What is ERISA 404(c) protection?

Last updated October 2, 2026

ERISA 404(c) shields fiduciaries from liability for participants' own investment choices — but only when the plan offers a broad range of options, delivers required disclosures, and lets participants exercise real control. Fiduciaries always remain responsible for prudently selecting and monitoring the menu itself.

In a participant-directed 401(k), who's responsible when a participant invests badly? Section 404(c) answers: the participant — if the plan earns the protection by:

  • Offering a broad range of investment alternatives (at least three diversified core options with materially different risk/return profiles)
  • Allowing transfers with appropriate frequency
  • Providing the required disclosures, including the 404a-5 fee disclosure

The critical boundary: 404(c) never covers the fiduciaries' own acts. Selecting the menu, monitoring it, and choosing the default remain fully fiduciary functions — the fee litigation of the past two decades lives entirely in that space. Treat 404(c) as protection for participant choices, not a shield for the committee's.

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