiduciary: What Plan Sponsors Need
Choosing between a 3(21) and 3(38) fiduciary is one of the most important decisions a plan sponsor can make. Here’s how “do it with you” differs from “do it for you,” and what liability still stays with the employer.
When plan sponsors hear “fiduciary,” they often assume it means “someone else is responsible now.” In reality, hiring a 3(21) or 3(38) fiduciary can reduce risk and improve governance, but it doesn’t eliminate your responsibilities as the employer. The key is understanding what each role actually does—and what it means for your day-to-day workload and liability.
This guide breaks down the differences between a 3(21) fiduciary (often “do it with you”) and a 3(38) fiduciary (often “do it for you”), who typically provides these services, and how plan sponsors can make a defensible selection.
What do “3(21)” and “3(38)” mean?
Both terms come from the Employee Retirement Income Security Act of 1974 (ERISA). They describe different fiduciary roles related to investment decisions in retirement plans.
ERISA 3(21) investment fiduciary: Provides investment advice for a fee and shares fiduciary responsibility with the plan sponsor for investment decisions.
ERISA 3(38) investment manager: Has discretionary authority to select, monitor, and replace plan investments (within the scope you delegate) and is a fiduciary for those decisions.
You can review ERISA’s fiduciary framework and responsibilities through the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA): Meeting Your Fiduciary Responsibilities. For the statutory definitions in ERISA, see the law text on Congress’s official publications site (GovInfo).
3(21) is “do it with you,” while 3(38) is “do it for you”
The easiest way to think about the difference is how decisions get made.
With a 3(21) fiduciary (“do it with you”):
The advisor recommends an investment lineup (add/remove/replace funds, map changes, QDIA suggestions, etc.).
The plan sponsor (or committee) typically approves and documents the final decision.
Fiduciary responsibility for investment decisions is generally shared.
With a 3(38) investment manager (“do it for you”):
The 3(38) makes the investment decisions in the scope you delegate (for example, selecting and monitoring the fund lineup).
The plan sponsor is not deciding which funds stay or go day-to-day—your role shifts to oversight of the 3(38).
Fiduciary responsibility for those delegated investment decisions is generally shifted to the 3(38) (but not all fiduciary duties disappear for the sponsor).
In practice, many sponsors choose 3(21) when they want to stay closely involved in investment decisions, and 3(38) when they want a more turnkey approach with fewer committee debates and less administrative burden.
What liability still stays with the plan sponsor?
Even with a 3(38), plan sponsors are not “off the hook.” ERISA still expects you to act prudently and in participants’ best interests. The biggest ongoing sponsor duty is prudently selecting and monitoring the advisor or investment manager you hire.
That means you should be prepared to demonstrate:
Due diligence at hire: You evaluated qualifications, services, fees, and fiduciary status in writing.
Clear scope: The service agreement spells out whether the advisor is acting as 3(21) or 3(38), and what decisions they control.
Ongoing monitoring: You review performance, process, fees, and service quality on a regular schedule (often quarterly or annually).
This is why hiring the right professional matters. If you need a framework, see how to hire a retirement plan advisor and compare options in our directory of 401(k) financial advisors and plan advisors.
Also remember: fiduciary governance doesn’t stop at investments. Many plans also have compliance obligations tied to reporting and audits. If your plan is large enough to require an audit, see what a 401(k) audit is and when you need one and what is needed for a 401(k) audit. For annual reporting, review what a Form 5500 is and the penalties for late or rejected Form 5500 audits.
Who offers 3(21) and 3(38) services?
Not every “financial advisor” is a retirement plan specialist, and not every plan advisor is willing (or able) to accept 3(38) discretion. Here’s how the market typically breaks down.
Retirement plan advisors (specialists) often provide:
3(21) fiduciary investment advice
Sometimes 3(38) investment management (either directly or through an affiliated investment management platform)
Plan governance help: investment policy statements, committee support, fee benchmarking, participant education
Wealth advisors (primarily focused on individual clients) may offer:
3(21)-style guidance, but sometimes without deep operational plan expertise
Less frequent experience with committee process, provider benchmarking, or plan-level fiduciary documentation
Registered investment advisers (RIAs), banks, and trust companies may offer 3(38) services because they have the infrastructure to take on discretionary management and the associated fiduciary risk.
Bottom line: ask directly whether the professional will serve as a 3(21) fiduciary or a 3(38) investment manager—and insist it appears in the contract.
How to choose between 3(21) and 3(38)
There’s no universal “best.” The right fit depends on your internal bandwidth, committee comfort level, and how much you want to delegate.
Choose 3(21) if you want to stay hands-on and prefer to approve investment changes, but want expert fiduciary guidance and documentation support.
Choose 3(38) if you want a more turnkey investment process, fewer internal debates, and clearer delegation of investment decision-making authority.
In either case, focus on prudent selection and monitoring: qualifications, process, fees, service model, and clarity of fiduciary role.
As a practical step, consider building a short “finalist scorecard” that compares:
Fiduciary status (3(21) vs 3(38)) and willingness to put it in writing
Investment process and documentation (how decisions are made and recorded)
Fee transparency (advisor compensation and any revenue sharing)
Team experience with plans like yours (size, industry, complexity)
Service scope beyond investments (committee support, provider benchmarking, education)
Don’t forget the rest of your fiduciary checklist
Investment oversight is only one part of a well-run plan. Many sponsors also need to confirm they have the right risk protections and compliance partners in place.
If your plan handles assets, you may need an ERISA fidelity bond. Learn more in what an ERISA bond is and how to buy one and explore ERISA bond providers.
If you’re approaching the large-plan audit threshold or already there, compare specialized firms through 401(k) auditors (or browse all auditors if you sponsor other plan types).
If you need legal support for plan governance or fiduciary questions, consider engaging ERISA attorneys.
Conclusion: delegation helps, but governance still matters
A 3(21) fiduciary is typically a “do it with you” partner—advice and shared responsibility. A 3(38) investment manager is typically “do it for you”—they make investment decisions within the authority you delegate. Either model can be a strong choice, as long as the plan sponsor prudently selects a qualified professional, documents the arrangement, and monitors performance over time.
If you’re evaluating advisors now, start by clarifying how much discretion you want to delegate, then use a structured selection process. For more guidance, review how to hire a retirement plan advisor and explore our directory of 401(k) plan advisors.
We have specific listing pages for both 3(38) and 3(21) advisors to help you find the right financial advisor for you.