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ERISA Tips: Prudent Man Standard of Care

Editor’s Note: ERISA Tips is a feature provided with you in mind — to make the newsletter more useful to you! If you have any content for ERISA Tips or the 403(b) Advisor that you would like to contribute or suggest, please contact John Iekel, editor of the 403(b) Advisor,
at [email protected].

What Does ERISA say about the Prudent Man Standard of Care?

Under ERISA Section 404(a)(1), a fiduciary is to discharge their duties regarding a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of:

  • providing benefits to participants and their beneficiaries; and

  • defraying reasonable expenses of administering the plan;

A fiduciary is to do so:

  • with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

  • by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and

  • in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of other sections of ERISA.