If your pension's investment policy flunks ERISA's "prudence test," your retirement plan may be in jeopardy. And that's not the worst of it!

Situation: The IRS and Department of Labor (DOL), which regulate ERISA retirement plans, are alarmed at the growing number of problems with fiduciary compliance. These usually result from the absence of independent plan review, ineffective audits, and (ironically) the lack of any requirements to report ERISA violations.

Compliance standards and procedures for fiduciaries are based on the "prudent man" doctrine. In fact, procedural prudence, by those with fiduciary responsibility for a retirement plan, is of much greater interest to the IRS and DOL than the performance of assets in the plan.

DOL and IRS auditors can inspect retirement plans for compliance. Violations may result in actions against the plan fiduciary. These range in severity from loss of the plan's tax-deferred status, and remedial penalties or damages (or both), to incarceration — depending on how badly plan assets have been mismanaged. What's more, the number of lawsuits by plan participants seeking to recover damages resulting from compliance problems is likely to climb.

Problem: Under the "prudent man" doctrine, physicians, and other professionals with fiduciary responsibility for retirement plans, may be personally liable for investment decisions made by their pension plans' asset managers.

Solution:

1. Learn ERISA's "prudence procedures" for plan fiduciaries.


2. Review your retirement plan's investment policy to ensure it complies with ERISA standards.


3. Get a second opinion. Have your retirement plan reviewed by a competent adviser.

If you'd like additional information or insight, contact Stephen McCoy at 555-1234.