Simply offering plan participants the option of investing their own plan assets DOES NOT fully protect a plan fiduciary from liability. ERISA §404(c) offers protection only if all of the following steps are taken:

 

• Participant may request written confirmation of his instructions

• The person executing participant requests is a plan fiduciary who is obligated to comply with the participant’s instructions

• The participant must receive the following documents from a plan fiduciary:
  • A statement that the plan is intended to be a §404(c) plan
  • An explanation that the fiduciaries of the plan may be relieved of liability for investment losses
  • A description of the investment alternatives available in the plan
  • The investment objectives, and risk and return characteristics of each plan investment
  • Identification of the investment managers
  • Information about how to provide investment instructions
  • Disclosure of all transaction fees and expenses that will be charged to the participant’s account
  • The name and contact information of the plan fiduciary responsible for providing information
  • Information about employer securities held by the plan (if any)
  • A prospectus for each of the plan investments that are subject to the Securities Act of 1933
  • Materials relating to the exercise of voting, tender or similar rights

• The participant may request any of the following:
  • Annual operating expenses of each investment option
  • Prospectus, financial statements or reports provided to the plan
  • List of assets comprising each investment alternative’s portfolio
  • The value of shares or units for each investment alternative

• Participants may give investment instructions that are appropriate in light of market volatility, and at least once in any 3-month period

• Core investment alternatives must constitute a broad range of options

 

image courtesy of David Castillo Dominici