What are 3(16) Fiduciary Services?

What are 3(16) Fiduciary Services?

3(16) fiduciary services refer to a type of service that allows a third-party to take on some of the fiduciary responsibilities associated with managing a retirement plan. The name "3(16)" comes from section 3(16) of the Employee Retirement Income Security Act (ERISA), which outlines the responsibilities of a plan administrator. By outsourcing some of these responsibilities to a TPA like The Ryding Company, you can  load off of the HR department and limit liability by ensuring that your plan is being run in compliance with ERISA regulations.

What should you expect to get from someone who offers 3(16) Fiduciary Services?

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Accuracy Checks

A good TPA will interpret your plan documents and notify you of any irregularities. Also, they should review and upload vesting to your recordkeeper.

Withdrawals, Loans and Refunds
A good TPA can take care of approvals for corrective refunds, hardship withdrawals, in-service withdrawals, loans, Qualified Domestic Relations Orders (QDROs), separation of service distributions, and Required Minimum Distributions (RMDs). These are all processes that require approval from various parties in order to be implemented. Here's a brief overview of what each of these approvals involves:

These various approvals are important steps in the administration of a retirement plan, ensuring compliance with legal requirements and protecting the interests of plan participants and sponsors alike.

1. Corrective refunds: Refunds of excess contributions or deferrals made to a retirement plan, usually due to errors made by the employer or plan administrator. In order to issue a corrective refund, the plan administrator must first determine the amount of the refund and obtain approval from the plan sponsor or employer.
2. Hardship withdrawals: Withdrawals made from a retirement plan due to an immediate and heavy financial need, such as medical expenses or eviction from a primary residence. In order to approve a hardship withdrawal, the plan administrator must verify that the participant meets the criteria for a hardship withdrawal and obtain approval from the plan sponsor or employer.
3. In-service withdrawals: Withdrawals made from a retirement plan while the participant is still employed by the plan sponsor. These withdrawals may be subject to restrictions or penalties, and must be approved by the plan administrator and the plan sponsor.
4. Loans: Allow participants to borrow money from their own account balance, usually for a specific purpose such as purchasing a home or paying for education expenses. In order to approve a loan, the plan administrator must verify that the participant meets the criteria for a loan and obtain approval from the plan sponsor or employer.
5. Qualified Domestic Relations Orders (QDROs): QDROs are court orders that direct a retirement plan to pay all or a portion of a participant's benefits to a former spouse, child, or other dependent. In order to approve a QDRO, the plan administrator must verify that the order meets certain legal requirements and obtain approval from the plan sponsor or employer.
6. Separation of service distributions: Distributions made to a participant who has terminated employment with the plan sponsor. In order to approve a separation of service distribution, the plan administrator must verify that the participant is eligible for a distribution and obtain approval from the plan sponsor or employer.
7. Required Minimum Distributions (RMDs): RMDs are the minimum amounts that must be distributed from a retirement plan to a participant who has reached age 72 (or 70 1/2 if born before July 1, 1949) and are subject to certain tax penalties if not distributed in a timely manner. In order to determine the amount of the RMD and approve the distribution, the plan administrator must verify the participant's age and account balance, and obtain approval from the plan sponsor or employer.

In addition to the above-mentioned services, some providers of 3(16) fiduciary services may offer services such as participant education and communication, plan design consulting, and investment management.

Conclusion

Many TPAs, like The Ryding Company, can offer 3(16) fiduciary services as part of their services to ensure that they can meet your needs and help you effectively manage your retirement plan.

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See our 3(16) Fiduciary Services for information on our offerings!

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