• A fiduciary, as defined by the Employee Retirement Income Security Act, is anyone who:
  • Exercises authority over plan assets.
  • Renders investment advice for a fee.
  • Has discretionary authority in the administration of the plan.
• What are the duties of a fiduciary?  The fiduciary:
  • Must act solely in the interest of plan participants and their beneficiaries.
  • Must prudently administer the plan and manage its assets.
  • Must follow the plan document.
  • Must diversify plan investments to minimize the risk of large losses.
• In summary, a plan fiduciary:
  • Is personally liable to the plan for losses and lost opportunity costs resulting from breaches of duty.
  • May be required to pay the party’s or the participant’s attorney fees.
  • May be subject to Department of Labor civil fines or excise taxes.

Prudent Expert Rule

The Employee Retirement Income Security Act (ERISA) applies a revised and restated version of the prudent man rule to pension and profit sharing plans. ERISA requires that a fiduciary discharge his/her duties “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.” This statement differs from the classic prudent man rule in that familiarity with such matters suggests a higher standard than simple prudence – hence the name, prudent expert rule.

​There have been court cases that enforce the prudent expert rule; as the court ruled in Donovan vs. Cunningham, 716 F 2d 1455, 1467 (5th Cir. 1983) – “A pure heart and an empty head are not good enough.”