For ERISA plans, fiduciaries are responsible for all plan investment decisions, including participant decisions, unless they comply with 404c. This article from Fred Reish explains the attractiveness and requirements of 404c. You will note in that article that while sufficient information to allow participants to make informed investment decisions is required, participant education is not explicitly required.
However, in testimony given by Mr. Reish arguing for improvements to 404c, he argues that general fiduciary provisions say that participants should be informed to make reasoned investment decisions for investing for retirement, and cites evidence that without education, participants are generally not informed.
We believe a proactive approach is the preferred method of participant education, and concur with Mr. Reish’s opinion that education be consistent with the guidance under DOL Interpretive Bulletin 96-1(d), which says information relating to plan information, general financial and investment information, asset allocation models, and interactive investment materials are not considered investment advice that gives rise to fiduciary status.
For non-ERISA plans, it is considerably more clear that education is not required because they don’t fall under these ERISA requirements, but why wouldn’t you want to achieve this higher standard?
The post was based on an email inquiry from an AIF designee. A 404c checklist used in consultant's assessments and in CEFEX Certifications is available for AIF/AIFA designees to download from the designee portal. If you have a question for fi360 that you would like to see answered in the fi360 Blog, please note them in the comments section below or email them to blog@fi360.com.
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