Coming on the heels of the U.S. Supreme Court’s Fifth Third Bancorp v. Dudenhoeffer decision, which eliminated a pro-fiduciary presumption with respect to company stock holdings in qualified retirement plans, the Fourth Circuit issued a decision last week that could cause even more unrest for plan fiduciaries. The case, Tatum v. RJR Pension Investment Committee, et al., represents a potential elevation of the standard “prudent fiduciary” rule as it had been widely understood it to govern Employee Retirement Income Security Act retirement plans.

In short, the Fourth Circuit in this case purports to require a fiduciary to determine whether a prudent fiduciary more likely than not would make the same decision, rather than simply asking whether a prudent fiduciary could make the questioned decision, which had been a generally accepted interpretation of ERISA’s fiduciary prudence rules, at least in some circuits. While this may seem like a merely semantic difference on first read, the impact is that the Fourth Circuit requires not just an objective determination of whether a prudent fiduciary might have also made this decision, but a determination that in light of all circumstances known to the plan fiduciaries, the decision is one that more prudent fiduciaries than not would also make. Stated another way, the decision potentially requires a deeper analysis of a spectrum of prudent fiduciary actions, and could require a fiduciary to prove that it acted as a majority of prudent fiduciaries or the most prudent fiduciary would have acted – a standard that demands greater analysis, and certainly some speculation, from plan fiduciaries.

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