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Abstract
Section 404(c) of the Employee Retirement and Income Security Act (ERISA) - an often-misunderstood provision that could become a battleground in 401(k) plan litigation - is discussed. Fiduciaries must act prudently in selecting 401(k) investment options. If the fiduciary fails to carry out his or her duties, the fiduciary is personally responsible for making good on any losses. To give investment fiduciaries a measure of relief, ERISA contains a provision, Section 404(c), that provides a partial defense for fiduciaries of participant-directed plans. Section 404(c) protects fiduciaries from poor asset allocation decisions by the participants but not from liability for losses caused by investment options chosen or kept because of imprudent practices by the investment fiduciaries. The obvious conclusion is that plans should comply with the Section 404(c) requirements.