March 16, 2020
Authored by: Randy Scherer, Lisa Van Fleet and Steve Evans
If you are an ERISA fiduciary charged with management or investment of plan assets, and recent market activity has not tripped any alarm bells — or, if the alarm bells have been tripped, but you are are looking for a bit of guidance on how to respond, then keep reading. Due to a combination of recent factors, including the spread of the Coronavirus (COVID-19), the stock market suffered its worst drop in over 30 years this past week. Moreover, the market outlook will likely continue to be uncertain for the near future as businesses around the world adjust and take action in response to the COVID-19 outbreak and many consumers are quarantined in their homes.
In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action. As a reminder, those duties under Sections 404 and 406 of ERISA include:
- The duty to act prudently;
- The duty to diversify assets of the plan;
- The duty to comply with provisions of the plan;
- The duty of loyalty;
- The duty to pay only reasonable plan expenses; and
- The duty to avoid prohibited transactions.
The first three of these are particularly relevant when the market is uncertain.
- The duty to act prudently: It is important to remember that this duty requires the fiduciary to act with the care, skill, prudence, and diligence that a prudent person acting in