Senior counsel Andrew Williams offers a cautionary anecdote about the mismanagement of employee 401(k) investment plans and the liability that could potentially fall on employers and plan administrators who do not have fiduciary liability insurance.

Fiduciaries who handle investments for self-directed 401(k) plans are increasingly exposed to liability for their investment decisions. Those fiduciaries, including employers and individuals charged with investment selection, are being second guessed in court actions for the investment funds they select.

Although the courts are divided, there are some guidelines that plan fiduciaries need to consider when reviewing their plan's mix of mutual funds offered for participant investment.