What Is a 3(21) Fiduciary Adviser for a 401(k)?

A "3(21) fiduciary adviser" is usually an investment professional that gives fiduciary-level recommendations while the 401(k) committee retains final investment authority. The phrase is useful industry shorthand, but it is not a separate federal license or a complete statement of the law. ERISA Section 3(21) is the statute's broader functional fiduciary definition, and current investment-advice fiduciary status depends on the restored five-part test.^[1][2][3][4]

That distinction matters more in 2026 than it did a few years ago.

The legal test changed.

Then it changed back.

The 2024 Fiduciary Advice Rule Is No Longer Current Law

DOL's 2024 Retirement Security Rule replaced the longstanding investment-advice test with a broader standard.

Federal courts later vacated the rule and related exemption amendments.

In March 2026, DOL formally removed the vacated rule from the Code of Federal Regulations and stated that the action:

restores the five-part test

for determining investment-advice fiduciary status.^[3][5]

Any current article that treats the 2024 rule as operative is stale.

Section 3(21) Is Broader Than Investment Advice

ERISA Section 3(21)(A) treats a person as a fiduciary to the extent the person performs specified functions.^[1]

The statute has three principal routes.

Discretion over plan management or plan assets

Discretionary authority over plan management—or authority or control over plan assets—can create fiduciary status.

Investment advice for compensation

Compensated investment advice, or authority or responsibility to provide it, supplies a second route.

Discretionary plan administration

Discretionary authority or responsibility in plan administration supplies the third.^[1]

The popular phrase:

3(21) adviser

usually refers only to the second route.

"3(21) Fiduciary" and "3(21) Adviser" Are Not Synonyms

An investment committee member can be a Section 3(21) fiduciary because the member exercises investment discretion.

A trustee can be a Section 3(21) fiduciary because it controls plan assets.

A plan administrator can be a fiduciary because it decides disputed claims.

None of those people is necessarily an investment adviser.

The statute defines fiduciary status.

Industry practice turned one part of that definition into a service label.

Why the Industry Uses the Label Anyway

The shorthand helps distinguish two common arrangements.

3(21) advisory structure

Outside adviser:

• analyzes
• monitors
• recommends.

Internal fiduciary:

• evaluates
• approves or rejects
• retains final authority.

3(38) management structure

Outside investment manager:

• holds discretionary authority
• makes covered investment decisions
• implements those decisions within the delegated mandate.

INV-133 covers the second structure.

The useful dividing line is:

recommendation vs. discretion.

The Current Investment-Advice Test Has Five Parts

Under the restored regulation, a person is treated as rendering investment advice under Section 3(21)(A)(ii) only when the regulatory requirements are satisfied.^[2][3][4]

The familiar five-part test asks whether the person:

1. renders advice about the value of securities or other property, or recommends investing in, purchasing or selling securities or other property
2. does so on a regular basis
3. acts pursuant to a mutual agreement, arrangement or understanding
4. provides advice that will serve as a primary basis for investment decisions involving plan assets
5. provides advice that is individualized based on the particular needs of the plan.^[2][3][4]

The statute separately requires a:

fee or other compensation, whether direct or indirect.^[1]

For a non-discretionary advice relationship, every element matters.

The Five-Part Test Is Conjunctive

This is not a:

three out of five

test.

DOL describes the current standard as requiring all five regulatory elements for investment-advice fiduciary status under the restored framework.^[2][3]

A recommendation can look highly investment-related and still fail one of the relationship-based elements.

That is one reason the 1975 test has drawn policy criticism over the years.

But it is the current test.

Element 1: Investment Advice or Recommendation

The first element covers advice to the plan about the value of:

• securities
• other property

or recommendations about the advisability of:

• investing in
• purchasing
• selling

securities or other property.^[2]

For a 401(k) committee, examples can include:

• add Fund A
• remove Fund B
• replace active strategy with index strategy
• change asset class
• alter investment policy
• rebalance a portfolio
• change diversification structure.

A purely administrative statement is different.

Example: Information vs. Recommendation

Provider says:

Fund A costs 0.08%. Fund B costs 0.42%.

That can be factual information.

Provider says:

Replace Fund B with Fund A because Fund A provides materially similar exposure at lower cost.

That is much closer to an investment recommendation.

The analysis turns on substance.

Not whether the document is titled:

"report"

or:

"advice."

Element 2: Regular Basis

Advice must be rendered:

on a regular basis.^[2][3][4]

A typical 401(k) adviser retained to:

• attend quarterly meetings
• monitor the fund menu
• recommend changes
• review the QDIA
• benchmark investments

has an ongoing relationship that naturally raises the regular-basis issue.

A single isolated recommendation presents a different case.

One-Time Advice Can Fall Outside the Current Test

Regularity is not a throwaway element.

Suppose a consultant gives one isolated recommendation:

replace one fund

and has no prior or expected ongoing investment-advice relationship with the plan.

That one recommendation may fail the regular-basis element even though it concerns plan investments.

The facts matter.

Current law cannot be analyzed using the vacated 2024 rule, which had removed or rewritten important parts of the old test.^[3][5]

Plan-Level Advisory Work Is Usually Easier to Analyze Than One-Time Rollover Advice

A standing 401(k) committee relationship often has:

• recurring meetings
• ongoing reports
• repeated recommendations
• annual investment reviews
• continuing fee analysis.

That pattern fits the concept of advice on a regular basis more naturally than a single transaction.

This is one reason the industry shorthand:

3(21) adviser

often maps reasonably well to an ongoing plan-level investment consulting arrangement.

The contract still matters.

So do the facts.

Element 3: Mutual Agreement, Arrangement or Understanding

The advice must be provided pursuant to a mutual:

• agreement
• arrangement
• understanding

between the adviser and the plan or a plan fiduciary.^[2]

The understanding can be:

written or otherwise.^[2]

A formal contract is strong evidence.

It is not the only possible evidence.

The Engagement Agreement Should Say What the Relationship Actually Is

A useful adviser agreement should address:

• investment-monitoring services
• recommendation responsibilities
• fiduciary capacity
• committee authority
• implementation process
• compensation
• conflicts
• reporting
• termination.

Avoid contradictory language.

Example:

"Adviser serves as an ERISA fiduciary for investment recommendations."

followed elsewhere by:

"All recommendations are generic information not intended to be relied upon."

That inconsistency creates avoidable ambiguity.

A Disclaimer Is Relevant but Not Always Controlling

Current DOL Technical Release 2026-01 applies the restored five-part framework in the proxy-advisory context.

DOL states that written disclaimers about the parties' understanding are not necessarily determinative when the surrounding facts indicate a different relationship.^[4]

That is useful beyond proxy advice.

A contract should describe reality.

Not attempt to reverse reality with one sentence.

Element 4: Advice Serves as a Primary Basis

The mutual arrangement or understanding must contemplate that the advice will serve as:

a primary basis

for investment decisions involving plan assets.^[2]

That is stronger than:

"the adviser sends material the committee may or may not read."

It does not mean the adviser must be the only source of information.

The committee can consider:

• adviser analysis
• benchmarking
• counsel
• internal finance input
• independent research.

The question is whether the advisory relationship is understood to play a primary role in the investment decision process.

Primary Basis Does Not Mean Final Authority

This distinction is central.

Adviser recommendation can serve as a primary basis for the committee's decision while the committee still retains:

final discretion.

That is exactly how a common 3(21) advisory structure works.

The outside adviser owns the recommendation.

Final approval remains with the internal fiduciary.

Element 5: Individualized to the Plan

Advice must be individualized based on the particular needs of the plan.^[2][3][4]

That can involve:

• current investment lineup
• plan size
• participant demographics
• cash flows
• QDIA structure
• investment policy
• plan expenses
• administrative platform
• available share classes.

Generic market commentary is different.

Example: Generic Newsletter

Adviser distributes the same monthly market note to:

4,000 clients.

It says:

"Small-cap stocks may outperform if rates fall."

No plan-specific analysis.

No recommendation tailored to the particular 401(k).

That is not the same relationship as individualized advice to a committee about whether its small-cap fund should remain on the menu.

Compensation Is a Statutory Requirement

ERISA Section 3(21)(A)(ii) also requires compensation tied to the advice, which can be received directly or indirectly.^[1]

Compensation can be straightforward:

• flat annual fee
• asset-based advisory fee
• project fee.

It can also be economically less obvious.

That is why the sponsor should understand the full compensation chain.

INV-129 covers 408(b)(2) service-provider disclosure in detail.

Direct Compensation Is the Easy Case

Plan pays adviser:

$30,000 per year

for:

• quarterly menu review
• fiduciary recommendations
• QDIA analysis
• fee benchmarking.

The compensation connection to advisory services is explicit.

The harder cases involve compensation from third parties or compensation that changes depending on the recommendation.

RIA Status Does Not Automatically Answer the ERISA Question

A provider registered as an investment adviser can have fiduciary obligations under federal or state securities law.

That does not automatically establish that every service the provider performs for a 401(k) satisfies ERISA's investment-advice fiduciary test.

Different bodies of law ask different questions.

For ERISA Section 3(21)(A)(ii), apply:

• statute
• current DOL regulation
• facts.

Do not substitute the letters:

RIA

for the analysis.

408(b)(2) Treats RIA and ERISA Status Separately

DOL's service-provider disclosure regulation is revealing here.

Covered providers must disclose, when applicable, whether they will provide services:

• as an ERISA fiduciary
• as a registered investment adviser.^[7]

Those are separate disclosures.

That regulatory structure itself shows why:

RIA = ERISA fiduciary

is too simplistic.

The Written Fiduciary Acknowledgment Still Has Value

Unlike Section 3(38), Section 3(21)(A)(ii) does not contain the same statutory written-acknowledgment element.

But a plan-level adviser can still contractually acknowledge fiduciary status for defined services.

That is valuable because it clarifies:

• role
• scope
• standard
• expectations.

The agreement should not overstate the legal effect.

A sentence does not convert nonfiduciary conduct into fiduciary conduct in every context.

And an inaccurate disclaimer does not necessarily erase fiduciary status created by actual facts.

Scope Matters Because Fiduciary Status Is Functional

ERISA says a person is fiduciary:

to the extent

the person performs the fiduciary function.^[1]

Suppose adviser is fiduciary for:

• fund recommendations
• QDIA review.

But provides nonfiduciary administrative support for:

• scheduling meetings
• collecting reports
• formatting minutes.

The fiduciary role does not automatically spread to every service.

That is why contracts should identify capacity by function.

A Typical 3(21) Adviser Does Not Make the Final Decision

The common advisory model looks like this:

Adviser analyzes → adviser recommends → committee challenges recommendation → committee approves/rejects → trustee or recordkeeper implements

If the adviser can change funds without committee approval, the actual structure has moved toward discretionary management.

That is the line INV-133 addresses.

Example: Adviser Recommends Fund Replacement

Adviser identifies:

• expense ratio: 0.68%
• similar institutional alternative: 0.16%
• comparable benchmark exposure
• stable manager team.

Recommendation:

replace Fund A with Fund B.

Committee asks:

• Are there redemption fees?
• What are transition costs?
• Does Fund B fit the IPS?
• Is participant mapping required?
• Is there any revenue-sharing difference?
• Are there platform restrictions?

Committee then votes.

That is a real advisory process.

Rubber-Stamping Defeats the Point of Retained Discretion

Now change the meeting.

Adviser says:

replace Fund A.

Committee asks no questions.

No materials are reviewed.

Chair says:

"The adviser is a fiduciary, so approve it."

Internal fiduciaries cannot credibly claim to have retained prudent final authority while refusing to exercise judgment.

Hiring an expert can support prudence.

Blind reliance does not replace it.

A Fiduciary Adviser Can Be Wrong

Fiduciary status is a legal standard.

Not an accuracy guarantee.

An adviser can:

• misread data
• select a bad benchmark
• overlook a fee
• underestimate risk
• recommend an imprudent fund.

Retained internal decision authority is not ceremonial.

It is why the committee should understand enough to challenge the recommendation.

The Adviser Also Has Its Own Fiduciary Duty

When the adviser is an ERISA fiduciary for its advice, Section 404 duties apply within that function.^[9]

That includes:

• loyalty
• prudence
• exclusive purpose
• attention to reasonable expenses
• compliance with governing documents where consistent with ERISA.

The adviser cannot defend a conflicted or careless recommendation by saying:

"The committee had final authority."

Final authority does not erase the quality of fiduciary advice.

Two Fiduciaries Can Fail on the Same Decision

Example:

Adviser recommends a proprietary fund because the fund pays an affiliate.

The fund is:

• materially more expensive
• not demonstrably better
• poorly matched to the plan.

Committee knows the conflict and approves without analysis.

Potential issues can exist at both levels:

Adviser

Conflict, loyalty, prudence, prohibited-transaction analysis.

Committee

Prudence, conflict evaluation, failure to challenge recommendation.

Shared involvement does not mean shared roles are identical.

3(21) vs. 3(38)

The acronyms describe different responsibility maps.

A Provider Can Wear Both Hats in Different Services

A firm could act as:

• 3(21)-type adviser for one plan
• 3(38) manager for another
• nonfiduciary educator in another service
• registered investment adviser under securities law across multiple engagements.

Even inside one plan relationship, different service modules can carry different authority.

Analyze each function.

Do not classify the entire organization from one label.

3(21) Does Not Have the 3(38) Registration Test

Section 3(38) imposes specific qualifying categories such as:

• registered investment adviser
• qualifying bank
• qualifying insurance company

plus written fiduciary acknowledgment.^[1]

The investment-advice prong of Section 3(21) does not use that same statutory qualification structure.

That difference is often overlooked.

A provider's professional licensing still matters for other laws.

It is not the defining Section 3(21) test.

Fees Can Create More Than a Reasonableness Question

Suppose adviser receives:

Option A recommended

$30,000 annual advisory fee.

Option B recommended

$30,000 advisory fee + $20,000 affiliate payment.

The issue is no longer only:

Is $50,000 reasonable?

It is also:

Did the recommendation cause additional compensation to a fiduciary or affiliate, and what prohibited-transaction rule or exemption applies?

Fiduciary conflicts need separate analysis.

PTE 2020-02 Still Exists

DOL's 2026 vacatur notice did not erase the operative 2020 version of PTE 2020-02.

DOL republished the original operative text after the 2024 amendments were vacated.^[5][6]

The exemption can permit qualifying investment-advice fiduciaries and financial institutions to receive certain compensation that would otherwise raise prohibited-transaction concerns, if all applicable conditions are satisfied.^[6]

But there is an important 2026 caveat.

The 2020 PTE Preamble Is No Longer Reliable Guidance

DOL's 2026 notice states that judicial decisions vacated portions of the Department's interpretation in the original 2020 PTE preamble.

DOL said the:

entire preamble of PTE 2020-02 is effectively vacated

and no longer provides reliable guidance for stakeholders.^[5]

That is easy to miss.

The operative exemption remains.

The old interpretive gloss does not remain intact.

This Matters Most for Rollover Advice

Many older articles explain rollover fiduciary status using the 2020 PTE preamble's interpretation of:

• regular basis
• anticipated future advice
• primary-basis relationships.

That material now requires caution.

A current 2026 analysis should start with:

• restored regulation
• current DOL guidance
• applicable court decisions.

Not a stale 2021 FAQ copied without its litigation history.

A Standing Plan Adviser Is Less Dependent on Rollover Theory

For a committee that hires an adviser to provide recurring investment advice:

• quarterly
• annually
• continuously

the regular-basis question often arises from the actual ongoing plan relationship.

That is analytically cleaner than trying to turn one rollover recommendation into part of an ongoing relationship.

This article focuses on plan-level 401(k) advice.

Individual rollover analysis can require a separate fact pattern.

408(b)(2) Should Be Reviewed Before the Adviser Is Hired

A covered fiduciary or RIA service provider expecting at least the regulatory compensation threshold generally must provide required written information under 408(b)(2).^[7]

The hiring fiduciaries should review:

• services
• fiduciary/RIA status
• direct compensation
• indirect compensation
• affiliate/subcontractor compensation
• termination charges
• manner of payment.

A fiduciary acknowledgment without a compensation map is incomplete due diligence.

Example: Level Fee Adviser

Adviser receives:

$40,000 annual flat fee.

No revenue sharing.

No proprietary products.

No compensation tied to fund selection.

The conflict analysis is comparatively straightforward.

The committee still evaluates:

• fee reasonableness
• qualifications
• advice quality
• service.

"Level fee" does not mean "no fiduciary analysis."

It means one common compensation conflict may be reduced.

Example: Adviser Paid From Plan Assets

Adviser fee is charged:

0.12% of plan assets.

Plan assets:

$80 million.

Annual fee:

$96,000.

Five years later plan reaches:

$180 million.

Same percentage:

$216,000.

The service scope barely changes.

A fee that was reasonable at hiring does not become permanently reasonable.

Monitoring should convert percentages into dollars.

Example: Adviser Receives Revenue Sharing

Adviser receives direct annual fee plus payments from certain investment providers.

Now ask:

• Which investments create the payment?
• Does payment vary by fund?
• Can recommendation increase adviser compensation?
• Is the compensation disclosed?
• Is an exemption required?
• Are lower-conflict alternatives reasonably available?

Disclosure identifies the conflict.

It does not automatically cure it.

The Committee Should Benchmark Advisory Services, Not Just Investments

Plan sponsors often benchmark:

• mutual fund expense ratios
• recordkeeping fees.

Then leave adviser compensation untouched for a decade.

That is incomplete.

Compare:

• scope
• meeting frequency
• fiduciary status
• investment research
• participant services
• fee benchmarking
• QDIA work
• provider search
• managed-account oversight
• reporting.

Price only makes sense against service.

Adviser Selection Is a Fiduciary Decision

DOL's fiduciary guidance treats hiring plan service providers as fiduciary work.^[8]

Selection should examine:

• qualifications
• experience
• fiduciary status
• scope
• investment process
• conflicts
• compensation
• regulatory history
• insurance
• technology/data security where relevant
• references/service quality.

The hiring record should document why the adviser was chosen.

Not merely preserve the winning proposal.

Monitoring Does Not Require a Full RFP Every Year

A reasonable monitoring process can include:

• annual scope review
• fee review
• recommendation quality
• responsiveness
• benchmark quality
• conflict changes
• staff turnover
• regulatory issues
• contract changes.

A formal RFP may be useful periodically.

ERISA does not impose one universal procurement calendar.

The governing question is whether retaining the adviser remains prudent.

Monitor the Advice, Not Just the Relationship

A committee can like its adviser personally and still receive mediocre analysis.

Review whether recommendations are:

• timely
• supported
• consistent with plan needs
• fee-aware
• benchmarked correctly
• candid about uncertainty
• free from unexplained product bias.

Relationship quality matters.

Analytical quality matters more.

A Good Recommendation Identifies Alternatives

DOL's broader prudence framework for fiduciary investment decisions focuses on relevant facts and reasonably available alternatives.^[9]

A useful adviser report should therefore do more than say:

"Fund A is on watch."

It should explain:

• why
• benchmark
• risk
• fees
• manager changes
• available alternatives
• costs of replacement
• recommendation.

That gives the committee something it can actually evaluate.

Avoid Adviser Reports That Are Mostly Performance Rankings

A report filled with:

• stars
• quartiles
• red/yellow/green scores

can look rigorous.

It can still be shallow.

Questions that matter:

• Is the benchmark appropriate?
• Did strategy drift?
• Is the share class efficient?
• Is underperformance expected from style?
• Is manager turnover material?
• Does another fund offer better net economics?

INV-130 covers the investment-policy side of this process.

The Committee Needs Its Own Decision Record

The adviser's report belongs in the file.

So do committee minutes.

For a material recommendation, minutes should show:

Recommendation

What did adviser propose?

Evidence

What supported it?

Questions

What did committee challenge?

Alternatives

What else was considered?

Conflicts

Any adviser or provider compensation issue?

Decision

Approve, reject, defer or modify?

Follow-up

Who owns implementation?

That separation is important.

Example: Committee Rejects the Adviser

Adviser recommends replacing an active fund.

Committee finds:

• benchmark comparison was inappropriate
• lower-cost share class just became available
• manager team remains intact.

Committee keeps the fund but switches share class.

That can be a stronger fiduciary process than automatic acceptance.

A good adviser should tolerate informed disagreement.

Example: Committee Defers Pending Data

Adviser proposes adding a managed-account service.

Committee asks for:

• participant utilization assumptions
• fees
• personalization methodology
• 408(b)(2) disclosure
• conflicts
• alternative providers.

Decision is deferred.

That is not indecision.

It is evidence that the committee understood the difference between:

recommendation

and:

approval.

When Advice Becomes Discretion

Suppose the contract says:

committee retains final authority.

But operationally, adviser:

• removes funds
• adds funds
• instructs recordkeeper directly
• never obtains committee approval.

The practical authority no longer matches the contract.

That can create fiduciary status through discretion under Section 3(21)(A)(i) and may implicate the formal Section 3(38) framework if the parties intended to delegate investment management.^[1]

Authority drift should be corrected.

Do Not Use "3(21)" to Hide Discretion

A provider cannot say:

"Only 3(21), so no discretion"

while actually controlling plan investments.

ERISA looks at function.

If the provider decides, that fact matters.

The 3(21) shorthand should describe the relationship.

Not disguise it.

Do Not Use "3(38)" When the Committee Still Decides

The reverse error is equally common.

Contract markets:

3(38) fiduciary management

but every fund change requires committee approval.

That looks more like advice than delegated investment management.

INV-133 explains the statutory 3(38) requirements.

The actual authority map should match the label.

Adviser vs. Committee Responsibility

A well-written contract should make this table boringly obvious.

RIA Status vs. ERISA Fiduciary Status

The two can overlap.

They should not be collapsed.

Five-Part Test in Practice

For a traditional ongoing 401(k) investment adviser, the pattern can be straightforward.

The analysis becomes harder at the edges.

Edge Case: One-Time Fund Search

Plan hires consultant only to run:

one investment-manager search.

Consultant makes recommendation.

No expected continuing advice.

The recommendation is individualized and compensated.

But the regular-basis requirement can be the difficult element.

Do not assume every investment consultant engagement equals current-law ERISA advice fiduciary status.

Edge Case: Generic Platform Research

Recordkeeper publishes:

"Top 10 funds by performance."

Same list to every client.

No plan-specific recommendation.

That may fail:

• individualized advice
• mutual understanding
• primary-basis relationship

depending on the facts.

Fiduciary status cannot be inferred from the fact that investment information was distributed.

Edge Case: Contractual Fiduciary Promise

The agreement states:

"The adviser acknowledges ERISA fiduciary status for the investment recommendations covered by this engagement."

The promise matters.

It creates contractual clarity.

But legal analysis should still identify:

• actual service
• authority
• compensation
• relationship.

A broad acknowledgment can exceed what the statute would otherwise impose.

That may be intentional.

The sponsor should understand the scope it negotiated.

Co-Fiduciary Liability Still Matters

A fiduciary adviser and investment committee can each have distinct duties.

ERISA Section 405 can impose responsibility for another fiduciary's breach in specified circumstances involving:

• knowing participation
• enabling a breach through one's own fiduciary failure
• knowledge of a breach without reasonable remedial efforts.^[10]

The adviser should not ignore obvious committee misconduct.

The committee should not ignore obvious adviser misconduct.

INV-131 covers the co-fiduciary framework more fully.

Example: Adviser Identifies an Obvious Breach

Committee insists on retaining an affiliated investment solely because an executive benefits personally.

Adviser:

• recognizes the conflict
• knows the process is improper
• says nothing
• continues issuing reports as if the decision were normal.

Depending on the facts, the adviser cannot necessarily hide behind:

"final authority belonged to the committee."

Knowledge can create a separate co-fiduciary question.

Adviser Termination Should Be Possible Without Excessive Friction

A prudent service arrangement should allow the plan to change providers when necessary.

Review:

• notice period
• termination fee
• data ownership
• access to research history
• transition support
• pending fee payments
• return of plan information.

A committee that cannot exit a failing adviser without severe penalties has a governance problem.

What Should the Adviser Agreement Say?

Services

Exactly what analysis and recommendations are included.

Fiduciary capacity

Which services are acknowledged as fiduciary.

Authority

Recommendation vs. discretion.

Compensation

Direct and indirect.

Affiliates

Financial relationships that can affect advice.

Reporting

What committee receives and when.

Conflicts

Disclosure and mitigation.

Investment policy

How IPS fits the advice.

Implementation

Who authorizes and executes changes.

Records

Ownership and retention.

Termination

How relationship ends.

Regulatory change

What happens if fiduciary-law standards change again.

That last clause is not theoretical after 2016, 2018, 2020, 2024 and 2026.

What Should the Committee Ask Before Hiring?

1. Which services will be fiduciary?
2. Will fiduciary status be acknowledged in writing?
3. Does the adviser believe the current five-part test is satisfied?
4. Who has final investment discretion?
5. Can the adviser direct the recordkeeper without committee approval?
6. What direct compensation is paid?
7. What indirect compensation is received?
8. Can compensation change based on recommended investments?
9. Are proprietary funds or affiliates involved?
10. What 408(b)(2) disclosures will be provided?
11. How are recommendations documented?
12. Which benchmarks and peer groups are used?
13. How are conflicts handled?
14. What insurance applies?
15. How can the relationship be terminated?

If the answers leave final authority unclear, keep negotiating.

What Should Ongoing Monitoring Ask?

Advice quality

Are recommendations well supported?

Independence

Is product bias appearing?

Fees

Are direct and indirect economics still reasonable?

Conflicts

Have affiliations or compensation changed?

Scope

Is adviser performing contracted services?

Personnel

Did key team members leave?

Regulatory status

Any enforcement or disciplinary issues?

Plan fit

Does the service still match the plan's needs?

Governance fit

Does actual practice still match the contract and committee charter?

The sponsor is monitoring the adviser relationship.

Not outsourcing awareness.

Frequently Asked Questions

What does "3(21) fiduciary adviser" mean?

It is industry shorthand for an adviser providing fiduciary investment recommendations under ERISA's Section 3(21) framework while another plan fiduciary usually retains final investment discretion.

Is 3(21) a license?

No.

Section 3(21) is ERISA's functional fiduciary definition.^[1]

Is every RIA a 3(21) fiduciary?

No.

RIA status and ERISA investment-advice fiduciary status arise under different legal frameworks. Apply the current ERISA test to the actual service.^[1][2][7]

What is the current investment-advice fiduciary test in 2026?

DOL restored the longstanding five-part test after the 2024 Retirement Security Rule was vacated.^[2][3][4][5]

What are the five parts?

The person must provide investment advice or recommendations:

1. about securities or other property
2. on a regular basis
3. pursuant to a mutual agreement, arrangement or understanding
4. with the advice serving as a primary basis for plan investment decisions
5. individualized to the plan's particular needs.^[2][3][4]

The statute also requires direct or indirect compensation.^[1]

Do all five elements have to be met?

Yes, under the restored investment-advice test.^[2][3]

Does a one-time recommendation automatically make someone an ERISA investment-advice fiduciary?

No.

A one-time isolated recommendation can fail the regularity element from satisfying the current test, depending on the facts.

Does a written disclaimer always prevent fiduciary status?

No.

Current DOL guidance says disclaimers can be relevant but are not necessarily determinative when facts indicate a different mutual understanding.^[4]

Does a 3(21) adviser make the final fund decision?

Usually not in the common advisory model.

The adviser recommends; the committee or named fiduciary retains final discretion.

Can the adviser still be liable for bad advice?

Yes.

When acting as an ERISA fiduciary, the adviser owes fiduciary duties within that function.^[9]

Can the committee rely on the adviser?

Yes, but not blindly.

Hiring a qualified expert can support a prudent process. The decision-makers still have to evaluate recommendations when it retains final authority.

What is the main difference between 3(21) and 3(38)?

Discretion.

A 3(21)-type adviser generally recommends. A properly appointed Section 3(38) investment manager decides within its delegated mandate.

Does a 3(21) adviser need to satisfy the Section 3(38) registration categories?

No.

Those statutory qualification requirements belong to the Section 3(38) investment-manager definition.^[1]

Does 408(b)(2) apply to a fiduciary adviser?

It can. Fiduciary and registered-investment-adviser services are expressly within the covered-service-provider framework when the other regulatory conditions are satisfied.^[7]

Can a fiduciary adviser receive conflicted compensation?

Potentially only when the compensation arrangement is permitted under ERISA or an applicable prohibited-transaction exemption and all conditions are satisfied. Fiduciary status by itself does not cure the conflict.

Is PTE 2020-02 still available?

Yes. DOL republished the operative 2020 text after the 2024 amendments were vacated.^[5][6]

Can current analysis rely on the old 2020 PTE preamble?

Not safely. DOL stated in 2026 that the entire preamble is effectively vacated and no longer provides reliable stakeholder guidance after court decisions vacated portions of the interpretation.^[5]

Does the sponsor need to monitor a fiduciary adviser?

Yes.

The hiring and continued retention of a service provider are fiduciary decisions.^[8][9]

The ROIStreet 3(21) Adviser Test

Start with the actual service, not the marketing label → identify whether the provider recommends investments or actually decides → identify the ERISA Section 3(21) fiduciary route involved → for non-discretionary investment advice, apply the restored five-part test → confirm advice concerns securities or other plan property → test whether advice occurs on a regular basis → identify the mutual agreement, arrangement or understanding → determine whether advice is intended to serve as a primary basis for investment decisions → confirm advice is individualized to the plan's needs → identify direct and indirect compensation → review written fiduciary acknowledgment and contract scope → distinguish RIA status from ERISA status → map recommendation authority vs. committee discretion → collect 408(b)(2) disclosures → identify compensation conflicts and applicable prohibited-transaction analysis → evaluate recommendation quality rather than rubber-stamping it → document the committee's independent decision → monitor adviser fees, conflicts, personnel, regulatory status and service quality → revisit the authority map when actual conduct stops matching the contract

The useful question is not:

"Does the proposal say 3(21)?"

It is:

"What fiduciary function is this adviser actually accepting, what legal test makes that function fiduciary today, and who still has the authority to say yes or no when the recommendation reaches the committee?"

Sources & References

1. U.S. House Office of the Law Revision Counsel: 29 U.S.C. §1002(21) — Definition of Fiduciary — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1002
2. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2510.3-21 — Definition of Fiduciary — https://www.law.cornell.edu/cfr/text/29/2510.3-21
3. U.S. Department of Labor — Employee Benefits Security Administration: U.S. Department of Labor Restores Long-Standing Investment Advice Rule After Court Vacatur — https://www.dol.gov/newsroom/releases/ebsa/ebsa20260318
4. U.S. Department of Labor — Employee Benefits Security Administration: Technical Release 2026-01 — https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/technical-releases/26-01
5. U.S. Department of Labor — Employee Benefits Security Administration: Retirement Security Rule — Notice of Court Vacatur — https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/erisa/retirement-security
6. U.S. Department of Labor — Employee Benefits Security Administration: PTE 2020-02 — Improving Investment Advice for Workers and Retirees — https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class
7. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.408b-2 — Service Provider Arrangements and Disclosures — https://www.law.cornell.edu/cfr/text/29/2550.408b-2
8. U.S. Department of Labor — Employee Benefits Security Administration: Meeting Your Fiduciary Responsibilities — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/meeting-your-fiduciary-responsibilities
9. Legal Information Institute / U.S. Code: 29 U.S.C. §1104 — Fiduciary Duties — https://www.law.cornell.edu/uscode/text/29/1104
10. Legal Information Institute / U.S. Code: 29 U.S.C. §1105 — Co-Fiduciary Liability — https://www.law.cornell.edu/uscode/text/29/1105

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan fiduciary status, investment advice, service-provider relationships and ERISA governance. This article is not legal, fiduciary, investment, securities, tax or plan-administration advice. Section 3(21) status depends on the provider's actual functions, compensation, relationship with the plan, governing documents, current DOL regulation, contract terms and applicable court decisions. The investment-advice fiduciary framework has changed repeatedly and should be checked against current primary authority before relying on it for a transaction or service arrangement.

The ROIStreet Reader Promise

We strive to explain before we evaluate, present evidence before opinions, discuss risks alongside potential benefits, distinguish facts from analysis, and correct material errors transparently.

Our purpose is to help readers better understand investing—not to tell them what to do.