The mantra of Congress, investment advisors and the DOL over the past decade has been consistent: retirement plan assets must be invested in such a way to provide American workers with sufficient assets upon which to actually retire comfortably. This is as basic as apple pie, and a concept with which one can hardly disagree. It has even been the driving force behind regulatory efforts like the QDIA regs, where stable value or insurance investment options were openly scorned as appropriate default investment options.
As laudable as these efforts have been in the past, and as sound as they still may be, encouraging investment gain for the purpose of providing adequate retirement gain is NOT and has NEVER been the standard by which fiduciaries are judged.
ERISA Section 404(a)(1)(b) is written pretty clearly:
…a fiduciary shall discharge his duties…. by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly imprudent to do so."
There is no talk of maximizing gain. There is no language about providing any particular level of income. There is nothing about testing to see what level of return is needed to maintain a lifestyle. There is no discussion of age based target funds. It is truly based upon the concept of preserving the assets of the trust.
It is important to re-find this lost concept, particularly as fiduciaries review their investment policies to test whether they are adequate under the current market conditions. This is not an argument against the use of equities, merely that the manner in which one fulfills the duty to minimize large loss necessarily includes investments designed to preserve capital.