Relief from liability associated with participant investment decisions
Congress recognized that retirement plans might wish to extend to participants the ability to control or manage their individual accounts within the retirement plan. Accordingly, ERISA Section 404(c) addresses the liability issue as follows:
In the case of a pension plan which provides for individual accounts and permits a participant or beneficiary to exercise control over assets in his account, if a participant or beneficiary exercises control over the assets in his account (as determined under regulations of the Secretary) -
- such participant shall not be deemed to be a fiduciary by reasons of such exercise, and
- no person who is otherwise a fiduciary shall be liable under this part for any loss, or by reason of any breach, which results from such participant's, or beneficiary's exercise of control.
As the statute expressly states, relief under 404(c) exists if the associated regulations from the Department of Labor are fully complied with. The regulations, published in October, 1992 as the Final Regulation Regarding Participant Directed Individual Account Plans, comprised 6 pages of the Federal Register . Its preamble was 26 pages in length!
Anecdotal evidence suggests that few fiduciaries and their consultants have read not the Final Regs in their issued format but only commentaries on them. Many such commentaries contain errors or lack sufficient detail.