What is the prudent expert standard?

ERISA's prudence duty is often called the "prudent expert" rule because the comparison isn't to a reasonable layperson — it's to someone familiar with such matters. A well-meaning amateur decision can still be imprudent.

Two implications follow:

• Hire what you lack. Committees without investment expertise are expected to engage advisers — and selecting and monitoring that adviser is itself a fiduciary act done to the same standard.
• Process is the defense. Courts evaluate whether the decision process was thorough, informed, and documented at the time — not whether the fund picked later underperformed. Strong minutes showing the analysis behind each decision are worth more than lucky outcomes.

This is why governance rhythm — regular meetings, reports reviewed, decisions recorded — is the core of retirement plan risk management.