Qualified Retirement Plan
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401k Plans
Regulation 404(c):
  • Shifts most investment liability from employer/trustee to participants
  • Is optional
  • Applies to all defined contribution plans - not just 401(k) plans
  • Education vs. Investment advice
  • 404(c) notice must be in plan document and Summary Plan Description
  • 404(c) applies to brokerage accounts in addition to a menu of mutual funds
Protecting sponsor from investment loss liability

There are three basic conditions necessary for the plan to meet, so that fiduciaries can be relieved of liability for plan investment losses. They are:
  1. The participants must have a "broad range of investment alternatives." These would include cash, bonds, and equities.
  2. The participants must have the opportunity to give investment instructions with a "frequency which is appropriate in light of the market volatility" of the investment alternatives. This means that at least quarterly valuations are required.
  3. The participants must have the opportunity to obtain "sufficient information to make informed decisions with regard to investment alternatives available under the plan."
It must be emphasized that even when all the conditions are met, the fiduciaries retain the responsibility for the prudent choice of designated investment alternatives and the responsibility to monitor those investment alternatives and to monitor the administration and management of the plan on an ongoing basis.

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