Posts Tagged ‘ERISA’
Will ERISA Trustees ever learn? or “I guess they aren't that smart at Princeton”
The Duty: An ERISA trustee is obligated to know who is being paid what by whom and whether the fees being paid are fair and reasonable. This duty is implicit in the trustee’s duty of prudence under C.F.R. §404a-1 and is specifically required by the U.S.C. §1104(a)(1)(A)(ii). The Breach: The ERISA plan trustees at Boeing…
Read MoreWhen to Fire an Investment Advisor
Question: When, if ever, should a business manager recommend that their client fire their investment advisor? Answer: It will be time for your client to part ways with their investment advisor when, over a protracted period of time, the investment advisor has been unable to accomplish the job they were hired to do. The problem…
Read MoreTrust But Verify: Do Private Equity and Hedge Funds Deliver Superior Risk-adjusted Returns?
For several decades, the investment industry has promoted the virtues of hedge funds and private equity funds for large instructional investors and ultra high net worth individuals. But over the last few years these products have come under increased scrutiny because the hoped-for benefits have, for the most part, not materialized. A report in April…
Read MoreERISA 1104(a)(1)(B) re Duty to Prudently Delegate
A trustee has a duty to prudently invest the plan assets on behalf of the beneficiaries. However, few trustees actually take on this complex responsibility alone. In most cases the trustee will…
Read MoreERISA §1104(a)(1)(c): Duty to balance risk and return with Alternative Investments
Prudence not Prescience Trustees are required to make hard investment decisions. They are to take into consideration the risk of loss and the opportunity for gain associated with each particular investment or investment course of action. ERISA trustees are required to balance the risk and return of each investment decision under conditions of uncertainty. Because…
Read MoreERISA §1104(a)(1)(C) re Diversification
US Code §1104(a)(1)(C) states, “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries… by diversifying the investments of the plan so as to minimize the risk of large losses…” The court in Marshall v. Glass/Metal (D. Haw. 1980) noted, “Ordinarily the fiduciary should not…
Read MoreERISA §1104(a)(1)(A)(ii) re Duty to Incur Reasonable Fees
It is fundamental to a trustee’s duties to ensure that expenses incurred by the plan are fair and reasonable. However, when a plan is using one vendor to provide a bundled solution representing various services, determining whether the plan is paying “fair fees” is difficult. But just because it is hard does not mean it…
Read MoreERISA §1104(a)(1)(C) re Diversification
US Code §1104(a)(1)(C) states, “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries… by diversifying the investments of the plan so as to minimize the risk of large losses…” The court in Marshall v. Glass/Metal (D. Haw. 1980) noted, “Ordinarily the fiduciary should not…
Read MoreERISA §404(a)(1)(B) re Duty to Balance Risk and Return
Trustees are required to make hard investment decisions. They are to take into consideration the risk of loss and the opportunity for gain associated with each particular investment or investment course of action. ERISA trustees are required to balance the risk and return of each investment decision under conditions of uncertainty. Because ERISA trustees do…
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