Procedural Prudence is a legal term that has developed into a body of work that explains the appropriate activities of a person (or persons) who is responsible for the operation of, or makes decisions related to, the retirement assets of others. These persons are known as fiduciaries because of their discretionary authority for management responsibilities of the retirement assets on behalf of others.
Since the enactment of ERISA in 1974, the federal courts have issued numerous decisions that have gradually established a broad body of law governing fiduciary conduct. If you are a fiduciary you may not be aware of the requirements governing the investment of retirement plan assets or the personal liability you may incur. It is significant to note that even if a fiduciary is not a benefits expert with regard to the overall management of retirement plans or an investment expert, it is not sufficient to protect the fiduciary from liabilities. It is often the case where a fiduciary may be responsible for a specified activity with regards to the plan where they do not have all of the expertise necessary to prudently carry out their duties. In our opinion, the best thing a fiduciary can do is to retain the services of a qualified investment professional who is willing to also be a fiduciary to the plan.
However, Wall Street does not understand the significance of being a fiduciary. In most circumstances the industry refuses to acknowledge or act as a co-fiduciary. This blatant omission allows the industry to disregard the prudent procedures that should be in place with every retirement plan. If you are working with an advisory firm that will act as a co-fiduciary it then is in everyone’s interest to establish the prudent procedures to protect themselves, or at least greatly reduce their exposure to fiduciary liability.
Since Premier Financial Group acknowledges its co-fiduciary relationship in writing we are aligned with plan fiduciaries in seeking to identify, manage and reduce potential liabilities.
Key elements of Premier Financial Group’s prudent process include the following:Finally, it is worth noting the best-laid plans are worthless if they are not executed. Therefore it is imperative for plan fiduciaries to follow a prudent process at all times.
While no one can predict how plan fiduciaries will fair in our litigious society, those fiduciaries that adopt, follow and maintain a prudent process will be doing their best to limit their potential exposure to unknown liabilities.
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