ERISA Benefit Plan Investment Management Agreements: Selecting 3(38) Investment Managers, Structuring the IMA

Description

ERISA requires that plan fiduciaries act with prudence and care; breaching these fiduciary duties subjects plan fiduciaries to personal liability. ERISA Section 3(38) defines an investment manager to whom investment responsibility can be delegated. A named fiduciary who has delegated investment decisions to a 3(38)-investment manager is not responsible or liable for the 3(38)-investment manger's investment decisions but remains accountable for hiring and monitoring the 3(38)-investment manager.

ERISA also imposes the duty to avoid "prohibited transactions" with "parties in interest" to the ERISA plan, unless an exemption, such as QPAM, exists. Because ERISA defines both prohibited transactions and parties in interest broadly, all transactions are potentially prohibited, requiring an applicable exemption. However, the exemptions are nuanced, and fiduciaries appointing 3(38)-investment managers, as well as the 3(38)-investment manager taking advantage of the exception, must understand the conditions of the exemption upon which they are relying.

Listen as our authoritative panel of attorneys discusses ERISA 3(38) investment managers and offers guidelines for selecting investment managers, negotiating and drafting IMAs, and documenting the investment manager partnership from the perspectives of both the plan sponsor and the investment manager.