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ERISA places high standards on the conduct of any party who acts as a fiduciary in the establishment, administration, and maintenance of an ERISA qualified benefit plan. A fiduciary is required to conduct all affairs related to these plans with the utmost integrity, honesty, and good faith. If a fiduciary fails to act, or acts in any way that breeches his/her fiduciary duties, that party can be held personally liable for any damages that result.
There are four main fiduciary duties that are required of anyone involved in handling ERISA qualified benefits and pension plans. First and foremost, a fiduciary must always act in the best interest of the plan beneficiary with the skill and care of a prudent person. A fiduciary must act in accordance with all documents and instruments that govern the plan. S/he must also operate for the exclusive purpose of providing benefits to the plan beneficiary. In order to facilitate a fiduciary relationship, there exists an ERISA diversification requirement.
The ERISA diversification requirement mandates that a fiduciary diversify a plan''s assets in order to minimize the risk of large losses to the plan, in accordance with the “prudence” principal. A fiduciary must take into account a number of factors in order to adequately meet ERISA diversification standards. These factors can include the purpose of the benefit plan, the type of investments that are, or could, be utilized, the amount of assets involved in the plan, geographic dispersion, dates of maturity, and the conditions of the financial and other industries.
ERISA diversification standards are outlined in Section 404(c) of the ERISA Act. There are twenty five different ERISA compliance provisions contained within this section that define fiduciary responsibilities, including ERISA diversification. In the wake of national scandals, such as the Enron case and others, ERISA diversification is becoming an even more important consideration for fiduciaries involved in ERISA benefit plan transactions.
If a fiduciary fails to meet the ERISA diversification standards, they face personal liability for any damages that result. Civil legal penalties can be imposed on fiduciaries in a lawsuit for violation of Section 404''s ERISA diversification requirements. In some cases, a fiduciary can be removed from his professional post if s/he is found in breech of ERISA diversification standards.
Enron Corp. has tentatively agreed to settle ERISA lawsuits over employee pension fund claims. Enron is the energy trader whose 2001 collapse resulted in corporate governance and accounting changes.
Under the proposed agreement, Enron woul...
A suit was filed in the U.S. District Court for the Middle District of North Carolina, charging Krispy Kreme executives “failed to manage prudently and loyally” the assets of the retirement plans “by continuing to offer the plans’ assets in the compa...
Conseco Inc., a Carmel, Indiana based insurer, has agreed to pay $10 million to settle a class action lawsuit filed by employees alleging violations of the Employee Retirement Income Security Act (ERISA) for stock losses related to the company’s 2002 ...
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