Click to see Misconceptions about this ERISA statute
Plan sponsor fiduciaries (Trustee, plan administrator, or any individual that exercises judgment or discretion with respect to any aspect of the plan's investments or operations) assume personal liability for their errors and omissions and for the errors and omissions of the co-fiduciaries that they may have been, or should have been, aware of. The prudent expert standard of ERISA is a very high bar. Simply hiring someone or some company to "take care of the plan" and assuming that you can fix problems later is a big mistake.
ERISA and the DOL do not accept ignorance or lack of time, or lack of interest as adequate excuses for what is very serious business, the retirement future of your employees. Being a fiduciary is a very unique position that involves the highest level of personal integrity, diligence, and effort. That means securing the help needed to properly discharge obligations that require the expertise of professionals.
Many plaintiff attorneys are turning their attention to ERISA plans as a potential new market in the wake of recent corporate scandals (Enron, Worldcom, Adelphia and the mutual fund short-term trading and late-day trading). ERISA and the DOL regulations provide a treasure trove of potential "rule violations" that can be used to place blame for market losses, or even for mediocre performance.
Liability exists not just for actual losses in a Plan. Liability can exists for what a Plan should have earned. A recent case involving a Painter's Union retirement trust in Pennsylvania resulted in an $8 million dollar judgment against the Trustees for allocating all assets to bonds during the run-up of the stock market in the mid 1990s.
Many Plan Fiduciaries feel that the discussion of personal liability is a "scare tactic" used by investment salespeople to help close a sale. Whereas that is often the case, such criticism does not negate the fact that the Prudent Expert Rule does impose significant personal liability on the Plan Fiduciary.
Other Plan fiduciaries simply think of themselves as "small fish," that the Department of Labor's attention is elsewhere. They believe they have no real risk of audit.
Still others think that the standard of care is not that high. "I picked good funds and that should be enough."
Such Plan fiduciaries have convinced themselves they are right. Hopefully, they will never have to convince the DOL or a court of law they are right since the burden of proof will be their's.