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An Ounce of Prevention — for the Faithful

Fiduciary Rules and Practices

Discipline. It can be routine, it can be difficult, but its rewards can be many. Among them, argues a recent blog entry, is the ounce of prevention that consistent application of due diligence offers.

In “Due Diligence Is a Piece of Cake — Unless You Don’t Do it,” a post published recently on the BenefitsPro website (free registration required), Christopher Carosa  argues that discipline is a key to keeping a plan in compliance with the law and with fulfilling its fiduciary duties. “Here’s the one obstacle plan sponsors need to overcome to insure they stay on the due diligence path: discipline,” he writes. But, he also says, if one does maintain discipline, one will reap the rewards: “adhering to the documented process makes due diligence smooth and painless.”

What may impede that crucial ingredient? Not making it part of day-to-day routine. “It’s too tempting to succumb to the lure of fighting the fire du jour when everything else (like the 401(k) plan) seems to be working in fine order,” Carosa writes, warning that that can lead to trouble, which “sneaks up on you when you least expect it — when you’re distracted by the here and now,” and “pounces on you the moment you cut an unsuspecting corner in the due diligence process.”

How to avoid that? Carosa suggests being faithful. “For those assigned the fiduciary duty to construct a multi-layered retirement plan, fidelity to the written procedures remains the best way to avoid those nagging liabilities that seem to hang over their heads,” he says. And to do that, Carosa says, it is necessary to adopt a process to which one “can give undying loyalty.”

The fruits of that process? Due diligence. And that, Carosa says, “offers a hefty ounce of prevention when it comes to fiduciary liability.”