Under the guidance--which is subject to change--401k fiduciaries are now given a safe harbor on 401k investment management decisions and any breach that is "the direct and necessary result of investing a participant or beneficiary's account" in a default investment."
Investment managers and advisers, on the other hand, are solely responsible for any decisions they make with regard to the 401k investments or any resulting losses and do not get the same kind of relief.
In order to qualify for that 401k safe harbor, however, 401k fiduciaries must allow participants
- the opportunity to move their investments into an alternate account
- provide advance notice of the default investment and
- invest the assets in a certain kind of qualified default investment.
Moreover, that default investment, which can be a lifecycle fund or a managed account, or other fund, must limit the presence of employer stock in the portfolio, as well as allow funds to be transferred.
The 401k fiduciary responsibility associated with selecting funds for the investment options in a 401k plan has now been tempered with this new preliminary safe harbor.
One less furrowed brow for plan sponsors.
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