Prudent Expert Rule of ERISA

The Employee Retirement Income Security Act (ERISA) applies a revised and restated version of the prudent man rule to pension and profit sharing portfolios. ERISA requires that a fiduciary manage a portfolio 'with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.' This statement differs from the classic prudent man rule in that familiarity with such matters suggests a higher standard than simple prudence-hence the name, prudent expert rule. Other provisions of the law and United States Department of Labor regulations suggest a portfolio approach under which a position imprudent in isolation may be acceptable in a portfolio context. See also Employee Retirement Income Security Act (ERISA), Prudent Man Rule.

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