United States Code

USC most recently checked for updates: Oct 07, 2022

§ 1104.
Fiduciary duties
(a)
Prudent man standard of care
(1)
Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—
(A)
for the exclusive purpose of:
(i)
providing benefits to participants and their beneficiaries; and
(ii)
defraying reasonable expenses of administering the plan;
(B)
with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
(C)
by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
(D)
in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.
(2)
In the case of an eligible individual account plan (as defined in section 1107(d)(3) of this title
(b)
Indicia of ownership of assets outside jurisdiction of district courts

Except as authorized by the Secretary by regulations, no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States.

(c)
Control over assets by participant or beneficiary
(1)
(A)
In the case of a pension plan which provides for individual accounts and permits a participant or beneficiary to exercise control over the assets in his account, if a participant or beneficiary exercises control over the assets in his account (as determined under regulations of the Secretary)—
(i)
such participant or beneficiary shall not be deemed to be a fiduciary by reason of such exercise, and
(ii)
no person who is otherwise a fiduciary shall be liable under this part for any loss, or by reason of any breach, which results from such participant’s or beneficiary’s exercise of control, except that this clause shall not apply in connection with such participant or beneficiary for any blackout period during which the ability of such participant or beneficiary to direct the investment of the assets in his or her account is suspended by a plan sponsor or fiduciary.
(B)
If a person referred to in subparagraph (A)(ii) meets the requirements of this subchapter in connection with authorizing and implementing the blackout period, any person who is otherwise a fiduciary shall not be liable under this subchapter for any loss occurring during such period.
(C)
For purposes of this paragraph, the term “blackout period” has the meaning given such term by section 1021(i)(7) of this title.
(2)
In the case of a simple retirement account established pursuant to a qualified salary reduction arrangement under section 408(p) of title 26, a participant or beneficiary shall, for purposes of paragraph (1), be treated as exercising control over the assets in the account upon the earliest of—
(A)
an affirmative election among investment options with respect to the initial investment of any contribution,
(B)
a rollover to any other simple retirement account or individual retirement plan, or
(C)
one year after the simple retirement account is established.
No reports, other than those required under section 1021(g) of this title, shall be required with respect to a simple retirement account established pursuant to such a qualified salary reduction arrangement.
(3)
In the case of a pension plan which makes a transfer to an individual retirement account or annuity of a designated trustee or issuer under section 401(a)(31)(B) of title 26, the participant or beneficiary shall, for purposes of paragraph (1), be treated as exercising control over the assets in the account or annuity upon—
(A)
the earlier of—
(i)
a rollover of all or a portion of the amount to another individual retirement account or annuity; or
(ii)
one year after the transfer is made; or
(B)
a transfer that is made in a manner consistent with guidance provided by the Secretary.
(4)
(A)
In any case in which a qualified change in investment options occurs in connection with an individual account plan, a participant or beneficiary shall not be treated for purposes of paragraph (1) as not exercising control over the assets in his account in connection with such change if the requirements of subparagraph (C) are met in connection with such change.
(B)
For purposes of subparagraph (A), the term “qualified change in investment options” means, in connection with an individual account plan, a change in the investment options offered to the participant or beneficiary under the terms of the plan, under which—
(i)
the account of the participant or beneficiary is reallocated among one or more remaining or new investment options which are offered in lieu of one or more investment options offered immediately prior to the effective date of the change, and
(ii)
the stated characteristics of the remaining or new investment options provided under clause (i), including characteristics relating to risk and rate of return, are, as of immediately after the change, reasonably similar to those of the existing investment options as of immediately before the change.
(C)
The requirements of this subparagraph are met in connection with a qualified change in investment options if—
(i)
at least 30 days and no more than 60 days prior to the effective date of the change, the plan administrator furnishes written notice of the change to the participants and beneficiaries, including information comparing the existing and new investment options and an explanation that, in the absence of affirmative investment instructions from the participant or beneficiary to the contrary, the account of the participant or beneficiary will be invested in the manner described in subparagraph (B),
(ii)
the participant or beneficiary has not provided to the plan administrator, in advance of the effective date of the change, affirmative investment instructions contrary to the change, and
(iii)
the investments under the plan of the participant or beneficiary as in effect immediately prior to the effective date of the change were the product of the exercise by such participant or beneficiary of control over the assets of the account within the meaning of paragraph (1).
(5)
Default investment arrangements.—
(A)
In general.—
For purposes of paragraph (1), a participant or beneficiary in an individual account plan meeting the notice requirements of subparagraph (B) shall be treated as exercising control over the assets in the account with respect to the amount of contributions and earnings which, in the absence of an investment election by the participant or beneficiary, are invested by the plan in accordance with regulations prescribed by the Secretary. The regulations under this subparagraph shall provide guidance on the appropriateness of designating default investments that include a mix of asset classes consistent with capital preservation or long-term capital appreciation, or a blend of both.
(B)
Notice requirements.—
(i)
In general.—
The requirements of this subparagraph are met if each participant or beneficiary—
(I)
receives, within a reasonable period of time before each plan year, a notice explaining the employee’s right under the plan to designate how contributions and earnings will be invested and explaining how, in the absence of any investment election by the participant or beneficiary, such contributions and earnings will be invested, and
(II)
has a reasonable period of time after receipt of such notice and before the beginning of the plan year to make such designation.
(ii)
Form of notice.—
The requirements of clauses (i) and (ii) of section 401(k)(12)(D) of title 26 shall apply with respect to the notices described in this subparagraph.
(d)
Plan terminations
(1)
If, in connection with the termination of a pension plan which is a single-employer plan, there is an election to establish or maintain a qualified replacement plan, or to increase benefits, as provided under section 4980(d) of title 26, a fiduciary shall discharge the fiduciary’s duties under this subchapter and subchapter III in accordance with the following requirements:
(A)
In the case of a fiduciary of the terminated plan, any requirement—
(i)
under section 4980(d)(2)(B) of title 26 with respect to the transfer of assets from the terminated plan to a qualified replacement plan, and
(ii)
under section 4980(d)(2)(B)(ii) or 4980(d)(3) of title 26 with respect to any increase in benefits under the terminated plan.
(B)
In the case of a fiduciary of a qualified replacement plan, any requirement—
(i)
under section 4980(d)(2)(A) of title 26 with respect to participation in the qualified replacement plan of active participants in the terminated plan,
(ii)
under section 4980(d)(2)(B) of title 26 with respect to the receipt of assets from the terminated plan, and
(iii)
under section 4980(d)(2)(C) of title 26 with respect to the allocation of assets to participants of the qualified replacement plan.
(2)
For purposes of this subsection—
(A)
any term used in this subsection which is also used in section 4980(d) of title 26 shall have the same meaning as when used in such section, and
(B)
any reference in this subsection to title 26 shall be a reference to title 26 as in effect immediately after the enactment of the Omnibus Budget Reconciliation Act of 1990.
(e)
Safe harbor for annuity selection
(1)
In general
With respect to the selection of an insurer for a guaranteed retirement income contract, the requirements of subsection (a)(1)(B) will be deemed to be satisfied if a fiduciary—
(A)
engages in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts;
(B)
with respect to each insurer identified under subparagraph (A)—
(i)
considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract; and
(ii)
considers the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under such contract; and
(C)
on the basis of such consideration, concludes that—
(i)
at the time of the selection, the insurer is financially capable of satisfying its obligations under the guaranteed retirement income contract; and
(ii)
the relative cost of the selected guaranteed retirement income contract as described in subparagraph (B)(ii) is reasonable.
(2)
Financial capability of the insurer
A fiduciary will be deemed to satisfy the requirements of paragraphs (1)(B)(i) and (1)(C)(i) if—
(A)
the fiduciary obtains written representations from the insurer that—
(i)
the insurer is licensed to offer guaranteed retirement income contracts;
(ii)
the insurer, at the time of selection and for each of the immediately preceding 7 plan years—
(I)
operates under a certificate of authority from the insurance commissioner of its domiciliary State which has not been revoked or suspended;
(II)
has filed audited financial statements in accordance with the laws of its domiciliary State under applicable statutory accounting principles;
(III)
maintains (and has maintained) reserves which satisfies all the statutory requirements of all States where the insurer does business; and
(IV)
is not operating under an order of supervision, rehabilitation, or liquidation;
(iii)
the insurer undergoes, at least every 5 years, a financial examination (within the meaning of the law of its domiciliary State) by the insurance commissioner of the domiciliary State (or representative, designee, or other party approved by such commissioner); and
(iv)
the insurer will notify the fiduciary of any change in circumstances occurring after the provision of the representations in clauses (i), (ii), and (iii) which would preclude the insurer from making such representations at the time of issuance of the guaranteed retirement income contract; and
(B)
after receiving such representations and as of the time of selection, the fiduciary has not received any notice described in subparagraph (A)(iv) and is in possession of no other information which would cause the fiduciary to question the representations provided.
(3)
No requirement to select lowest cost

Nothing in this subsection shall be construed to require a fiduciary to select the lowest cost contract. A fiduciary may consider the value of a contract, including features and benefits of the contract and attributes of the insurer (including, without limitation, the insurer’s financial strength) in conjunction with the cost of the contract.

(4)
Time of selection
(A)
In general
For purposes of this subsection, the time of selection is—
(i)
the time that the insurer and the contract are selected for distribution of benefits to a specific participant or beneficiary; or
(ii)
if the fiduciary periodically reviews the continuing appropriateness of the conclusion described in paragraph (1)(C) with respect to a selected insurer, taking into account the considerations described in such paragraph, the time that the insurer and the contract are selected to provide benefits at future dates to participants or beneficiaries under the plan.
Nothing in the preceding sentence shall be construed to require the fiduciary to review the appropriateness of a selection after the purchase of a contract for a participant or beneficiary.
(B)
Periodic review

A fiduciary will be deemed to have conducted the periodic review described in subparagraph (A)(ii) if the fiduciary obtains the written representations described in clauses (i), (ii), and (iii) of paragraph (2)(A) from the insurer on an annual basis, unless the fiduciary receives any notice described in paragraph (2)(A)(iv) or otherwise becomes aware of facts that would cause the fiduciary to question such representations.

(5)
Limited liability

A fiduciary which satisfies the requirements of this subsection shall not be liable following the distribution of any benefit, or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract, for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the terms of such contract.

(6)
Definitions
For purposes of this subsection—
(A)
Insurer

The term “insurer” means an insurance company, insurance service, or insurance organization, including affiliates of such companies.

(B)
Guaranteed retirement income contract

The term “guaranteed retirement income contract” means an annuity contract for a fixed term or a contract (or provision or feature thereof) which provides guaranteed benefits annually (or more frequently) for at least the remainder of the life of the participant or the joint lives of the participant and the participant’s designated beneficiary as part of an individual account plan.

(Pub. L. 93–406, title I, § 404, Sept. 2, 1974, 88 Stat. 877; Pub. L. 96–364, title III, § 309, Sept. 26, 1980, 94 Stat. 1296; Pub. L. 101–508, title XII, § 12002(b)(1), (2)(A), Nov. 5, 1990, 104 Stat. 1388–565, 1388–566; Pub. L. 104–188, title I, § 1421(d)(2), Aug. 20, 1996, 110 Stat. 1799; Pub. L. 107–16, title VI, § 657(c)(1), June 7, 2001, 115 Stat. 136; Pub. L. 107–147, title IV, § 411(t), Mar. 9, 2002, 116 Stat. 51; Pub. L. 109–280, title VI, §§ 621(a), 624(a), Aug. 17, 2006, 120 Stat. 978, 980; Pub. L. 110–458, title I, § 106(d), Dec. 23, 2008, 122 Stat. 5107; Pub. L. 116–94, div. O, title II, § 204, Dec. 20, 2019, 133 Stat. 3165.)
cite as: 29 USC 1104