Part 3 · Chapter 2

DC Plan Investment Menu Governance

Law stated as of October 3, 2026 · Fiduciary Duties and Prohibited Transactions

Scope and status

This chapter is the companion to chapter 1 of this Part, which supplies the §404/§406 framework and the participant-direction safe harbors (its Part C); this chapter covers the decision those safe harbors never protect — what goes on the menu, at what share class, at what price, and on what record. Two live rulemakings and one pending Supreme Court case bear directly on this material. Verify the status of the March 31, 2026 designated-investment-alternatives proposal, the pending ESG-replacement rule, and Anderson v. Intel before relying on them. Related questions are treated elsewhere: the §404/§406 framework, PTEs, and §408(b)(2) in chapter 1 of this Part; pleading standards, standing, and litigation posture in Part 23 (ERISA Disputes, Enforcement, Preemption, and Remedies); §404a-5 and §408(b)(2) disclosure mechanics in Part 4 (Reporting, Disclosure, Recordkeeping, and Claims); employer securities in chapter 1 of this Part (D5) and Part 9 (ESOPs and Employee Ownership); and cybersecurity diligence on an investment provider in Part 24 (Benefits Cybersecurity and Data Incidents).

Sections

Part A is shown in full. The other sections are listed by title; their text is available to subscribers.

Part A — Why the Menu Is the Exposure

A1.Designating the menu is a fiduciary act that no safe harbor covers

Part 3, ch. 2, § A1

ERISA §404(c) relieves fiduciaries of liability for losses resulting from a participant's own investment direction, but it has never relieved them of the duty to prudently select and monitor the alternatives made available. DOL has taken this position since the §404(c) regulation was finalized, and the courts have applied it consistently. Statute: ERISA §404(a)(1)(B), §404(c); Final reg: 29 C.F.R. §2550.404c-1; DOL guidance — formal: preamble to the 1992 final §404(c) regulation (the act of limiting or designating investment options is itself a fiduciary function). The same is true of a QDIA: the regulation gives default-investment relief, not menu-selection relief. Final reg: 29 C.F.R. §2550.404c-5.

A2.The prudence duty here is procedural, and the record is the defense

Part 3, ch. 2, § A2

Prudence under ERISA is judged by the process the fiduciary followed, not by investment outcomes measured with hindsight. Statute: ERISA §404(a)(1)(B); Final reg: 29 C.F.R. §2550.404a-1 (the general investment-duties regulation). The Supreme Court has twice made the point that the inquiry is context-specific and cannot be resolved by categorical defenses: offering some prudent options does not cure an imprudent one, and a fiduciary's duty to monitor is continuing and separate from the duty of initial selection. Case law: Supreme Court — Tibble v. Edison Int'l, 575 U.S. 523 (2015) (continuing duty to monitor; a claim accrues on the failure to monitor, not only on initial selection); Hughes v. Northwestern Univ., 595 U.S. 170 (2022) (rejecting the categorical "meaningful choices" defense; the inquiry is context-specific).

A3.The investment policy statement

Part 3, ch. 2, § A3

An IPS is not required by ERISA, but maintaining one has long been treated as consistent with — and evidence of — a prudent process, and DOL guidance has assumed their use for decades. Statute: no IPS requirement; DOL guidance — formal: the interpretive-bulletin line at 29 C.F.R. Part 2509 addressing statements of investment policy, superseded in relevant part by the current §2550.404a-1(d); Practitioner consensus. The risk runs the other way: an IPS the committee does not follow is a plaintiff's exhibit, because if the IPS is a governing instrument, failing to follow its mandatory terms is a §404(a)(1)(D) breach. Whether an IPS binds is unsettled: DOL's regulation assumes investment managers must follow plan investment policies under §404(a)(1)(D), but the Eighth Circuit has questioned whether an informal IPS is a binding plan document, and the Third Circuit left the question open, holding that permissive IPS terms are not violated by a reasoned decision not to act. Statute: ERISA §404(a)(1)(D); Final reg: 29 C.F.R. §2550.404a-1(d)(4)(ii); Case law: Circuit — Tussey v. ABB, Inc., 746 F.3d 327, 334 n.5 (8th Cir. 2014); In re Quest Diagnostics ERISA Litig., No. 24-2866 (3d Cir. June 22, 2026).

A4.Committee structure, delegation, and the §3(38) alternative

Part 3, ch. 2, § A4

Menu decisions should sit with a properly appointed committee operating under a charter, with the appointing fiduciary retaining a documented duty to monitor its appointees. Statute: ERISA §402(a), §405(c); DOL guidance — formal: interpretive bulletin, 29 C.F.R. §2509.75-8, FR-17 (monitoring appointees at reasonable intervals); Case law: Supreme Court — Tibble. A plan may instead appoint an ERISA §3(38) investment manager, which transfers discretionary investment authority and, if the appointment is prudent, generally limits the appointing fiduciary's liability for the manager's conduct to the selection and monitoring of the manager, although the appointing fiduciary remains liable for its own acts, including knowing participation in or concealment of the manager's breach. Statute: ERISA §3(38), §405(a)(1), §405(d). A §3(21) co-fiduciary adviser does not produce that shift — the committee retains the decision and the liability.

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.