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CBIZ does not provide legal advice. By providing this sample document to the Employer, CBIZ is not providing the Employer with legal
advice and CBIZ strongly recommends that the Employer seek legal advice on its particular situation.
Plan Sponsor 404(c) Checklist
Purpose:
To assist plan sponsors with ERISA Section 404(c) compliance, so that plan fiduciaries
will not be held liable for losses on individual participant transactions.
Requirements:
The requirements for ERISA Section 404(c) fall under three basic categories:
1)
Investment menu requirements
2)
Plan design and administrative requirements
3)
Information and disclosure requirements
1) Investment Menu Requirements
ERISA Section 404(c) generally requires a plan to offer a “broad range of investment alternatives.” This is
satisfied by meeting the following requirements:
The investments available under the plan are sufficient to provide the participant a chance to materially
affect a) the potential returns in his or her account and b) the degree of risk to which it is subject.
The plan offers at least three investment alternatives that:
o
Are diversified
o
Have materially different risk and return characteristics
o
Enable the participant to achieve a portfolio with aggregate risk and return characteristics at any
point within the range appropriate for the participant
o
When combined with the others, each tends to minimize risk to the portfolio through diversification
Participants are given the opportunity to diversify their accounts to sufficiently avoid large losses.
2) Plan Design and Administrative Requirements
Under the terms of the plan, participants are given the opportunity to give investment instructions to an
identified fiduciary who is obligated to follow those instructions.
If participants do not give investment instructions in writing, they must be given an opportunity to receive a
written confirmation of their instructions.
Participants have the ability to change investments with a frequency appropriate in light of the volatility of
the investments (generally quarterly or more frequently).
3) Information and Disclosure Requirements (Required to be provided automatically)
A statement that the plan is intended to be an ERISA 404(c) plan, with an explanation that this will relieve
plan fiduciaries of liability for losses resulting from the participant’s investment directions. This can be
provided in the Summary Plan Description.
A description of each investment alternative under the plan, including a) a general description of investment
objectives and risk/return characteristics and b) information about the type and diversification of assets in
the investment alternative.
The identity of any ERISA investment managers.
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