This report was produced by the Advisory Council on Employee Welfare and Pension Benefit Plans, which was created by ERISA to provide advice to the Secretary of Labor. The contents of this report do not necessarily represent the position of the Department of Labor.

Executive Summary

This report was produced by the 2006 ERISA Advisory Council’s Working Group on Prudent Investment Process. The ERISA Advisory Council was created by ERISA to provide advice to the Secretary of Labor. The contents of this report do not represent the position of the Department of Labor (DOL). The 2006 ERISA Advisory Council formed a Working Group on a Prudent Investment Process (hereinafter referred to as the “Working Group”) to study numerous issues in managing plan assets. The desired result of the Working Group was to discover and present matters that would enhance the ability of fiduciaries to execute their responsibilities under ERISA.

Testimony to the Working Group was provided on August 9, 2006 and September 21, 2006 by 13 speakers, representing plan sponsors, investment management, organizations that represented multi-stakeholders, lawyers/consultants, and the federal government. After careful debate and analysis of the issues and transcripts, the Working Group submits the following recommendations to the Secretary of Labor for consideration:

Recommendation 1: The Department of Labor should issue a publication which expresses ‘best practices’ for fiduciaries to consider for use in the investment management of a defined benefit plan.

Recommendation 2: The Department of Labor should publish guidance which expresses the unique features of hedge funds and matters for consideration in their adoption for use by qualified plans as a matter of procedural prudence.

Recommendation 3: The Department of Labor should require that fiduciaries, to the extent appropriate, acknowledge a responsibility to have a working knowledge of investment management and risk management concepts.

Recommendation 4: The Department of Labor should require that the “summary profile” contemplated and discussed in DOL Adv. Op. 2003-11A be provided for all investment vehicles within participant-directed plans, whether or not the plan is covered by ERISA §404(c). Prospectus delivery, where currently required, should be changed to optional upon participant request.

Recommendation 5: The Department of Labor’s electronic delivery standard should be updated from the ‘integral part of the employee’s duties’ standard currently employed to a ‘reasonable access’ standard currently in use by the Internal Revenue Service.

Respectfully Submitted,

Richard D. Landsberg, Chair

Robert M. Archer, Vice-Chair