Skip to main content

404(c) Compliance Checklist

By complying with ERISA section 404(c), sponsors and other fiduciaries of retirement plans with participant-directed investments may shield themselves from liability for poor investment decisions made by plan participants. If a retirement plan meets the requirements of ERISA section 404(c), no plan fiduciary will be liable for any loss that is the direct and necessary result of a participant’s exercise of control over the investment of his or her plan account.
For example, ERISA section 404(c) plan protects a plan fiduciary from being liable for the losses suffered in a down market by the 60-year-old who invests his entire account in an aggressive growth fund. However, plan fiduciaries are responsible for the selection or retention of particular investment options and for investments required by the plan or directed by the plan sponsor.

This checklist will help you determine how well you are complying with ERISA section 404(c). This checklist is for informational purposes only and is not intended to provide authoritative guidance or legal advice. Consult your attorney or other advisor for guidance on your particular situation.

1. The plan offers a broad range of investment alternatives. 

    • Generally, this is satisfied by having an investment menu that includes diversified funds from equity, fixed income and capital preservation asset classes.
    • Investments available under the plan allow participants to control both the potential returns and the degree of risk.
    • The plan offers at least three core options that are diversified and have materially different risk and return characteristics. 

2. The plan provides participants with an opportunity to exercise control over assets in their accounts, subject to reasonable restrictions.

    • The plan offers participants the opportunity to change investments as frequently as appropriate in light of the volatility of plan investments – at least quarterly.
    • Restrictions on participants’ investment directions are reasonable, applied uniformly to participants and comply with certain guidelines. For example, a plan fiduciary may decline to implement a participant’s investment election if the election would result in a “prohibited transaction” under ERISA or the Internal Revenue Code.
    • Participants are provided with (or are able to access) information that is sufficient to help them make informed election decisions.

3. Participants exercise independent control over their plan investment decisions. 

Determining whether a participant acted independently involves looking at the facts and circumstances of each situation. For example, a participant does not act independently when he or she is subjected to improper influence by a plan fiduciary in connection with the transaction.

4. The plan supplies participants with certain information regarding the plan and its investment options, including the following information: 

    • Regular and periodic disclosures of plan-related and investment-related information. To comply with this requirement, plans must adhere to the participant-level fee disclosure requirements under ERISA section 404(a). More information on the participant-level fee disclosure requirements is available on the Department of Labor’s website.
    • A notice that the plan intends to comply with ERISA 404(c) and fiduciaries may be relieved of liability for investment losses as a result of participant investment decisions. This can be provided in the summary plan description. 
    • If applicable, information regarding employer securities offered as an investment alternative under the plan, including a description of special procedures for ensuring the confidentiality of the purchase, holding and sale and the exercise of voting, tender and similar rights. In addition, participants must be provided with the name, address and phone number of the plan fiduciary responsible for monitoring compliance with the special procedures for employer securities.
If you have any questions about this article, or would like to begin talking to a dedicated retirement plan advisor, please get in touch by calling (800) 388-1963 or e-mail us at

Popular posts from this blog

COVID-19: Retirement and Benefit Plan Resources

As the COVID-19 crisis continues to unfold, we are closely monitoring news and updates from top sources. We’ll be updating this section as new developments unfold. Here are several key articles and links to help plan sponsors and administrators navigate the COVID-19 impact to retirement and benefit plans: Retirement Plans 4 Key CARES Act Provisions for Retirement Plan Sponsors Markets React to Coronavirus   Important Considerations for Retirement Plan Sponsors during the Coronavirus Pandemic In Fed We Trust Participant Education Services: Timely Help from a Safe Distance CRDs 100% Taxable for New York State and Local Income Tax Purposes in 2020 IRS Permits Remote Notarization of Participant Elections   Employee Benefits CARES Act Expands Health Coverage Rules Understanding the Historic $2 Trillion Stimulus Package Employee Compensation and Benefits During Closures and Furloughs DOL Clarifies Exemptions to Coronavirus Paid Leave Laws Small Business Exemption to

SECURE 2.0 Discussion Series: Session One

SECURE 2.0 provisions: What we know and what’s still up in the air The SECURE 2.0 Act, signed into law in late December 2022, has factored heavily in retirement industry discourse since the final legislation was published. As with any legislation of this depth and breadth, there’s a lot to digest and the industry takes time to adjust. Our team of experienced advisors recently met to discuss some of the more nuanced provisions of the legislation, such as changes to Roth contributions, and what they could mean for plan sponsors. Panel participants included the following HBS team members: Noah Buck, Christina Bauer-Dobias, Sean Bayne, Vincent Bocchinfuso and Kathleen Coonan. Highlights of our panel’s conversation below should serve to help guide plan sponsor thinking. On Roth employer contributions NB – In addition to deferring pre-tax or Roth, plan sponsors can now allow employer contributions to be classified as Roth, is that right? VB – Correct. This is immediately available to plan s

HANYS Benefit Services names Noah Buck president

Buck brings 20 years of retirement and benefits industry experience to leadership role of boutique advisory agency  Rensselaer, NY July 14, 2022— HANYS Benefit Services announced today Noah Buck has been appointed president. Buck steps into the advisory agency’s leadership role at a time when organizations are seeking expert retirement and employee benefits guidance for fiduciary governance and employee engagement. With HBS since 2019, Buck had most recently served as interim president and was previously vice president of client relationship management. Before joining HBS, Buck was a principal in Milliman’s employee benefits practice. He earned a Bachelor of Science in management science and information systems from Penn State University and a Master of Business Administration from SUNY Albany. "I’m honored to be leading a team that is passionate about making sure our clients are meeting their organization’s and employees’ needs,” said Buck. “A focused approach to retirement and