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ERISA Tips: Providing Information, Advice and Education

Editor’s Note: ERISA Tips is a feature provided with you in mind — to make the newsletter more useful to you! If you have any content for ERISA Tips or the 403(b) Advisor that you would like to contribute or suggest, please contact John Iekel, editor of the 403(b) Advisor, at [email protected].

The following information is derived from “Meeting Your Fiduciary Responsibilities,” a publication of the Department of Labor’s Employee Benefits Security Administration.

Providing Information in Participant-Directed Plans

When plans allow participants to direct their investments, fiduciaries need to take steps to regularly make participants aware of their rights and responsibilities under the plan related to directing their investments. This includes providing plan and investment-related information, including information about fees and expenses, that participants need to make informed decisions about the management of their individual accounts.

Participants must receive the information before they can first direct their investment in the plan and annually thereafter. The investment-related information needs to be presented in a format, such as a chart, that allows for a comparison among the plans investment options. If the information furnished to participants is provided by a service provider a fiduciary relies on reasonably and in good faith, that affords protection from liability regarding the completeness and accuracy of the information.

Investment Advice and Education

An increasing number of employers are offering participants help so they can make informed investment decisions. Employers may decide to hire an investment adviser offering specific investment advice to participants. These advisers are fiduciaries and have a responsibility to the plan participants.

On the other hand, employers also may hire a service provider to provide general financial and investment education, interactive investment materials and information based on asset allocation models. As long as the material is general in nature, providers of investment education are not fiduciaries. However, the decision to select an investment adviser or a provider offering investment education is a fiduciary action and must be carried out in the same manner as hiring any plan service provider.