Process, Not Outcomes, Governs Fiduciary Prudence

ERISA and traditional trust law judge prudence based on the process used at the time of the decision, not investment results in hindsight. The U.S. Supreme Court reaffirms this position in three landmark decisions.

Tibble v. Edison (2015)

Fiduciaries have a continuing duty to monitor investments. Each investment must be prudent at the time of selection and periodically thereafter.

Initial prudence doesn’t eliminate the obligation to revisit decisions. Evidence of ongoing monitoring is necessary to prove prudence!

Hughes v. Northwestern (2022)

• Good Options Don’t Excuse Bad Ones.
• Each investment must be prudent independent of the status of other options.
• No imprudent investment is insulated from scrutiny because better options exist in the menu.

Cunningham v. Cornell (2025)

• A documented process is evidence that proves prudent behavior.
• Plaintiffs are no longer required to prove the absence of an exemption.
• Defendants must now prove an exemption applies.

What Really Matters for a Defensible Fiduciary Process

• Regular, calendar-driven monitoring (quarterly recommended)
• Fee and share-class benchmarking (annual recommended)
• Comparative analysis of competitive alternatives
• Documented reasoning regarding trade-offs for decisions
• Well-maintained substantive committee minutes
• Periodic RFPs for covered service providers (tri-annual recommended)

A disciplined, well-documented process matters more than a perfect outcome!!!