What fundamental ERISA requirement guides fiduciaries in selecting and monitoring investment options?

• A. Invest only in government securities
• B. Avoid monitoring after selection
• C. Use a prudent process, diversify, document decisions, and monitor investments
• D. Prioritize in-house funds

Answer: (C)

ERISA requires fiduciaries to act with prudence and to use a careful, systematic process when selecting and monitoring plan investments. This means evaluating investment options for risk, return, and fees; ensuring diversification so no single investment unduly dominates the portfolio; documenting the reasons for choosing or adding investments so there’s a clear trail of decision-making; and continuously monitoring the options over time to respond to changing conditions or new information. This ongoing, prudent, and well-documented approach is what protects participants and aligns with the standards of care under ERISA. The idea of restricting to government securities isn’t required, ongoing monitoring after selection is essential, and prioritizing in-house funds isn’t a mandated requirement for fiduciaries.