29 CFR. §2509.75-8 FR-17: At reasonable intervals, the performance of trustees and other fiduciaries should be reviewed by the appointing fiduciary in such manner as may be reasonably expected to ensure that their performance has been in compliance with the terms of the plan and statutory standards and satisfies the needs of the plan.
29 C.F.R. §2509.94-2: Maintenance of a statement of investment policy does not relieve the named fiduciary of its obligations under ERISA §404(a) with respect to the appointment and monitoring of an investment manager or trustee. In this regard, the named fiduciary appointing an investment manager must periodically monitor the investment manager’s activities with respect to the management of the plans assets.
DOL Interpretive Bulletin 94-2: It is the view of the Department that compliance with the duty to monitor necessitates proper documentation of the activities that are subject to monitoring …. Maintenance of a statement of investment policy does not relieve the named fiduciary of its obligations under ERISA §404(a) with respect to the appointment and monitoring of an investment manager or trustee. In this regard, the named fiduciary appointing an investment manager must periodically monitor the investment manager’s activities with respect to the management of the plans assets.
Morrissey v. Curran: ERISA fiduciaries must monitor investments with reasonable diligence and dispose of investments which are improper to keep.
Harley v. Minnesota Mining and Manufacturing Company: Once an investment has been made, a fiduciary has an ongoing duty to monitor investments with reasonable diligence and remove plan assets from an investment that is improper.
UPIA §9(a): A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall
exercise reasonable care, skill, and caution in:
(1) Selecting an agent;
(2) Establishing the scope and terms of the delegation, consistent with the purposes
and terms of the trust; and
(3) Periodically reviewing the agent’s actions in order to monitor the agent’s
performance and compliance with the terms of the delegation.
UMPERSA §6(b)(2) and (3): [Trustee must exercise reasonable care, skill, and caution in]:
(2) Establishing the scope and terms of the delegation, consistent with the purpose and
terms of the retirement program; and
(3) Periodically reviewing the agent’s performance and compliance with the terms of the
delegation.
UMPERSA §10(b): The trustee’s investment and management decisions must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the program or appropriate grouping of programs.
ERISA §406(a)(1): [A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction] … constitutes a direct or indirect … furnishing of goods, services, or facilities between the plan and a party in interest; [or] transfer to, or use by or for the benefit of, a party in interest or any assets of the plan.
ERISA §406(b): A fiduciary with respect to a plan shall not –
(1) Deal with the assets of the plan in his own interest or for his own account;
(2) In his individual or in any other capacity act in any transaction involving the plan
on behalf of a party (or represent a party) whose interests are adverse to the interests
of the plan or the interests of its participants or beneficiaries, or
(3) Receive any consideration for his own personal account from any party dealing
with such plan in connection with a transaction involving the assets of the plan.
Whitfield v. Tomasso: In addition to the general fiduciary duties of loyalty and prudence, ERISA also regards specific types of transactions between a plan and related persons, known as “parties in interest,” as inherently susceptible to abuse.
Whitfield v. Tomasso: In addition to the prohibitions of section 406(a), section 406(b), 29 U.S.C. §1106(b), prohibits plan fiduciaries from placing themselves in a conflict-of-interest situation where their loyalty to the plan may be divided.
29 C.F.R. §2509.75-8: At reasonable intervals, the performance of trustees and other fiduciaries [such as investment managers] should be reviewed by the appointing fiduciary in such manner as may be reasonably expected to ensure that their performance has been in compliance with the terms of the plan and statutory standards, and satisfies the needs of the plan. No single procedure will be appropriate in all cases; the procedure adopted may vary in accordance with the nature of the plan and other facts and circumstances relevant to the choice of the procedure.
UPIA §9(a)(3): [The trustee must] exercise reasonable care, skill, and caution in periodically reviewing the [investment manager’s] performance and compliance with the terms of the delegation.
UMPERSA §7(2) (Comments): … requires fiduciaries to be motivated only by the objective of providing benefits and paying reasonable expenses.
UMPERSA §17(c)(12) and (13): … require the plan to annually disclose …
(12) A description of any material interest, other than the interest in the retirement
program itself, held by any public employer participating in the system or any employee
organization representing employees covered by the system in any material transaction
with the system within the last three years or proposed to be effected;
(13) A description of any material interest held by any trustee, administrator, or employee who is a fiduciary with respect to the investment and management of assets in the system, and, if the fiduciary is an individual, by a related person of the beneficiary, in any material transaction with three system within the last three years or proposed to be effected.
UMPERSA §6(a) and (b)(1–3):
(a) A trustee or administrator may delegate functions that a prudent trustee or
administrator, acting in a like capacity and familiar with those matters, could properly
delegate under the circumstances.
(b) The trustee or administrator shall exercise reasonable care, skill, and caution in:
(1) Selecting an agent;
(2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the retirement program; and
(3) Periodically reviewing the agent’s performance and compliance with the terms of the delegation.
Rule 2240 – Conflicts of interests
600-1: Defining monitoring responsibilities