Relying on section 404(c) for reduced liability.
Many plan sponsors have sought to reduce their liability
by electing to comply with a regulation called 404(c) of ERISA. Most believe
if they provide diversified investment options along with a chance for participants
to make changes in their investment options, they have met the 404(c)
requirement. However, to meet 404(c) the plan sponsor must meet all the
guidelines of 404(c) and this is a very lengthy list. Most plan sponsors are
caught off guard when they see requirements of 404(c) in detail.
404(c) does not eliminate certain fiduciary
duties.
Even if a plan elects to comply with 404(c) there are
still certain fiduciary duties that cannot be delegated. Plan sponsors are
still obligated and required to select prudent investment options and
understand all costs associated with the platform.
Plan sponsors need to understand that just because they
elect 404(c) it doesn’t let them off of the fiduciary hook….and no matter what
, if something goes wrong, at the end of the day they will be scrutinized for
their prudence when it comes to decisions and actions affecting the plan.
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