3(38) Investment Manager Agreement


Investment managers need a specific understanding of pension rules to meet their fiduciary obligations under ERISA. An investment manager`s understanding of ERISA as well as additional services and experience for qualified plans may be more important than investment experience or past performance. It is also important to determine which functions the investment manager may not be ready or able to perform. Often, the manager`s services can be provided remotely and/or limited to the management of the IDRs, QDIA and/or participating accounts of the plan. Lack of familiarity with investments will not be excused as the reason it fails to meet its fiduciary duties. If trustees do not know what to do, they are encouraged to keep professional advisors to make recommendations. Consultants can take many forms and offer different types of faithful support. Assumes joint responsibility. Has a fiduciary responsibility for a prudent investment board, in accordance with ERISA trust standards. While an investment advisor is responsible for the investment policy consultation, the sponsor retains the ultimate decision-making power over the planning assets. However, the sponsor of the plan is not relieved of fiduciary responsibility for selecting and tracking the plan`s investment options. Contributor Scott Simon provides a plan to legally protect a sponsor when he appoints a 3 (38).

First, it is important to understand that the fiduciary protection afforded to a plan sponsor who uses an investment manager is not absolute. The sponsor of the plan is always responsible for the careful selection and control of the investment manager. As a result, the proponent should carefully choose an investment manager based on the administrator`s qualifications and all other relevant factors. Assumes sole fiduciary responsibility for the selection and supervision of investments. Hiring an investment manager provides the plan sponsor with the largest outsourcing of work and protection against claims related to poor investment selection and oversight decisions. The responsibility of the plan sponsor is limited to the selection and control of the investment administrator. If you opt for an investment manager 3 (38), you need to document a number of thoughts to ensure that you have actually delegated your tasks. In these cases, it may still be necessary to hire an advisor to assist with other aspects of the plan (i.e., directly provide advice or training to participants, assist administrators in selecting and monitoring plan service providers, including the investment manager, etc.).

In addition to the liability protection offered, trustees are looking for ways to reduce work and costs on their plan.