Advice vs. Information

As an administrator at a participating institution, you should clearly distinguish between providing your employees with educational investment information and giving them investment advice.

General educational information about the plan's investment options is not considered investment advice, so providing it isn't likely to subject you to fiduciary liability. Nor should there be any liability for discussing general investment principles and strategies or describing the advantages and flexibilities of one fund over another, as long as the information is factual and does not include actual allocation recommendations.

Giving accurate information is critical to the proper operation of the plan, and it does become more complex as the number of alternative financial services organizations and investment choices that are available to your plan's participants increases.

If your institution's plan offers several choices, you can reduce its risks by:

• Giving your employees comparisons of the choices
• Reviewing the plan's financial services organizations' literature for accuracy
• Having the financial services organizations review material prepared by the institution
• Preventing competitive financial services organizations from describing each other's products
• Notifying participating employees if the financial strength or rating of a financial services organization deteriorates
• Making sure that all descriptive material distributed to employees (including material distributed by financial services organizations) remains up-to-date
• Making sure that administrative staff members who counsel employees are knowledgeable about plan provisions, options, and flexibilities, and that they understand the limitations on their role