401(k) Fiduciary Liability for Plan Sponsors: What CFOs Need to Know

The rules governing 401(k) fiduciary liability changed materially in 2026, and most plan sponsors have not adjusted their exposure accordingly. On March 30, 2026, the Department of Labor proposed a safe-harbor rule that shifts how courts evaluate fiduciary prudence — from second-guessing investment outcomes to scrutinizing whether the fiduciary followed a documented process. For CFOs and HR Directors serving as plan fiduciaries, that change rewards disciplined documentation and punishes its absence.

CFOs, HR Directors, and members of an investment committee are ERISA fiduciaries with personal liability for plan decisions, and that personal exposure is the part most plan sponsors underweight. Hiring an advisor or recordkeeper does not transfer the duty — delegation still requires prudent selection and ongoing monitoring.

• Anyone exercising discretionary authority over the plan — CFO, COO, HR Director, committee member — is a fiduciary under ERISA.
• Fiduciary breaches include excessive fees, imprudent investment selection, failure to monitor providers, and administrative errors.
• Average breach settlements run $500K–$5M, with defense costs adding $200K–$800K regardless of outcome.
• The required ERISA fidelity bond covers fraud and dishonesty only — it does not cover breach of fiduciary duty.
• Most D&O policies contain ERISA exclusions, leaving fiduciary liability insurance as the operative protection.

What Did the DOL’s March 2026 Safe-Harbor Rule Actually Change?

The proposed rule reframes the duty of prudence around process rather than results. For plan sponsors, the practical effect is that how you make and document decisions now matters more than which investment you ultimately selected.

• It establishes a process-based safe harbor: follow and document a disciplined evaluation, and you gain protection even if an investment later underperforms.
• It responds to Executive Order 14330, which directed broader access to alternative assets in 401(k) menus.
• It is asset-neutral — the framework applies to traditional and alternative investments alike.
• It raises expectations: fiduciaries lacking robust documentation become more vulnerable to claims, not less.
• The comment period closed June 1, 2026; sponsors should align process now rather than wait for finalization.

How Anderson v. Intel Affects Plan Sponsor Liability

On January 16, 2026, the Supreme Court agreed to review Anderson v. Intel, the leading case on whether plan sponsors face liability for including nontraditional investments. The decision will shape how easily fee and imprudence claims survive the early stages of litigation.

• The case centers on whether sponsors are liable for offering alternative or nontraditional options.
• It also addresses how a plaintiff’s “meaningful benchmark” allegations are treated at the pleadings stage.
• A documented rationale for an investment class makes it harder for plaintiffs to argue a cheaper option should have been chosen.
• The ruling will influence settlement dynamics, which fiduciary liability insurers weigh heavily.
• Until decided, sponsors should assume scrutiny of investment selection remains high.

What Does 401(k) Fiduciary Liability Insurance Cover?

Fiduciary liability insurance protects the individual fiduciaries, the plan sponsor, and the plan itself against claims of ERISA breach. It is the coverage that responds when a documented process is challenged.

• Defense costs, which are six figures even when a claim is ultimately defeated.
• Damages and settlements arising from alleged breaches of fiduciary duty.
• Coverage for excessive-fee, imprudent-selection, and failure-to-monitor claims.
• Protection that the ERISA fidelity bond and most D&O policies do not provide.
• Limits typically structured in $1M increments, sized to plan assets and risk profile.

Explore each topic in depth: premium factors | ERISA bond vs. fiduciary | documented fiduciary process | alternative investments.