Under a safe harbor rule, ERISA fiduciary liability does not apply to investment decisions made by plan participants if plan participants control the investment of their individual accounts. Many employers design plans to meet the safe harbor rule in order to minimize fiduciary responsibilities. If the safe harbor rule applies, a plan fiduciary may be liable for the investment alternatives made available, but not for the specific investment decisions made by participants. This includes investments in employer stock made at the direction of the participant. Failure to satisfy the safe harbor rule means that plan fiduciaries may be held liable for the investment decisions of participants.

In order for the safe harbor to apply:

• the plan must provide at least three different investment options, each of which is diversified and has materially different risk and return characteristics;
• the plan must allow participants to give investment instructions with respect to each investment option under the plan with a frequency that is appropriate in light of the reasonably expected market volatility of the investment option (the general volatility rule);
• at a minimum, participants must be allowed to give investment instructions at least every three months with respect to at least three of the investment options, and those investment options must constitute a broad range of options (the three-month minimum rule);
• participants must be provided with detailed information about the investment options, information regarding fees, investment instructions and limitations, and copies of financial data and prospect uses; and
• specific requirements must be satisfied with respect to investments in employer stock to ensure that employees’ buying, selling, and voting decisions are confidential and free from employer influence.

In addition, the safe harbor rule applies only with respect to a transaction where a participant exercises "independent control in fact" with respect to the assets in his or her account. Whether a participant has exercised "independent control in fact" with respect to a transaction depends on the facts and circumstances of the particular case. However, a participant’s exercise of control is not "independent in fact" if:

• the participant is subjected to improper influence by a plan fiduciary or the employer with respect to the transaction;
• a plan fiduciary has concealed material nonpublic facts regarding the investment from the participant, unless the disclosure of the information by the plan fiduciary to the participant would violate other law not preempted by ERISA; or
• the participant is legally incompetent and the responsible plan fiduciary accepts the participant’s instructions knowing this.