Need / value of 3(21) / 3(38) service

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test123
Posts: 91
Joined: Mon Feb 22, 2016 8:35 am

Need / value of 3(21) / 3(38) service

Post by test123 »

I manage a small company and we are moving our 401k plan to a vanguard plan. Finally! Our local TPA has offered us plan advisory / fiduciary services and now VG is also offering similar services thru Mesirow. Total annual Cost thru VG is between $5-10k per/ year based on the amount in the plan and on level of fiduciary. For what they provide if Seems costly and unnecessary . I suppose it is a form of insurance that would allow the company to share the risk if a plan member tries to make a case that we were negligent and breeched our fiduciary responsibility. Everything I read about these suits suggest that they center around high fees, limited fund offerings, or self dealing. None of those things would even remotely apply here. We plan on offering 20 or so VG low fee fund options , including retirement date as default. Appreciate any experience you have had and alternate opinions. Thx.
Horton
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Re: Need / value of 3(21) / 3(38) service

Post by Horton »

Unfortunately, sponsoring and managing a 401k is more involved than managing your personal accounts. I doubt many Bogleheads are going to be able to give you good advice on this topic, and you certainly won’t get formal “advice” that you can use later if you get sued or audited by the IRS or DOL.

This a fiduciary decision your company / investment committee has to make.
80% global equities (faith-based tilt) + 20% TIPS (LDI)
JBTX
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Joined: Wed Jul 26, 2017 12:46 pm

Re: Need / value of 3(21) / 3(38) service

Post by JBTX »

As a 401k provider you do have some fiduciary liability exposure, and having a 3(38) in theory provides some liability protection. 3(21) giving advice on selection and 3(38) doing the actual fund selection.

The downside for Boglehead types is a 3 (38) advisor may pick funds that we don't like. Spouses fund has a 3 (38) and I questioned some of his selections.

I think the advisor charged $5000 a year for the small company and did fund selection, showed up at employee 401k meetings for employees questions, other issues etc. You don't want to be your employees fund advisor.
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