Limit your liability with 404(c)

You can reduce your liability as a plan sponsor by complying with 404(c) regulations under ERISA. These regulations allow you to pass responsibility for selecting investments on to your participants so you won’t be liable for any investment losses.

404(c) basics

See if your plan meets the 404(c) requirements:

  • Choice — Offer participants a broad range of diversified investment alternatives — at least three — with different levels of risk and return potential.
  • Change — Give participants a way to transfer assets between investments at least quarterly. If the investment options are volatile, the opportunity to make monthly or daily exchanges might be required.
  • Communication — Disclose your plan’s 404(c) status to participants. They must also receive comprehensive education about the investment options in the plan — including objectives, risks, fees and expenses — so that they can make informed decisions.

Monitor your plan’s investments

Even if your plan meets 404(c) requirements, it’s your ongoing responsibility to carefully select and monitor your plan’s investments. 404(c) liability protection will not apply for investments inappropriate for your plan (for example, a fund with expenses that are obviously too high). Make sure you’re meeting ERISA requirements by following these steps:

  • Thoroughly review the plan’s investment options.
  • Monitor the results and costs of each plan investment on an ongoing basis.
  • Compare each plan investment to others in the same asset class.
  • Document your investment selection and review processes, and keep complete records of relevant meetings and discussions.


Consult with your company attorney or financial professional for more information about 404(c) regulations.

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