The Magic Bullet of 404(c) Compliance

magic bullet

ERISA §404(c), is the code section that may limit a plan sponsor’s liability in retirement plans where participant directs their investments. There are many people in the marketplace that have guaranteed that plan sponsors won’t get sued with 404(c) compliance and others have guaranteed that plan sponsors will get sued if they are not fully compliant.


I got a chuckle many years ago when a retirement plan “expert” who is not a financial advisor, actuary, third party administrator or ERISA attorney, claimed that people like me create a fear factor within the retirement plan industry to generate business with no evidence to support it.  It was a good laugh because as an ERISA attorney who charges a flat fee for most of my services, I get paid whether the plan has fiduciary liability issues or not.  My Retirement Plan Tune-Up plan review only discovers errors that are there. As far as evidence goes, like Justice Potter Stewart, I know plan problems when I see it. How many retirement plans out there have compliance issues? I don’t know and since most compliance issues only become compliance issues when they are actually discovered, your guess is good as mine.  I guess the same person who thinks retirement plans have no problems probably thinks that all husbands are faithful because I have no evidence to determine how many wives are being cheated on when they don’t know it.

Section 404(c) compliance or ignorance is not a guarantee on liability issues. There are no absolutes in the retirement plan business and even if a plan sponsor fully complies with Section 404(c), there is still always a chance than an irate employee may sue the plan fiduciaries even if they have absolutely no case. Whether a plan sponsor is vigilant in their duties or not, fiduciary liability and responsibility can really never be fully eliminated. It’s a threat that is always there.  All a plan sponsor can do is implement good practices like annual reviews, semi-annual or an annual fiduciary review, and regular plan enrollment/education meetings to minimize as much potential liability as they can. That is why plan sponsors should always purchase some fiduciary liability insurance because there are no guarantees in life and in plan compliance.

Plan sponsors need to follow a prudent process. As I say, a prudent process is not a full proof process.  I don’t need any evidence to back that out.

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