If I allow my employees to make their own investment choices, will I reduce my fiduciary liability?

You might, but then again, if you are not prudent, you could increase your liability.  Generally, the plan fiduciaries are responsible for the investment decisions of the plan.  However, ERISA § 404(c) provides that fiduciaries will not be liable for participant choices of investments in the plan as long as the plan meets certain requirements outlined in the DOL regulations.  Plans that meet these requirements are referred to as  §404(c) compliant.  If your plan is not §404(c) compliant, you could find yourself liable for the poor decisions made by older employees who invested all of their plan assets in volatile investments shortly before retirement.  We have attached a checklist you can use to ascertain if your plan is §404(c) compliant.  The plan declares to the DOL annually its intention to be §404(c) compliant on line 8 by using the code 2F.  If you have marked this on your filings you should be certain that you are in compliance with the provisions on the attached checklist.  If it is not marked, consider your fiduciary liability carefully.  Just by giving your employees the choice to choose their own investments does not mean your plan is ERISA 404(c) compliant.