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because the Shedds, who were the sole shareholders of petitioner,
were also its only employees. Petitioner asserts that the
failure to diversify is irrelevant to a determination of prudence
with respect to plans not subject to title I of ERISA.
Petitioner maintains further that under ERISA, even when
title I applies to a pension plan, a fiduciary cannot breach the
prudent investor rule by failing to diversify where the asserted
failure to diversify is because of a beneficiary-directed
investment. Accordingly, petitioner contends, a failure to
diversify is not a violation of the prudent investor rule where,
as in the instant case, title I does not apply and the sole
participants of the plan, in effect, make investment decisions in
their capacity as the ultimate beneficiaries, and not as
fiduciaries of the plan.
Citing H. Conf. Rept. 93-1280, at 302 (1974), 1974-3 C.B.
415, 463, infra pp. 28-29, respondent contends that the ERISA
section 404(a) fiduciary requirements for investing trust funds
under the prudent investor rule--i.e., that (1) a fiduciary must
discharge his duties with respect to a plan solely in the
interest of the participants and their beneficiaries, and (2) he
10(...continued)
(1) An individual and his or her spouse shall not be
deemed to be employees with respect to a trade or business,
whether incorporated or unincorporated, which is wholly
owned by the individual or by the individual and his spouse,
and * * *
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