What are the main responsibilities of a fiduciary? ERISA imposes specific duties upon plan fiduciaries, including:
- DUTY OF LOYALTY: Known as the “exclusive benefit rule,” a fiduciary must perform his or her duties solely in the interest of participants and beneficiaries, for the exclusive purpose of: − Providing benefits to participants and beneficiaries
- DUTY TO ACT PRUDENTLY: Interpreted by the courts to be a “prudent expert” rule, a fiduciary must act with the “care, skill, prudence, and diligence…that a prudent man acting in a like capacity and familiar with such matters would use…” [ERISA §404(a)(1)(B)] − Fiduciaries may need to hire or consult with an expert if they do not have the expertise on their own. − Acting in good faith is not sufficient. − A prudent decision-making process can be more important than the outcome of a decision. − Decisions and meetings should be properly documented.
- DUTY TO DIVERSIFY INVESTMENTS: A fiduciary should act to diversify investments so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so. − Diversification is measured with respect to the plan’s entire assets, not at the level of the individual manager or investment option.
- DUTY TO FOLLOW PLAN PROVISIONS: To the extent not inconsistent with ERISA, fiduciaries must follow the terms of the governing documents for the plan. − The plan document provisions should be periodically reviewed and kept up-to-date.