401(k) glossary
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Fiduciary & roles
3(21) fiduciary
Short definition
A 3(21) fiduciary, in everyday use, is an investment adviser who recommends a 401(k) plan’s investments as a co-fiduciary while the employer keeps the final decision. The name comes from section 3(21) of ERISA.
What a 3(21) fiduciary is
Section 3(21) of ERISA is the general definition of a fiduciary. It covers anyone who exercises discretion over a plan or its assets, administers it with discretion, or gives investment advice to it for a fee. In the retirement industry, “3(21) fiduciary” has a narrower meaning: an adviser who gives the plan investment advice for a fee and acknowledges fiduciary status for that advice.
A 3(21) adviser recommends. They propose a fund lineup, monitor it, report to you and suggest changes. You, or your plan committee, approve or reject each recommendation. Responsibility for the decision is shared, and the final call is yours.
Why it matters to employers
Choosing and monitoring plan investments is a fiduciary duty with real exposure, and most employers are not investment professionals. A 3(21) adviser gives you expert input and a documented process. It suits employers who want to stay involved in investment decisions. If you would rather hand the decisions over, a 3(38) investment manager has discretion to make them.
3(21) and 3(38) compared
3(21) adviser | 3(38) investment manager | |
|---|---|---|
Who decides the lineup | The employer, on the adviser’s recommendation | The manager |
Employer’s remaining duty | Make decisions prudently and monitor the adviser | Select and monitor the manager prudently |
Paperwork | Advisory agreement | Written agreement in which the manager acknowledges it is a fiduciary |
Common mistakes
Thinking a 3(21) adviser removes your responsibility for investment decisions. It is shared.
Approving recommendations without reading them or keeping minutes.
Working with an adviser who has not confirmed fiduciary status in writing.
Not asking how the adviser is paid and whether pay varies by the funds chosen.
Basic Capital and this term
On plans Basic Capital recordkeeps, an outside advisor can serve as a 3(21) or 3(38) fiduciary.
Go deeper
Read the full employer guide related to: 3(21) fiduciary
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Sources
U.S. Code (govinfo.gov): 29 U.S.C. 1002 (ERISA section 3): Definitions (https://www.govinfo.gov/content/pkg/USCODE-2023-title29/html/USCODE-2023-title29-chap18-subchapI-subtitleA-sec1002.htm), retrieved 2026-11-11 U.S. Department of Labor, EBSA: Meeting your fiduciary responsibilities (https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/meeting-your-fiduciary-responsibilities), retrieved 2026-11-11 U.S. Code (govinfo.gov): 29 U.S.C. 1105 (ERISA section 405): Liability for breach of co-fiduciary (https://www.govinfo.gov/content/pkg/USCODE-2023-title29/html/USCODE-2023-title29-chap18-subchapI-subtitleB-part4-sec1105.htm), retrieved 2026-11-11
General information, not legal or tax advice.
