Recently, I have been working on a number of cases that involve allegations of breach of fiduciary duty.  Having read a number of court decisions and article on this issue, it strikes me that while there are a number of duties that a fiduciary has to plans, there are 4 that have jumped out at me as the big ones.

Section 404 of ERISA provides that a fiduciary shall discharge duties with the case, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity would under the same circumstances.  404 also sets out two of the largest duties. 

First, there is the duty of loyalty.  The fiduciary has to act solely and exclusively in the best interests of the plan to provide benefits for participants and defray expenses for administration of the plan.  This means no self-dealing, but it also means watching how the dollars that are spent elsewhere to see that they are properly spent.  Fiduciaries have to know what is reasonable to pay for services rendered to the plan.

Second, there is the duty of diversification or prudent investment.  A fiduciary has to make investment decisions so as to minimize the risk of large losses, unless under the circumstances it is not prudent to do so.  It is interesting that the statute does not require fiduciaries to maximize return.  So fiduciaries should be wary of investment decisions that promise greater returns if those returns come with higher risk. 

Third, there is a duty to properly communicate.  Though specifically articulated in Section 404, there are many court cases that address failure to communicate or miscommunication of plan terms.  Fiduciaries must avoid misleading information and should seek to make sure participants are fully informed of the terms of the plan, and also any changes that occur.

Fourth, there is a duty to maintain the trust.  Sometimes referred to as a record keeping obligation or a segregation obligation, this duty requires fiduciaries to keep accurate records of the plan and also to keep plan assets separate from other assets.  No co-mingling with corporate assets is permitted.  There must e accurate accounting and reporting of plan assets, returns and withdrawals.

Certainly there are more duties that can be read into these and interpreted from them.  But if a prudent fiduciary focuses on these four and makes sure that they are diligent in their exercise of these duties, the risk of claims for breach of fiduciary duty will be lowered.