Removal of Underperforming Funds (Posted January 31, 2001) Technical Tip 5: The following question and answer were from the DOL Q&A Session at the 2000 ASPPA Annual Conference: What is the consequence of fiduciaries failing to monitor and remove underperforming funds in a participant-directed plan? DOL Response: ERISA Sections 404(a) and 404(c) both require that the investment fiduciaries prudently monitor the participant-directed investment options and, where indicated, remove underperforming funds. Section 404(a) imposes an affirmative duty to monitor under ERISA's general fiduciary responsibility rules. Section 404(c), and the regulations under that section, provide that the plan's investment fiduciaries will not be entitled to 404(c) protection for participant investments in funds which are not prudently selected and monitored. Caveat: The answer was drafted by Fred Reish and Brad Huss, the program moderators, based on their understandings of discussions with four senior officials of the Pension and Welfare Benefits Administration (PWBA) of the U.S. DOL. As a result, it does not represent a formal or binding position statement by the PWBA. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.