ERISA § 404(c) and DOL Interpretive Bulletin 96

Developing a successful retirement Plan (specifically a 401(k) plan) requires you to review all features of the plan.  In today's world, participants want to be able to direct their investments and have easy access to account balances either by voice response or by the internet. 

In allowing participants to direct their investments, there was a concern that arose from the unclear definition of "investment education".  Fiduciaries are relieved from liability partially by providing investment education.  However, the concern was what constitutes "investment education" versus "investment advise". 

The Department of Labor (DOL) has issued regulations so that plan sponsors and other plan fiduciaries can have relief of their liability in connection with losses on investments resulting from participants' investment choices.

These are much awaited guidelines to investment and fiduciary concerns.  Plans are not required to follow these guidelines.  In the case that the guidelines are not followed, the plan fiduciaries will continue to be held responsible for participant directed accounts. 

There is even more concern since the Enron bankruptcy and the loss of retirement accounts by plan participants.  Is just handing them a booklet on their choices enough.  I would suggest not.  That it is important that trustees document that plan participants are being educated and not just handed information.  I believe that future legislation and court cases will also agree with and take this stance. 

DOL Interpretive Bulletin - 29CFR2509.96-1

404(c) Regulations - as published by Reish Luftman Reicher & Cohen

Final 404(c) preamble - as published by  Reish Luftman Reicher & Cohen

Link to: Section 404(c) Compliance Audit Checklist - published by Snell & Willmer, L.L.P.