As an ERISA litigator, I have long been an advocate of the idea that the best defense against litigation is good compliance – in other words, that the best way to prevent lawsuits and, if sued, to come out whole on the other end is to operate a well-run benefit program and to consistently do so long before the process server shows up. In this regard, one of the central elements of running a compliant 401(k) plan that maximizes the opportunity to prevent or win lawsuits is to establish the prerequisites for compliance with ERISA section 404(c); 404(c) provides some protection against claims for breach of fiduciary duty where the employees have control over how their salary deferrals are invested.

For years, one of the more hotly contested topics in ERISA litigation has been the scope of protection against liability that plan sponsors and fiduciaries can claim for themselves by running 404(c) compliant 401(k) plans. There is certainly some protection earned by doing so, but the scope of that protection is likely less than many plan sponsors would like to have obtained or, possibly, believe they acquired by engaging in that particular act of compliance.

Financial advisor Doug Lutkus, who like me believes that providing more information about investment options to plan participants is often the best course of action for plan sponsors, and I will be discussing these topics in a webinar today. If you would care to join us, you can find the sign up information here.