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purposes of employee benefit plans intended to be effectuated by
the Act." H. Rept. 93-533, at 12 (1973), 1974-3 C.B. 210, 221.12
Thus, we must "recognize that a fiduciary's duties are
circumscribed by Congress' overriding goal of ensuring 'the
soundness and stability of plans with respect to adequate funds
to pay promised benefits.'" Acosta v. Pacific Enters., 950 F.2d
611, 618 (9th Cir. 1992) (quoting 29 U.S.C. sec. 1001 (1988)).
We conclude that the prudent investor principles of ERISA
section 404 apply to an exclusive benefit determination under
section 401(a)(2), regardless of whether title I of ERISA applies
to the plan. We find support for our conclusion in the following
excerpt from the conference report on ERISA:
Basic fiduciary rules
Prudent man standard.--The substitute requires that
each fiduciary of a plan act 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 conducting an enterprise of like
character and with like aims. The conferees expect that the
courts will interpret this prudent man rule (and the other
fiduciary standards) bearing in mind the special nature and
purpose of employee benefit plans.
Under the Internal Revenue Code, qualified retirement
plans must be for the exclusive benefit of the employees and
their beneficiaries. Following this requirement, the
Internal Revenue Service has developed general rules that
govern the investment of plan assets, including a
requirement that cost must not exceed fair market value at
the time of purchase, there must be a fair return
commensurate with the prevailing rate, sufficient liquidity
12 The quoted material from H. Rept. 93-533, at 12 (1973),
1974-3 C.B. 210, 221, describes H.R. 2, 93d Cong., 2d Sess. sec.
111(b)(1) (1974) as reported by the House Committee on Education
and Labor, on Oct. 2, 1973, which became ERISA sec. 404(a)(1).
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