1998) (indicating that the assumption behind the Prudent Man Rule
is that "trust beneficiaries are highly risk averse and therefore prefer to receive a lower expected return in exchange for taking fewer risks").
Moreover, the recent cases were litigated under situations governed by the "prudent man rule
," whereas most states' trust laws have by now adopted the Prudent Investor Act.
ERISA was aimed at protecting pension fund holders from the outrageous acts of money managers who flouted the Prudent Man Rule
. ERISA came under the Department of Labor's control (in my experience a bureaucratic snakepit).
* Investment skills: Most states require that trustees operate under the "Prudent Man Rule
" of investing and have certain investment mixes that trustees must adhere to.
Some of the important aspects of ERISA included a revision of the Prudent Man Rule
, rules affecting funding, a rule allowing fiduciaries to delegate fiduciary responsibilities, and the requirement that all pension funds develop and maintain an investment policy statement.
In earlier periods of the twentieth century, the so-called "prudent man rule
" gradually became the dominant rule of trust investment law in the various states, generally displacing less flexible approaches, such as "legal lists" of permissible investments.
Prudent Man and Prudent Investor Rules--The Prudent Man Rule
was developed through years of analysis dating back to 1830.
Known as the prudent man rule
, it requires a trustee to "observe how men of prudence...manage their own affairs...considering the probable income as well as the probable safety of the capital to be invested."
Randall Miller, in the November 1989 issue of Contingency Journal, explains that we must exercise our "duty of trust" and "duty of care" and apply the common-law standard of the "prudent man rule
" to our management of information assets.
Vesting requirements take up two pages, minimum funding standards, two pages, and the prudent man rule
, three pages.
The "best interest" standard is a combination of ERISA's prudent man rule
and duty of loyalty.
On the other hand, traditional and rollover IRAs-and SEPs and SIMPLE IRAs that cover only business owners and their spouses-are not ERISA plans, in which case ERISA's prudent man rule
does not apply.