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The DOL regulations state that a fiduciary will satisfy the
prudent investor requirements of ERISA section 404(a)(1)(B) if
the fiduciary (i) gives appropriate consideration to the relevant
facts and circumstances of the investment or investment course of
action and (ii) acts accordingly. 29 C.F.R. sec. 2550.404a-
1(b)(1) (1997). Pursuant to those regulations,
"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 * * * , 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 * * * :
(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. [29 C.F.R. 2550.404a-
1(b)(2).]
The DOL requirements appear consistent with criteria set
forth by the Commissioner in Rev. Rul. 69-494, 1969-2 C.B. 88,
for testing compliance with the exclusive benefit requirement of
section 401(a)(2). Those criteria are (1) cost must not exceed
fair market value at the time of purchase; (2) a fair return
commensurate with the prevailing rate must be provided; (3)
sufficient liquidity must be maintained to permit distributions
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