Fiduciary Protection for Default Investments in 401(k) and Other Retirement Plans

Lorman Education Services

Review basic fiduciary standards and duties, and how ERISA Section 404(c) may relieve fiduciaries of these duties for a participant’s directed investment.

Most 401(k) and other defined contribution retirement plans allow participants to choose their own investments. When plan fiduciaries allow participants to choose their own investments, the fiduciaries are protected from liability if certain conditions are met.

Notwithstanding, in some cases, participants do not take advantage of the opportunity to choose their own investments. The plan fiduciaries are then forced to choose an investment, thus reviving the potential liabilities associated with allegations that the choice was imprudent and resulted in losses in the form of actual investment losses, as well as fees.

Many fiduciaries do not understand that they are even making those choices and incurring potential liabilities. There are regulations that provide fiduciaries with protections when they are forced to choose a participant’s investments by default.

This information will assist fiduciaries in taking advantage of and attaining those protections.

Learning Objectives:

• You will be able to identify fiduciaries, default investments, and fiduciary standards of care.
• You will be able to describe how to choose a default investment and obtain the protections afforded under the law associated with those choices.
• You will be able to explain the potential consequences and liabilities arising in connection with fiduciary breaches in the context of default investments and otherwise, and how to avoid or minimize those risks.
• You will be able to discuss the importance of recognizing fiduciary duties and fulfilling the applicable standards relative to default investments, as well as other consequences.

Faculty: John C. Hughes, Counsel, Hawley Troxell LLP

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