Retirement Strategies LLC, Little Chute Wisconsin

ERISA Section 404(c)

ERISA 404(c) provides relief for a fiduciary with respect to participant-directed accounts. Compliance is voluntary, but fiduciaries who comply with 404(c) may be relieved of fiduciary responsibility for investment losses. For the fiduciary to qualify for this relief, the requirements of DOL Regulation Section 2550.404c-1 must be satisfied. ERISA 404(c) states that participant and beneficiary must have control over investments;

1)	Disclosure requirements – the regulations prescribe disclosure requirements that are designed to enable the participant or beneficiary to be an informed investor. Mandatory disclosures include:
		An explanation that the plan is intended to be a 404(c) plan and that 404(c) relieves plan fiduciaries of liability.
		A description of investment options.
		The identity of any designated investment managers that may be selected by the participant or beneficiary,
		The restrictions on investment selection or transfers.
		An explanation of fees and expenses that my be charged in connection with the investment transactions.
		The materials relating to voting rights or other rights incidental to the holding of an investment.
		The most recent prospectus for an investment option which is subject to the Securities Act of 1933.

2)	Diversified core investments – there must be at least three diversified investment options (“core investments”) that offer a broad range of investment opportunity where each of the core investments must have materially different risk and return characteristics.

3)	Frequency of investment instructions – the opportunity to give investment instructions must be available with a frequency that is appropriate to the volatility of the investment; with core investments, the opportunity to give investment instructions must be at least quarterly, even if a less frequent period would be appropriate given the investment’s volatility.

Some questions for plan decision-makers to review include:
	Have all eligible participants been clearly informed that the plan intends to comply with 404c?
	Have participants been given the name, address and phone number of the plan fiduciaries responsible for providing investment information?
	Does the plan have a written Investment Policy Statement (IPS) and does it explicitly state that the plan intends to comply with 404c?
	Has the plan's annual Summary Plan Description been checked against specific requirements of 404c? Has this process been documented in the plan's compliance file?
	Does the plan have a published schedule of participant information and education events? Is a document file maintained, containing copies of all communications with plan participants? At every meeting with plan participants, is a list of attendees recorded and filed?
	Have any restrictions on transferring to or from an investment choice been clearly communicated to participants?
	Have all transaction fees and commissions that affect the participant been disclosed? Specifically, have participants been given a description of the annual operating expenses of each designated investment alternative?
	The DOL has defined four specific categories of participant communication that do not constitute "investment advice" for purposes of limiting 404c protection. They are: 1) plan information; 2) general financial and investment information; 3) asset allocation models; and 4) interactive investment materials, such as worksheets, PC illustrations, etc. The common denominator of all four is that they don't steer the participant in any particular investment direction. Does the plan's investment advice meet this test?
	If an asset allocation model identifies a specific investment alternative available under the plan, have participants been advised that investment alternatives with similar risk and return characteristics also are available?
	If calculators are used in investor education, are they based on generally accepted investment theories? Do they clearly disclose the "what if" assumptions on which they are based, such as retirement age, income levels, inflation rates, rates of return, and all plan investment alternatives?
	Has the plan taken a survey of participants to determine their level of investment knowledge? Are plan communications written in a style and language that participants can clearly understand?
	Are plan fiduciaries aware of specific duties that may not be delegated or protected under 404c, including prudent selection and monitoring of investment menu choices?
	Does the plan have a formal process for evaluating investment managers' adherence to fund objectives, including a written evaluation report?