Establishing A Prudent Process

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.

In order to effectively manage fiduciary liability, it is necessary to thoughtfully plan, document and follow a prudent decision-making process. A fiduciary can generally meet this requirement, by adhering to the following guidelines:

1. Define the plan’s objectives in a written document
2. Select service providers best suited to the plan’s needs
3. Provide a mix of investments to achieve adequate diversification
4. Rigorously monitor conformance with plan documents
5. Record your results and make adjustments as needed

However, a fiduciary’s responsibility does not necessarily 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.

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