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
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