3(16), 3(21), 3(38): What Does This All Mean?

November 7, 2013
By: Chin Kim

Understanding the different types of ERISA fiduciaries can be confusing at times. Furthermore, depending on the "type" of fiduciary, the responsibilities will be different.

My kids came by the office while I was having a discussion with the Retirement Strategies Group members about our publication, ERISA Fiduciary Rules for Advisors, and they overheard "3(16), 3(21), and 3(38)." My oldest son, who plays both high school baseball and football, quickly approached me and asked, "What do downs in football or batting averages have to do with retirement planning?"

It can be overwhelming at times with all the various acronyms and terminologies when trying to understand certain concepts. Furthermore, it is critical that we are discussing the concepts in the proper context. Pacific Life's brochure, ERISA Fiduciary Rules for Advisors, can help you get a better understanding of:

  • Different types of fiduciaries—ERISA 3(16), ERISA 3(21), ERISA 3(38).
  • ERISA fiduciary responsibilities—steps to consider when acting in that capacity.
  • The overview of the "five-part" test—to help determine when investment advice results in fiduciary status.


Why Is This Important?

The SEC and the DOL are currently in the process of releasing regulations that will update fiduciary standards to be more in line with current practices for broker/dealers and RIAs. For the SEC, this was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act; this act granted authority to conduct studies and consider rule-making for a single fiduciary standard for both registered investment advisers and registered representatives. For the DOL, this will be re-proposing the regulation that was released in 2010. Below you'll see the distinctions between the SEC and DOL fiduciary issues, and ways in which each may impact the financial industry going forward.

Stay tuned for future updates that the Retirement Strategies Group will provide to you should we get new information. Contact (800) 722-2333, ext. 3939 or RSG@PacificLife.com.


Fiduciary Overview
 

  SEC Fiduciary-Related Matters
DOL Fiduciary-Related Matters
Reasons for Consideration
  • Dodd-Frank Act authorized the SEC to create guidelines.
  • Personalized investment advice to retail customers should be governed by fiduciary duty, regardless of whether the advice is provided by a registered investment adviser or a broker/dealer.
  • Significant changes in the retirement plan landscape (since 1975) have prompted the DOL to re-examine the fiduciary status.
  • Greater shift from employers offering defined benefit plans in the past to defined contribution plans today.
  • Increase in overall IRA assets due to rollovers from employer plans.
Possible Impacts
  • Eliminate regulatory gap between broker/dealers who provide investment advice without being subject to fiduciary standards as registered investment advisers.
  • Broaden the scope of investment advice.
  • Might lead to more individuals possibly being deemed a fiduciary.
  • Greater accountability for the advice rendered to plan sponsors and participants.

Additional disclosures for actions that may be deemed a conflict of interest between the person giving the advice and the client.


Pacific Life Insurance Company and its affiliates do not provide any employer-sponsored qualified plan administrative services and do not act in a fiduciary capacity for any plan. Clients should consult their tax advisors and/or attorneys regarding their specific situations.

The information in this blog is believed to be accurate as of the publication date. Additionally, it does not purport to be comprehensive in scope. Rules can change over time.

Picture of Chin Kim

Chin Kim leads the Retirement Strategies Group, as Assistant Vice President in the Retirement Solutions Division at Pacific Life. His core responsibilities includes sharing and supporting retirement strategies concepts through development of marketing materials and tools and leading the team members in the field and in the home office.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

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