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What Is A 3(16) Fiduciary?

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At hunter Benefits we are implementing a new service! For businesses who want to save time, have more peace of mind, and reduce chance of fees for their 401(k) plans, our 3(16) fiduciary service will be great for you. At the same time, if your a financial professional managing a plan our 3(16) service will create a stickier relationship between you and the plan sponsor.

A 3(16) fiduciary is a 401(k) plan administrator that keeps plans compliant with the law. Many employers hire 3(16) fiduciaries to handle some or all of the administrative tasks of a 401(k) plan saving them valuable time, resources and greatly reducing the risk of costly penalties. 

3(16) Fiduciary Services

Almost every task or function that a Plan Sponsor is responsible for can be performed by a § 3(16) Fiduciary. These tasks range from letting employees know they’re about to become eligible for their employer’s plan to approving in-service distributions to hiring the large plan auditor and reviewing the services offered by the Plan’s financial advisor and record keeper.

Hunter Benefits will be offering a basic suite of services for our clients. They will initially include

  • Participant loan approval
  • Benefit distribution approval
  • Participant rollover deposit approval
  • Participant communication
  • Form 5500 signing 
  • And, optionally, participant notifications 

Curious about the specifics of a 3(16) administrator?

3(16) fiduciary

The Benefit Of 3(16) Services

Save Time For Businesses

In the 30 plus years I’ve been in this business, Plan Sponsors and their employees in the Human Resources department have never really had a lot of excess time. And that seems to be more true now than ever since the start of the pandemic. And, in that same time span, the compliance obligations of the Plan Sponsor has only increased. It’s not really gotten easier. So what do you do when you have an HR department that is stretched thinner than ever, increasing regulatory obligations and employers trying to make hybrid or completely remote employee situations work? Employers are increasingly outsourcing more and more high level functions. In addition to what must be the most commonly outsourced employer function – payroll companies, employers now hire outside consultants to help strategize cash flow and pricing and employee recruiting. Not to mention the filing of their corporate tax returns. A §3(16) Fiduciary is a similar additional outside consultant – a premium service hired to help with the strategic growth and operation of the company. Hunter Benefits will be an outside consultant hired to take on a specific role that was historically performed by an employee or employees. 

Run More Efficient Plans

Efficiently and running a successful 401(k) Plan is admittedly hard. I get it. It’s the founding reason for why our industry exists. Successfully running a 401(k) Plan is like all the other tasks we’re doing for the first time ever, or the first time in a long time. If we’re doing it all the time, day in and day out – it’s all so much easier and efficient. Since helping Plan Sponsors run their ERISA covered retirement plans is essentially all we do – we’re the ones doing it day in and day out. By hiring a §3(16) Fiduciary to perform a function that’s done once a year – signing the Form 5500; or sometimes only twice a year – checking for new employee participant eligibility, the Plan Sponsor knows the task is going to be done right the first time. And with them having to spend less time seeing that it’s done properly. 

Reduce Time Spent With Federal Agencies

While we can’t and won’t make guarantees that the Internal Revenue Service (IRS) or Department of Labor (DOL) won’t ever conduct a random audit of your plan, hiring a §3(16) Fiduciary can either make that less of a bothersome process or less of a likelihood altogether. By hiring a §3(16) Fiduciary to help participants process their participant loans and distributions in an effective manner, Plan Sponsors reduce the reasons why participants complain to the DOL. By hiring a §3(16) Fiduciary to ensure that the correct employees receive participant eligibility notification timely (and have the technology to keep track of who was mailed what to which address), the Plan Sponsors can reduce their likelihood of having to make up employee contributions. 

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