- 28 - administered. Winger's Dept. Store, Inc. v. Commissioner, 82 T.C. at 887-888. Neither the Code nor the regulations provide specific rules identifying the types of investments which are considered to satisfy or violate the exclusive benefit rule. Id. Notwithstanding the lack of statutory and regulatory guidance, this Court and other courts have recognized that, in appropriate situations, improper investment practices of the trust may warrant disqualification of the related pension plan under the exclusive benefit rule. E.g., id. at 878 and the cases cited thereat. ERISA section 404(a)(1) requires a plan fiduciary to discharge his or her duties for the exclusive purpose of (1) providing benefits to participants and their beneficiaries and (2) defraying reasonable expenses of the plan. Additionally, the fiduciary must (1) perform those duties with the care, skill, prudence, and diligence that a prudent investor would exercise under similar circumstances, (2) diversify investments to minimize the risk of large losses, unless diversification clearly is not prudent under the circumstances, and (3) discharge those duties pursuant to the terms of the plan to the extent they are consistent with the provisions of title I. Id. The legislative history of ERISA section 404(a), however, cautions: "It is expected that courts will interpret the prudent man rule and other fiduciary standards bearing in mind the special nature andPage: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Next
Last modified: May 25, 2011