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 Revisiting ERISA 404(a) and 404(c)

Plan Fiduciary Information

With so much change facing our industry and the ongoing challenges confounding plan sponsors today, now is a good time to review basic fiduciary responsibilities. At your next Investment Committee meeting, consider a discussion around the basic guidelines as set forth by ERISA 404(a) and 404(c). If you do not have an Investment Committee that currently holds fiduciary responsibility for your retirement plan, please contact our Executive Benefit Plans (EBP) advisors for best practices in forming one.

While not all-encompassing, the following acts as a primer in regard to ERISA Sections 404(a) and 404(c).

ERISA Section 404(a)
ERISA 404(a) collectively represents the fiduciariesí responsibilities with regard to monitoring the planís investments. Basic compliance items would include:

  • Maintenance of an Investment Policy Statement, which is designed to provide a process by which the investments are monitored

  • Utilizing quantitative and qualitative analytics to monitor the investment options; the Investment ScorecardSM system utilized by Executive Benefit Plans was designed as an effective tool to document this requirement

  • Periodic review of investment recommendations and policies, which are part of each investment review meeting conducted by your planís consultant

  • Documentation of the investment committee meeting process

ERISA Section 404(c)
ERISA 404(c) provides fiduciaries the protection from potential losses that result from participant-level investment decisions. High level, but not comprehensive, compliance would include:

  • Offering a broad range of investment alternatives

  • Allowing participants to give instructions on how to invest their account; it is important that participants have ultimate control of where they invest their money

  • Providing participants sufficient information to make informed decisions

  • Allowing participants to exercise independent control over their investments

A final key element to 404(c) is to periodically notify participants of your intention to comply with this requirement. The most effective way to do so is through the periodic distribution of a 404(c) Notice and Policy Statement, which was provided to existing clients of Executive Benefit Plans at the beginning of the year.

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Source:  www.IRS.gov

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Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM


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