Self Directed Brokerage

[Scuba 401]

Are there any articles or opinions concerning potential liability of a fiduciary for the poor investment decisions of participants made in the Self Directed Brokerage option of a 401(k). Isn't this is really giving the participant the ultimate freedom of choice under 404©.

[KJohnson]

404© disclosure is the problem with unlimited self-direction. You can meet broad range of investments and volatility rules. However, disclosing information on each investment choice may be impossible. Also, 404© talks about giving investment instructions to a "fiduciary" and a broker would proably not qualify. I have heard DOL state that they think 404© compliance would be very difficult if not impossible in such a situation.

Without 404© protection, DOL's position would probably be that plan fiduciaries are still on the hook. Who knows what a Court would say.

[Scuba 401]

I was able to locate an article by Bruce Ashton from Reish & Luftman (it is posted on their website in the ERISA Report for Plan Sponsors) on the subject. His position is that the plan fiduciary will be ok as long as they follow the requirements of 404© with regard to the "core plan assets." I have mixed feeling on this subject and would be like to hear more feedback.