29 Usc 1104

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29 U.S. Code § 1104 - Fiduciary duties | U.S. Code | US Law | LII / Legal Information Institute

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> § 1104

29 U.S. Code § 1104 - Fiduciary duties
U.S. Code

Notes

(a) Prudent man standard of care
(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a
fiduciary shall discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;
(B) 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;
(C) by diversifying the investments of the plan so as to minimize
the risk of large losses, unless under the circumstances it is clearly
prudent not to do so; and
(D) in accordance with the documents and instruments governing
the plan insofar as such documents and instruments are consistent
with the provisions of this subchapter and subchapter III.
(2) In the case of an eligible individual account plan (as defined in
section 1107(d)(3) of this title), the diversification requirement of
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paragraph (1)(C) and the prudence requirement (only to the extent
that it requires diversification) of paragraph (1)(B) is not violated by
acquisition or holding of qualifying employer real property or qualifying
employer securities (as defined in section 1107(d)(4) and (5) of this
title).
(b) Indicia of ownership of assets outside jurisdiction of
district courts
Except as authorized by the Secretary by regulations, no fiduciary may
maintain the indicia of ownership of any assets of a plan outside the
jurisdiction of the district courts of the United States.
(c) Control over assets by participant or beneficiary
(1)
(A) In the case of a pension plan which provides for individual
accounts and permits a participant or beneficiary to exercise control
over the assets in his account, if a participant or beneficiary
exercises control over the assets in his account (as determined
under regulations of the Secretary)—
(i) such participant or beneficiary shall not be deemed to be a
fiduciary by reason of such exercise, and
(ii) no person who is otherwise a fiduciary shall be liable under
this part for any loss, or by reason of any breach, which results
from such participant’s or beneficiary’s exercise of control,
except that this clause shall not apply in connection with such
participant or beneficiary for any blackout period during which
the ability of such participant or beneficiary to direct the
investment of the assets in his or her account is suspended by a
plan sponsor or fiduciary.
(B) If a person referred to in subparagraph (A)(ii) meets the
requirements of this subchapter in connection with authorizing and
implementing the blackout period, any person who is otherwise a
fiduciary shall not be liable under this subchapter for any loss
occurring during such period.
(C) For purposes of this paragraph, the term “blackout period” has
the meaning given such term by section 1021(i)(7) of this title.

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(2) In the case of a simple retirement account established pursuant to
a qualified salary reduction arrangement under section 408(p) of title
26, a participant or beneficiary shall, for purposes of paragraph (1), be
treated as exercising control over the assets in the account upon the
earliest of—
(A) an affirmative election among investment options with respect
to the initial investment of any contribution,
(B) a rollover to any other simple retirement account or individual
retirement plan, or
(C) one year after the simple retirement account is established.
No reports, other than those required under section 1021(g) of
this title, shall be required with respect to a simple retirement
account established pursuant to such a qualified salary reduction
arrangement.
(3) In the case of a pension plan which makes a transfer to an
individual retirement account or annuity of a designated trustee or
issuer under section 401(a)(31)(B) of title 26, the participant or
beneficiary shall, for purposes of paragraph (1), be treated as
exercising control over the assets in the account or annuity upon—
(A) the earlier of—
(i) a rollover of all or a portion of the amount to another
individual retirement account or annuity; or
(ii) one year after the transfer is made; or
(B) a transfer that is made in a manner consistent with guidance
provided by the Secretary.
(4)
(A) In any case in which a qualified change in investment options
occurs in connection with an individual account plan, a participant
or beneficiary shall not be treated for purposes of paragraph (1) as
not exercising control over the assets in his account in connection
with such change if the requirements of subparagraph (C) are met
in connection with such change.

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(B) For purposes of subparagraph (A), the term “qualified change
in investment options” means, in connection with an individual
account plan, a change in the investment options offered to the
participant or beneficiary under the terms of the plan, under which
—
(i) the account of the participant or beneficiary is reallocated
among one or more remaining or new investment options which
are offered in lieu of one or more investment options offered
immediately prior to the effective date of the change, and
(ii) the stated characteristics of the remaining or new
investment options provided under clause (i), including
characteristics relating to risk and rate of return, are, as of
immediately after the change, reasonably similar to those of the
existing investment options as of immediately before the
change.
(C) The requirements of this subparagraph are met in connection
with a qualified change in investment options if—
(i) at least 30 days and no more than 60 days prior to the
effective date of the change, the plan administrator furnishes
written notice of the change to the participants and
beneficiaries, including information comparing the existing and
new investment options and an explanation that, in the absence
of affirmative investment instructions from the participant or
beneficiary to the contrary, the account of the participant or
beneficiary will be invested in the manner described in
subparagraph (B),
(ii) the participant or beneficiary has not provided to the plan
administrator, in advance of the effective date of the change,
affirmative investment instructions contrary to the change, and
(iii) the investments under the plan of the participant or
beneficiary as in effect immediately prior to the effective date of
the change were the product of the exercise by such participant
or beneficiary of control over the assets of the account within
the meaning of paragraph (1).

(5) Default investment arrangements.—
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(A) In general.—
For purposes of paragraph (1), a participant or beneficiary in an
individual account plan meeting the notice requirements of
subparagraph (B) shall be treated as exercising control over the
assets in the account with respect to the amount of contributions
and earnings which, in the absence of an investment election by the
participant or beneficiary, are invested by the plan in accordance
with regulations prescribed by the Secretary. The regulations under
this subparagraph shall provide guidance on the appropriateness of
designating default investments that include a mix of asset classes
consistent with capital preservation or long-term capital
appreciation, or a blend of both.
(B) Notice requirements.—
(i) In general.—The requirements of this subparagraph are met
if each participant or beneficiary—
(I) receives, within a reasonable period of time before each
plan year, a notice explaining the employee’s right under the
plan to designate how contributions and earnings will be
invested and explaining how, in the absence of any
investment election by the participant or beneficiary, such
contributions and earnings will be invested, and
(II) has a reasonable period of time after receipt of such
notice and before the beginning of the plan year to make
such designation.
(ii) Form of notice.—
The requirements of clauses (i) and (ii) of section 401(k)(12)(D)
of title 26 shall apply with respect to the notices described in this
subparagraph.

(d) Plan terminations
(1) If, in connection with the termination of a pension plan which is a
single-employer plan, there is an election to establish or maintain a
qualified replacement plan, or to increase benefits, as provided under
section 4980(d) of title 26, a fiduciary shall discharge the fiduciary’s
duties under this subchapter and subchapter III in accordance with the
following requirements:
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(A) In the case of a fiduciary of the terminated plan, any
requirement—
(i) under section 4980(d)(2)(B) of title 26 with respect to the
transfer of assets from the terminated plan to a qualified
replacement plan, and
(ii) under section 4980(d)(2)(B)(ii) or 4980(d)(3) of title 26
with respect to any increase in benefits under the terminated
plan.
(B) In the case of a fiduciary of a qualified replacement plan, any
requirement—
(i) under section 4980(d)(2)(A) of title 26 with respect to
participation in the qualified replacement plan of active
participants in the terminated plan,
(ii) under section 4980(d)(2)(B) of title 26 with respect to the
receipt of assets from the terminated plan, and
(iii) under section 4980(d)(2)(C) of title 26 with respect to the
allocation of assets to participants of the qualified replacement
plan.

(2) For purposes of this subsection—
(A) any term used in this subsection which is also used in section
4980(d) of title 26 shall have the same meaning as when used in
such section, and
(B) any reference in this subsection to title 26 shall be a reference
to title 26 as in effect immediately after the enactment of the
Omnibus Budget Reconciliation Act of 1990.
(e) Safe harbor for annuity selection
(1) In general
With respect to the selection of an insurer for a guaranteed
retirement income contract, the requirements of subsection (a)(1)
(B) will be deemed to be satisfied if a fiduciary—
(A) engages in an objective, thorough, and analytical search for the
purpose of identifying insurers from which to purchase such
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contracts;
(B) with respect to each insurer identified under subparagraph (A)—
(i) considers the financial capability of such insurer to satisfy its
obligations under the guaranteed retirement income contract;
and
(ii) considers the cost (including fees and commissions) of the
guaranteed retirement income contract offered by the insurer in
relation to the benefits and product features of the contract and
administrative services to be provided under such contract; and
(C) on the basis of such consideration, concludes that—
(i) at the time of the selection, the insurer is financially capable
of satisfying its obligations under the guaranteed retirement
income contract; and
(ii) the relative cost of the selected guaranteed retirement
income contract as described in subparagraph (B)(ii) is
reasonable.
(2) Financial capability of the insurer
A fiduciary will be deemed to satisfy the requirements of
paragraphs (1)(B)(i) and (1)(C)(i) if—
(A) the fiduciary obtains written representations from the insurer
that—
(i) the insurer is licensed to offer guaranteed retirement income
contracts;
(ii) the insurer, at the time of selection and for each of the
immediately preceding 7 plan years—
(I) operates under a certificate of authority from the
insurance commissioner of its domiciliary State which has not
been revoked or suspended;
(II) has filed audited financial statements in accordance with
the laws of its domiciliary State under applicable statutory
accounting principles;
(III) maintains (and has maintained) reserves which satisfies
all the statutory requirements of all States where the insurer
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does business; and
(IV) is not operating under an order of supervision,
rehabilitation, or liquidation;
(iii) the insurer undergoes, at least every 5 years, a financial
examination (within the meaning of the law of its domiciliary
State) by the insurance commissioner of the domiciliary State (or
representative, designee, or other party approved by such
commissioner); and
(iv) the insurer will notify the fiduciary of any change in
circumstances occurring after the provision of the
representations in clauses (i), (ii), and (iii) which would preclude
the insurer from making such representations at the time of
issuance of the guaranteed retirement income contract; and
(B) after receiving such representations and as of the time of
selection, the fiduciary has not received any notice described in
subparagraph (A)(iv) and is in possession of no other information
which would cause the fiduciary to question the representations
provided.
(3) No requirement to select lowest cost
Nothing in this subsection shall be construed to require a fiduciary to
select the lowest cost contract. A fiduciary may consider the value of a
contract, including features and benefits of the contract and attributes
of the insurer (including, without limitation, the insurer’s financial
strength) in conjunction with the cost of the contract.
(4) Time of selection
(A) In general
For purposes of this subsection, the time of selection is—
(i) the time that the insurer and the contract are selected for
distribution of benefits to a specific participant or beneficiary; or
(ii) if the fiduciary periodically reviews the continuing
appropriateness of the conclusion described in paragraph (1)(C)
with respect to a selected insurer, taking into account the
considerations described in such paragraph, the time that the

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insurer and the contract are selected to provide benefits at future
dates to participants or beneficiaries under the plan.
Nothing in the preceding sentence shall be construed to require
the fiduciary to review the appropriateness of a selection after
the purchase of a contract for a participant or beneficiary.
(B) Periodic review
A fiduciary will be deemed to have conducted the periodic review
described in subparagraph (A)(ii) if the fiduciary obtains the written
representations described in clauses (i), (ii), and (iii) of paragraph
(2)(A) from the insurer on an annual basis, unless the fiduciary
receives any notice described in paragraph (2)(A)(iv) or otherwise
becomes aware of facts that would cause the fiduciary to question
such representations.
(5) Limited liability
A fiduciary which satisfies the requirements of this subsection shall not
be liable following the distribution of any benefit, or the investment by
or on behalf of a participant or beneficiary pursuant to the selected
guaranteed retirement income contract, for any losses that may result
to the participant or beneficiary due to an insurer’s inability to satisfy
its financial obligations under the terms of such contract.
(6) Definitions
For purposes of this subsection—
(A) Insurer
The term “insurer” means an insurance company, insurance service,
or insurance organization, including affiliates of such companies.
(B) Guaranteed retirement income contract
The term “guaranteed retirement income contract” means an
annuity contract for a fixed term or a contract (or provision or
feature thereof) which provides guaranteed benefits annually (or
more frequently) for at least the remainder of the life of the
participant or the joint lives of the participant and the participant’s
designated beneficiary as part of an individual account plan.

(Pub. L. 93–406, title I, § 404, Sept. 2, 1974, 88 Stat. 877; Pub. L. 96–364,
title III, § 309, Sept. 26, 1980, 94 Stat. 1296; Pub. L. 101–508, title XII,
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§ 12002(b)(1), (2)(A), Nov. 5, 1990, 104 Stat. 1388–565, 1388–566; Pub. L.
104–188, title I, § 1421(d)(2), Aug. 20, 1996, 110 Stat. 1799; Pub. L. 107–
16, title VI, § 657(c)(1), June 7, 2001, 115 Stat. 136; Pub. L. 107–147, title
IV, § 411(t), Mar. 9, 2002, 116 Stat. 51; Pub. L. 109–280, title VI, §§ 621(a),
624(a), Aug. 17, 2006, 120 Stat. 978, 980; Pub. L. 110–458, title I, § 106(d),
Dec. 23, 2008, 122 Stat. 5107; Pub. L. 116–94, div. O, title II, § 204, Dec. 20,
2019, 133 Stat. 3165.)

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