A 3(21) fiduciary refers to a co-fiduciary investment advisor under the Employee Retirement Income Security Act (ERISA). A 3(21) advisor provides investment recommendations for a company’s 401(k) plan but does not have discretionary control. The employer retains final decision-making authority over the investment lineup.  In this role, the advisor helps with fund selection, monitoring, benchmarking, and documentation — while sharing fiduciary responsibility with the plan sponsor.

The key difference is discretion and liability. A 3(21) fiduciary provides investment advice, but the employer makes the final decisions and retains most of the fiduciary responsibility. A 3(38) fiduciary is a discretionary investment manager who has authority to select, monitor, and replace plan investments without needing employer approval. With a 3(38), the investment responsibility shifts significantly from the employer to the advisor. With a 3(21), responsibility is shared. Employers who want greater delegation and reduced liability exposure often prefer a 3(38) structure.

An Investment Policy Statement (IPS) is a written document that outlines how plan investments are selected, monitored, and replaced. While not legally required, an IPS is considered a best practice and helps demonstrate fiduciary prudence.