404c

This section concerns an overview of how to properly transfer some of the investment responsibility to participants and reduce the retirement plans sponsor’s potential liability. 

What is ERISA 404c?

In order to reduce liability for claims brought against retirement plans sponsors by participants for poorly performing funds in defined contribution plans, 404c and its regulations permit responsibility for properly diversifying retirement accounts investments to be transferred to participants. To so this, the plan sponsor must include certain disclosures in the summary plan description and:

• Choose among a diversified selection of investments.
• Transfer balances among alternatives; change investment direction at least once within any three-month period
• Ensure that investment information and education is delivered to all retirement plans participants (descriptions, objectives, managers, fees, prospectuses) or upon request (expenses, performance, statements, holdings).

The retirement plan sponsor will still be responsible for selecting the investment alternatives offered under the retirement plan but can limit liability for the specific investment decisions made by participants. 

Using 404c To Your Advantage

To meet 404c, retirement plan sponsors engage independent advisors who assume liability for participant decisions; however, the retirement plan sponsor is still responsible for assuring that advisors are acting prudently in participants’ best interests.

• 404c ERISA Compliance
• 404c ERISA Requirements
• 401k Retirement Plan Sponsors