Best Practices

It is generally accepted that a fiduciary’s responsibility does not require that the plan maintain the highest rated, best performing or lowest cost investment alternatives or service providers. While these may be considerations a fiduciary uses in the management of the plan, it is more important that the fiduciaries define, document and follow prudent processes for their ongoing management of the plan.

A prudent fiduciary process should aid in the communication of the plan’s policies to participants, as well as protect fiduciaries from making arbitrary or compulsive decisions.

ERISA requires that fiduciaries demonstrate their performance consistent with their duties of care and diligence, which demands that fiduciaries follow common practices that have been proven to demonstrate such prudence. This mandate requires fiduciaries to establish procedures for the routine management of their plan, with specific regard to periodically reviewing their service providers, investments and disclosures.

Although ERISA provides guidelines for required disclosures, there is little guidance in how to manage service providers and investments. So, this section is designed to help you understand the established rules with regard to disclosures and available investment-related safe harbors.