Under ERISA fiduciary duties, what is the role of diversification?

Prepare for the CEBS Course 3 Exam with Group Benefits Associate and Retirement Plans Associate content using flashcards and multiple choice questions. Enhance your understanding with hints and explanations for each question, ensuring you're ready for success!

Multiple Choice

Under ERISA fiduciary duties, what is the role of diversification?

Explanation:
Diversification is a required part of the prudent process under ERISA. A fiduciary must spread plan assets across a range of investments to reduce the impact of any one investment’s poor performance and protect the beneficiaries, while still seeking reasonable, appropriate returns. This duty applies to all ERISA plans, not just defined benefit plans, and deviations that overly concentrate holdings can breach the duty of prudence.

Diversification is a required part of the prudent process under ERISA. A fiduciary must spread plan assets across a range of investments to reduce the impact of any one investment’s poor performance and protect the beneficiaries, while still seeking reasonable, appropriate returns. This duty applies to all ERISA plans, not just defined benefit plans, and deviations that overly concentrate holdings can breach the duty of prudence.

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