(a) In general. Section 404(a)(1)(B) of the Employee Retirement
Income Security Act of 1974 (the Act) provides, in part, that a
fiduciary shall discharge his duties with respect to a plan with the
care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims.
(b) Investment duties. (1) With regard to an investment or
investment course of action taken by a fiduciary of an employee benefit
plan pursuant to his investment duties, the requirements of section
404(a)(1)(B) of the Act set forth in subsection (a) of this section are
satisfied if the fiduciary:
(i) Has given appropriate consideration to those facts and
circumstances that, given the scope of such fiduciary's investment
duties, the fiduciary knows or should know are relevant to the
particular investment or investment course of action involved, including
the role the investment or investment course of action plays in that
portion of the plan's investment portfolio with respect to which the
fiduciary has investment duties; and
(ii) Has acted accordingly.
(2) For purposes of paragraph (b)(1) of this section, ``appropriate
consideration'' shall include, but is not necessarily limited to,
(i) A determination by the fiduciary that the particular investment
or investment course of action is reasonably designed, as part of the
portfolio (or, where applicable, that portion of the plan portfolio with
respect to which the fiduciary has investment duties), to further the
purposes of the plan, taking into consideration the risk of loss and the
opportunity for gain (or other return) associated with the investment or
investment course of action, and
(ii) Consideration of the following factors as they relate to such
portion of the portfolio:
(A) The composition of the portfolio with regard to diversification;
(B) The liquidity and current return of the portfolio relative to
the anticipated cash flow requirements of the plan; and
(C) The projected return of the portfolio relative to the funding
objectives of the plan.
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(3) An investment manager appointed, pursuant to the provisions of
section 402(c)(3) of the Act, to manage all or part of the assets of a
plan, may, for purposes of compliance with the provisions of paragraphs
(b)(1) and (2) of this section, rely on, and act upon the basis of,
information pertaining to the plan provided by or at the direction of
the appointing fiduciary, if--
(i) Such information is provided for the stated purpose of assisting
the manager in the performance of his investment duties, and
(ii) The manager does not know and has no reason to know that the
information is incorrect.
(c) Definitions. For purposes of this section:
(1) The term investment duties means any duties imposed upon, or
assumed or undertaken by, a person in connection with the investment of
plan assets which make or will make such person a fiduciary of an
employee benefit plan or which are performed by such person as a
fiduciary of an employee benefit plan as defined in section 3(21)(A)(i)
or (ii) of the Act.
(2) The term investment course of action means any series or program
of investments or actions related to a fiduciary's performance of his
investment duties.
(3) The term plan means an employee benefit plan to which title I of
the Act applies.
[44 FR 37225, June 26, 1979]
