Education or Advice? How Retirement Plan Sponsors Can Boost Retirement Literacy While Avoiding ERISA Fiduciary Liability

Today’s retirement plans (401(k), 403(b), defined benefit pension plans, etc.) are growing ever more sophisticated, offering plan participants more features and options for increased retirement savings. Unfortunately, participant understanding of how those features and options actually work has not kept pace with innovations in plan design, and it may be affecting participants’ retirement readiness.

For employers, that knowledge gap is more than just a financial wellness talking point. Nearly 60% of employees in a recent PwC survey reported that financial matters were their top life stressor, negatively affecting both their productivity and attendance at work. As a result, closing that gap is one tangible step employers can take to ensure employees stay focused and productive on their jobs.     

Given these concerns, employers are becoming more and more focused on increasing their employees’ retirement literacy by helping them better understand their own retirement plan benefits. In doing so, however, employers must ensure that the information provided to plan participants is considered investment “education” (which is not subject to the Employee Retirement Income Security Act’s (ERISA) fiduciary obligations), and not investment “advice” (which is). Failing to appreciate the distinction may result in a breach of the employer’s ERISA fiduciary obligations.  

Why Retirement Fluency Matters

According to the findings of the 2026 TIAA Institute-GFLEC Personal Finance Index (the Index), retirement knowledge among American adults is lower than ever. The Index discusses the results of the TIAA Institute’s 2026 survey of 3,602 U.S. adults on a range of financial topics, including six questions measuring “basic retirement fluency.” Those questions examined the correlation between the respondents’ retirement readiness and their knowledge of subjects such as Social Security benefits; Medicare coverage; employment-based retirement savings; the need for lifetime income; the likelihood of needing long-term care; and their own life expectancies.  

According to the Index, on average, respondents answered just 2.2 of the 6 retirement-related questions correctly. For instance, less than 30% of the Index’s respondents understood how much of their healthcare costs would be covered by Medicare or the likelihood they might need long-term care. Even worse for retirement plan sponsors, only 43% correctly answered the question describing how employer matching contributions in a 401(k) plan work.

These results matter because retirement fluency ultimately drives retirement-readiness behaviors. Index respondents who answered more retirement-related questions correctly were more likely to be prepared for retirement. [1] For plan sponsors, the Index’s takeaway is clear: better-informed employees are more likely to make better use of their retirement plan benefits.

Investment Education vs. Investment Advice

Plan sponsors are well-positioned to help close plan participants’ retirement literacy gap by providing participants with the information necessary to make investment and retirement-related decisions appropriate to their particular situations. However, plan sponsors must understand the difference between providing participants with investment education, and not investment advice, as confusing the two can result in direct implications for the plan sponsor under ERISA.

Investment Education. Investment education includes information and concepts that help participants understand how their retirement plan and its investment alternatives work. This information allows participants to make their own informed decisions, without steering them toward any particular option.

Department of Labor (DOL) Interpretive Bulletin 96-1 (the Bulletin) provides a framework for identifying communications that will generally [2] be treated as investment “education,” regardless of who provides the information (i.e., the plan sponsor, another plan fiduciary, or an outside service provider), how often it is provided, or the manner in which it is provided. The Bulletin identifies four broad types of investment education:

• Plan information. This category describes a retirement plan’s terms and how it operates; the benefits of participating and of increasing contributions; and the impact of taking withdrawals before retiring (such as hardship distributions, loans, etc.).
• General financial and investment concepts. Information included in this category explains general concepts like risk and return; diversification; dollar-cost averaging; compounding; and tax-deferred investing; as well as describing the potential effects of inflation; estimating future retirement income needs; setting investment time horizons; and assessing a participant’s overall risk tolerance.

• Asset allocation models. These include sample portfolios for hypothetical investors with different time horizons and risk profiles.
• Interactive tools. This category of information includes questionnaires, worksheets, calculators, and similar offerings that allow participants to estimate their own future retirement income needs and consider how different asset allocations might affect their potential retirement income.

If a plan sponsor (or any vendor it engages to provide investment education as described below) does not stray beyond providing investment education to plan participants, it will not be viewed as acting as an investment “advisor” under ERISA.  

Investment Advice. As described in the Bulletin, investment “advice” includes specific, personalized recommendations about particular investment options or about actions a participant may take (such as helping a participant select specific investment options), typically provided for a fee. Under ERISA, a person providing investment advice with respect to a retirement plan will be deemed to be fiduciary of the plan and will be responsible for ensuring such advice is prudent.

Blurring the line between investment education and investment advice can expose plan sponsors (or their delegates) to potential liability for breaches of their fiduciary duties under ERISA. As a result, plan sponsors should avoid providing participants with individualized advice or assistance.

Outsourcing Investment Education

Communications Strategy. Many plan sponsors elect to outsource the responsibility for providing investment education to third-party vendors (such as the plan’s recordkeeper, third-party administrators, or other experts). These vendors can help a plan sponsor determine not only the information to provide to plan participants, but the method for providing it, by considering the plan sponsor’s workforce demographics, employee tenure, etc. For example, younger workers may prefer mobile apps or short-form videos, while older participants may respond better to longer-form content or one-on-one support. There is no one-size-fits-all approach to providing educational materials, however, so a multi-channel communication strategy is essential to reach all segments of the employer’s workforce.

Continuing Fiduciary Obligation. Outsourcing investment education/communications to a third-party vendor does not mean that the plan sponsor can outsource its fiduciary obligations, however. Retaining a third-party vendor to draft and distribute educational materials to plan participants will not transfer the plan sponsor’s fiduciary responsibility with respect to those materials to the vendor. (In fact, most vendors will specifically disclaim such liability in their service contracts.)

First, selecting a vendor to create and distribute educational materials is itself a fiduciary act. As a result, plan sponsors must act prudently when choosing a vendor, considering the proposed fees for the services to be provided, the vendor’s expertise, compliance history, technology capabilities, etc.

In addition, plan sponsors that elect to outsource their educational obligations to third-party vendors remain obligated to monitor the vendor’s activities. Even if the plan sponsor has established a retirement plan committee to administer the plan, it may wish to designate certain members of that committee, or establish a separate sub-committee, that will be responsible for reviewing all vendor-supplied educational materials to ensure they are accurate, complete, and align with the retirement plan’s terms.

Practical Takeaways

Given the continuing decline in retirement fluency among American workers, many plan sponsors are rightly concerned with how to help plan participants better understand their retirement plan benefits. By establishing an educational program that delivers clear, accurate, and well-targeted plan and investment education (without providing investment advice), plan sponsors can empower participants to make better decisions and improve their overall retirement situation while at the same time limiting the plan sponsor’s ERISA fiduciary liability. Plan sponsors looking to establish such a program should consider the following:

• Start with the basics. Any educational program should help participants understand their retirement plan benefits by explaining how the plan works, describing any employer matching contributions, vesting schedules, enrollment procedures, etc.
• Keep investment education general. While the program can explain the benefits of contributing to the plan and concepts like risk and return, diversification, dollar-cost averaging, compounding, and tax-deferred investing, it should not offer participants personalized recommendations or advice.

• Monitor third-party vendors. Even if the plan sponsor engages third-party vendors to help it implement an investment education program, the plan sponsor will remain responsible for monitoring the vendor’s activities and output. The plan sponsor (or the plan’s administrative committee) should periodically review and assess the vendor’s services, and review all participant communications for accuracy and to ensure that the materials are appropriate for the intended audience.

An investment education program incorporating these points can help equip plan participants to better understand their benefits and make sound retirement decisions, while at the same time limiting the plan sponsor’s fiduciary risks.

[1] For example, 80% of Index respondents who answered four or more retirement fluency questions correctly also reported saving regularly for retirement, and 60% of those respondents had calculated their likely retirement needs. Conversely, among the respondents who scored lowest on the retirement fluency questions (answering one or no questions correctly), only 49% were saving regularly, and just 26% had calculated their retirement needs.

[2] Note that while the Bulletin represents the DOL’s interpretation of what constitutes “investment education” under ERISA, it is not binding precedent. As a result, while courts may consider the Bulletin’s guidance, they are not obligated to follow it.