Proposed ERISA Regulation Clarifies Fiduciary Prudence in Selecting 401(k) Investment Options
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Summary
This document is a proposed regulation from the Department of Labor clarifying fiduciary duties under ERISA Section 404(a) regarding the selection of designated investment alternatives (DIAs) for participant-directed individual account plans (e.g., 401(k) plans). It addresses confusion about how the "prudence" standard applies when constructing investment menus, noting that certain portfolio-level factors (like diversification) from the 1979 Investment Duties Regulation do not apply to menu construction. The regulation provides a safe harbor for fiduciaries selecting DIAs, focusing on the duty of prudence in the context of offering investment options rather than managing a single portfolio.
Key quotes
· 2 pulledthe Department agreed that certain factors in paragraph (b) of the 1979 Investment Duties Regulation, such as 'the composition of the portfolio with regard to diversification,' do not apply to menu construction for such a plan
This document contains a proposed regulation that clarifies, and provides a safe harbor for, a fiduciary's duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA) in connection with selecting designated investment alternatives for a participant-directed individual...
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