And how can they do that? By asking themselves six questions about their approach to, and use of, investments in the plans they're responsible for, so that they keep participants' interests uppermost.

That's according to David J. Witz, founder and managing director of Fiduciary Risk Assessment LLC, who wrote at length about the court decision in a Fiduciary Matters Blog post.

Witz not only laid out the obligations of fiduciaries in a very no-nonsense, easy-to-follow list but kindly provided the six questions he says fiduciaries should ask if they're considering the use of a proprietary fund within a plan to reduce plan costs.

1. Are we using proprietary funds?

One reason ABB got into hot water was the proprietary nature of the Fidelity funds it switched to, since those funds shared revenue with Fidelity Trust.

Because of the revenue-sharing arrangement, Fidelity was able to collect high fees in one area and lower fees in another—all while passing along the cost of the fees to a single segment of its client population: the participants in the plan using the Fidelity funds.

Meanwhile, ABB was able to realize lower costs on some of the services it received from Fidelity.

2. Are we replacing an existing fund with a proprietary fund?

ABB may not have even considered any issues connected with the replacement of the Wellington fund with the proprietary Fidelity funds, since the court described ABB's Pension and Thrift Management Group research into the investments as "superficial and cursory."

Witz said, "It is worth noting that case law has not prohibited the use of proprietary funds, the collection of revenue sharing or the payment of plan expenses from plan assets. However, fiduciaries must understand that the use of proprietary funds creates an opportunity for additional liability issues to arise that must carefully and deliberately be addressed."

Those issues were never addressed by the Management Group or, indeed, by the investment committee.

3. Have we selected proprietary funds based on the standards and criteria established in the IPS?

Not only was this not done in ABB's case, the firm actually changed its investment policy statement to allow it to map to the Fidelity funds since the funds were so new their track record was insufficient to satisfy the IPS.

4. If an exception is necessary to use a proprietary fund, should we change the IPS standards and criteria permanently?

Changing the IPS to accommodate a proprietary fund that benefits the firm far more than the plan's participants isn't exactly a sterling example of fiduciary interest.

Permanently changing the IPS standards and criteria so that such a strategy is easier to pursue is conspicuously contrary to participants' interests, and fiduciaries should think long and hard before they take any such action.

Even changing an IPS with the best of intentions requires plenty of documentation of the discussion and reasoning behind such a decision, lest later a court should find that the change was not made to help participants but instead for some other reason.

5. Are we using a proprietary fund because it is in the best interests of participants or because it reduces the cost to the Plan Sponsor?

In order to know the answer to this question, ABB's Management Group and investment committee would have had to know how much the Fidelity funds' expenses amounted to for the participants—something neither body ever even bothered to calculate.

So they had no way of knowing whether the move was in the best interests of the participants.

However, thanks to an independent human resources consultant's warning that expenses for recordkeeping services were too high and possibly subsidizing other Fidelity-provided services to the firm, they probably had a pretty good idea that the change was not in participants' best interests.

6. How are we accounting for any additional revenue sharing from the use of the proprietary funds?

In ABB's case, the answer was to obfuscate and refrain from any attempt at transparency in accounting for revenue sharing.

Or, as the court said in its decision, "there are too many coincidences to make the beneficial outcome for ABB serendipitous, particularly considering the powerful draw of self-interest when transactions are occurring out of sight and are unlikely to ever be discovered."