The 2F Opportunity will help you demonstrate to plan decision-makers that you can help them manage their fiduciary risk, especially in participant-directed plans like 401(k)s, where individuals make poor investment choices, blow their nest eggs, and then blame fiduciaries for losses. 

As you access FreeERISA's 5500 filings, you will see on Line 8a a series of "pension benefits" listed by code in boxes. Code 2F indicates a plan that intends to meet the conditions of regulation 404c, adopted in 1992 to offer plan fiduciaries limited relief from liability for investment decisions made by plan participants. A plan listing 2F inside a box has taken the first step toward protecting its fiduciaries from poor investment choices made by participants. But other steps must be taken, for this protection to be meaningful.

2F gives you a two-sided opportunity: On Line 8a, boxes 2G and 2H indicate participant-directed account plans. If either of these codes is indicated and 2F is not, you should inquire why.

Unless the plan offers only guaranteed investment choices, it means fiduciaries are voluntarily increasing their personal risk. Make sure decision-makers understand the consequences.

If Box 2F is indicated, offer to cover a checklist of other steps the plan should take to make sure fiduciary protection is as strong as possible.

What 404c Requires

Some fiduciaries have skimmed summaries of 404c and concluded that they are "safe" if the plan offers participants at least three diversified investment choices, along with opportunity to make frequent changes among them. However, the regulation clearly specifies that participants also must have "sufficient information to make informed investment choices." A subsequent Interpretative Bulletin issued by the Department of Labor (96-1) clarifies what this means, as well as the potential loss of 404c protection for companies that offer participant investment advice.

A checklist of questions that you can cover with plan decision-makers is below. Web links to the 404c regulation and 96-1 IB follow.

• Have all eligible participants been clearly informed that the plan intends to comply with 404c?

• Have participants been given the name, address and phone number of the plan fiduciaries responsible for providing investment information?

• Does the plan have a written Investment Policy Statement (IPS) and does it explicitly state that the plan intends to comply with 404c?

• Has the plan's annual Summary Plan Description been checked against specific requirements of 404c?

• Has this process been documented in the plan's compliance file?

• Have plan documents been reviewed by an ERISA compliance attorney?

• Does the plan have a published schedule of participant information and education events?

• Is a document file maintained, containing copies of all communications with plan participants?

• At every meeting with plan participants, is a list of attendees recorded and filed?

• Have any restrictions on transferring to or from an investment choice been clearly communicated to participants? Have all transaction fees and commissions that affect the participant been disclosed?

• Specifically, have participants been given a description of the annual operating expenses of each designated investment alternative?

The DOL has defined four specific categories of participant communication that do not constitute "investment advice" for purposes of limiting 404c protection.

They are: 1) plan information; 2) general financial and investment information; 3) asset allocation models; and 4) interactive investment materials, such as worksheets, PC illustrations, etc.

The common denominator of all four is that they don't steer the participant in any particular investment direction. The questions to explore:

• Does the plan's investment advice meet this test?

• If an asset allocation model identifies a specific investment alternative available under the plan, have participants been advised that investment alternatives with similar risk and return characteristics also are available?

• If calculators are used in investor education, are they based on generally accepted investment theories?

• Do they clearly disclose the "what if" assumptions on which they are based, such as retirement age, income levels, inflation rates, rates of return, and all plan investment alternatives?

• Has the plan taken a survey of participants to determine their level of investment knowledge?

• Are plan communications written in a style and language that participants can clearly understand?

• Are plan fiduciaries aware of specific duties that may not be delegated or protected under 404c, including prudent selection and monitoring of investment menu choices?

• Does the plan have a formal process for evaluating investment managers' adherence to fund objectives, including a written evaluation report?

• Does the plan have fiduciary liability insurance from a carrier?

By helping plans in your market understand all necessary steps to gain the protection of 404c, you will demonstrate your professional knowledge, while also showing that you care about decision-makers and their priorities.

In today's climate, keeping retirement dreams from becoming legal nightmares can be a high priority for any fiduciary.