Make sure you are not making these five critical mistakes with your retirement plan’s ERISA 404(c) election

It is quite common for companies to elect the protection afforded under ERISA 404(c) as part of their company retirement plan. As fiduciary advisors, we often find the 404(c) election may have been made, but the plan fails to satisfy the ongoing conditions for 404(c) compliance.

The presumption made by the plan trustees or Retirement Committee members is that just giving the employee the ability to choose their individual plan investments assures that the employee is responsible for their investment outcome and not the plan fiduciaries. However, as detailed in ERISA 404(c), there are several steps needed to assure this level of protection to the plan sponsor and those serving as fiduciaries. Furthermore, election of 404(c) is not a “one and done” election. Compliance with 404(c) must be monitored and followed on a consistent basis.

Not following the requirements for 404(c) compliance leaves open the possibility that the fiduciary may still be liable for the participant’s decisions and investment results. We strongly urge you to review the list below to ensure you are satisfying the conditions necessary to remain 404(c) compliant.

The five critical mistakes we most typically see regarding a retirement plan's election of 404(c) protection:


404(c) election has not been made in the retirement plan document but is presumed to exist.


Plan participants are not informed of the plan’s intent to be 404(c) compliant.


Plan investments are not adequately diversified.


Investment information needed to make informed decisions is not readily available to the participants.


Movement between the funds by the participants is more limited than provided for by 404(c) provisions.

For a review of how your plan operates under ERISA 404(c) and other fiduciary considerations, contact one of our experienced advisors.

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