(a) In general. Section 404(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (the Act) provides, in part, that a fiduciary shall discharge his duties with respect to a plan 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.

Demonstrating prudence under ERISA includes proper investigation and documentation, and obtaining outside expertise when needed.  One of the professionals that an ESOP trustee will need to hire is a qualified, independent valuator to perform the appraisal of the employer securities.  ESOP trustees need to demonstrate prudence in selecting the valuation firm and in reviewing and approving their work.  Many of the same concepts discussed in this post will also apply in the selection of the valuation firm.  Once the valuation firm has been selected, a trustee is responsible for monitoring the performance of the valuation firm, including reviewing and approving the stock appraisal.  This includes understanding the valuation process and methodology as well as the content of the final valuation report.  This article contains a more thorough discussion of selecting a qualified financial adviser and reviewing the valuation report.