The fiduciary duty of prudence prescribed under the Employee Retirement Income Security Act of 1974 (ERISA) is a required standard of governance for those with discretionary control or responsibility for employee benefits governed by ERISA, including Taft-Hartley apprenticeship and training funds or JATCs. However, a JATC wears many hats — an ERISA employee benefit fund, an employee benefit fund regulated by the Taft-Hartley Act, an employer, an educational institution, and a business with expenses. It’s easy for JATC decision makers to get lost when it comes to properly applying JATC fiduciary duty of prudence.

Who is a fiduciary?

At a JATC, a fiduciary is anyone who exercises discretionary control over JATC assets or is named as a fiduciary in applicable plan documents. Named fiduciaries include trustees, training directors and administrators. Unnamed fiduciaries include instructors, investment advisors or anyone who exercises discretion over a plan asset. A “plan asset” in this case does not just mean money. It includes hard assets of a training center, including tools, materials, and equipment.

What is the fiduciary duty of prudence?

Pursuant to ERISA Section 404, the fiduciary prudence rule requires a fiduciary to act “… with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims …” 

This is a fancy way of saying the following:

"Be smart."

"Accept that you can’t know everything." 

"Where you’re not an expert, look to professionals or advisors who are."

"Even if you are an expert, double check your work with appropriate

professionals — people’s benefits are on the line."

"Don’t accept advice blindly. Ask questions and make sure you are

doing everything you can to make the right decision."

How is this applied in the real world?

Most commonly, JATC fiduciaries are great at applying the prudent person standard to the ERISA Fund side of their work, in the sense that they call upon professionals and experts when legal, accounting, and investment issues arise. However, it is easy for JATC fiduciaries to forget to apply this standard to the business or educational sides of their work. Here are some common examples of how JATC fiduciaries may unknowingly fail to apply the prudent person standard as well as how to correct those problems:

When it comes to employee practices, many JATCs don’t do simple things that a “prudent person” would do, like creating and implementing an employee handbook and ensuring they onboard all employees properly. 

If this is a problem, the fiduciaries need an attorney that has experience with both JATCs and employment law in their corner. The JATC is required under the prudent person standard to ensure that it is following applicable state and federal laws for employment practices as well taking proactive steps to avoid lawsuits and other liabilities related to employment practices. 

JATCs manage participant data that they are responsible for protecting, just like every other ERISA Fund. However, due to budget constraints, other issues, or just plain oversight, many JATCs do nothing to protect apprentice data beyond minor password protections and (hopefully at a minimum) the purchase of cyber liability insurance. 

If this is a problem, the fiduciaries need to engage with legal counsel and, at a bare minimum, explore and document their efforts to involve a cybersecurity or data protection expert. The Department of Labor recently issued guidelines that require all employee benefit funds, including ERISA funds, to make significant efforts to protect their participants’ data, and JATCs should follow applicable guidelines to the best of their ability. A small budget, without at least some sort of effort to safeguard participant information, will not be an excuse if a worst-case scenario were to occur. 

JATCs have tangible assets like tools, equipment, and materials. Many JATCs do not think to implement inventory controls in order to track those items and ensure that they are being used exclusively for JATC purposes. 

JATCs should engage with their attorney and their accounting team to implement an inventory control policy, as well as various processes to review and track their purchased items. 

In summary, with JATCs spinning so many plates, it’s easy to see how things could be overlooked. Every type of asset that the JATC owns or is responsible for must be managed with prudence. JATC fiduciaries should leverage the expertise of legal and accounting professionals, doing their best to examine the advice of those professionals to reach outcomes that protect the JATC and its participants.