Revisiting ERISA 404(a) and 404(c)
With so much change facing our industry and the ongoing challenges confounding plan sponsors today, now is a good time to review basic fiduciary responsibilities. At your next Investment Committee meeting, consider a discussion around the basic guidelines as set forth by ERISA 404(a) and 404(c). If you do not have an Investment Committee that currently holds fiduciary responsibility for your retirement plan, please contact our Assurance Financial Services (AFS) advisors for best practices in forming one.
While not all-encompassing, the following acts as a primer in regards to ERISA 404(a) and 404(c).
ERISA 404(a) collectively represents the fiduciaries responsibilities with regard to monitoring the plans investments. Basic compliance items would include:
- Maintenance of an Investment Policy Statement, which is designed to provide a process by which the investments are monitored
- Utilizing quantitative and qualitative analytics to monitor the investment options; the ScorecardSM system that is utilized by Assurance Financial Services was designed as an effective tool to document this requirement
- Periodic review of investment recommendations and policies, which are part of each investment review meeting conducted by your plans consultant
- Documentation of the investment committee meeting process
ERISA 404(c) provides fiduciaries the protection from potential losses that result from participant-level investment decisions. High level, but not comprehensive, compliance would include:
- Offering a broad range of investment alternatives
- Allowing participants to give instructions on how to invest their account; it is important that participants have ultimate control of where they invest their money
- Providing participants sufficient information to make informed decisions
- Allowing participants to exercise independent control over their investments
A final key element to 404(c) is to periodically notify participants of your intention to comply with this requirement. The most effective way to do so is through the periodic distribution of a 404(c) Notice and Policy Statement, which was provided to existing clients of Assurance Financial Services at the beginning of the year.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Assurance Financial Services, Ltd and Assurance Agency, Ltd are not affiliated with Kestra IS or Kestra AS. Assurance Financial Services, Ltd is a wholly owned subsidiary of Assurance Agency, Ltd.
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