Defined Benefit Plan Diversification Requirements?

[Fielding Mellish]

Defined benefit plan subject to ERISA. Is there guidance out there, or has anyone ever dealt with, the proper amount of investment diversification for a defined benefit plan?

For example, a $13MM fund. Is there anything out there that says how many different investment types the Plan should have? Or is it left to the discretion of the Trustees?

Thanks.

[jpod]

Aside from the fact that it is generally understood that ERISA embraces the concept of "modern portfolio theory," whatever that means, my guess is that there is no guidance other than perhaps one or more reported cases where the courts found - based on the particular facts of those cases - a lack of diversification consistent with the ERISA diversification standard.

[Lou S.]

1 is too few, 13 million is too many. So somewhere in between. Like jpod I don't thing there i any direct guidance on the optimal number of investments. It is left to the prudence of the Trustee's to decide.

[SwimmingInBowelsOfERISA]

Aside from the fact that it is generally understood that ERISA embraces the concept of "modern portfolio theory," whatever that means, my guess is that there is no guidance other than perhaps one or more reported cases where the courts found - based on the particular facts of those cases - a lack of diversification consistent with the ERISA diversification standard.

Agreed with both commenters. The law is vague (you must diversify plan assets unless it is clearly imprudent to do so) so you have to look at relevant case law consistent with facts and circumstances standards.