Didn’t Know I was Responsible for That.

Not knowing or understanding your plan sponsor responsibilities.

Once Joe (and others in his company…like those who help make plan decisions ) understand that they are fiduciaries, then they can look to UPIA (Uniform Prudent Investor Act- published American Law Institute in 1992) which discusses in detail a prudent investment approach based on Nobel Prize winning concepts called Modern Portfolio Theory.  It states that is not only important for a fiduciary to understand the nature of risk and return; but, there is a duty to diversify, monitor the investments, and understand all costs involved in the platform (known and hidden).  UPIA goes on to express the importance of delegating responsibilities to an independent third party expert to help protect and insulate fiduciary liability.  All Joe needs to do in this case is make sure the third party meets the standard.

The Good News

So here’s the good news; a plan sponsor who recognizes their role as a fiduciary and applies the UPIA in a process can effectively reduce the plan sponsor’s and his fiduciary liability.  Well planned third party relationships can not only bring the benefit of less liability; but, also provide participant comfort in knowing the legal standards have been met and the plan is built on prudent investment philosophy.