How 401(k) Plan Sponsors Can Shield Themselves from Investment Loss Liability

ARTICLE | January 05, 2026

The retirement landscape has fundamentally shifted, with employees now shouldering primary responsibility for funding their retirement through 401(k) plans. While this gives participants more control, it doesn't automatically absolve plan sponsors of fiduciary responsibility when investment choices yield poor results.

Many business owners assume that simply offering investment options provides complete protection from liability. However, to truly shield themselves from losses resulting from participant investment decisions, plan sponsors must ensure their 401(k) plans comply with specific ERISA Section 404(c) requirements.

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