Category: Recordkeeper


Interesting Angles on the DOL’s Fiduciary Rule #70

Posted on November 15, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, Plan Sponsors, prudent, Recordkeeper, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #70

The Fiduciary Rule and Recordkeeper Services

This is my 70th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

Almost all of my Angles articles have been about the impact of the fiduciary rule on advisors—representatives of broker-dealers and RIAs. However, the fiduciary rule also affects recordkeepers and the services that they offer to plans and advisors. In that regard, most of the work that we are doing for recordkeepers falls into three categories:

Acceptance of fiduciary responsibility by recordkeepers for “financial wellness” of participants.
Providing investment services and support for advisors, without becoming a fiduciary.
Providing investment services and support for plan sponsors, without becoming a fiduciary.

The next few Angles articles will discuss these issues in detail. This article is … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #62

Posted on September 20, 2017, by Fred Reish in 408(b)(2), Broker-Dealers, DOL Activity, fiduciary, Recordkeeper. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #62

Is It Possible To Be An Advisor Without Being A Fiduciary?

This is my 62nd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

Under the new fiduciary definition (that applied on June 9), an investment “suggestion” is fiduciary advice. That includes suggestions about a range of issues, including investments, insurance products, investment strategies, other investment advisors and managers, IRA transfers, and plan distributions.

Because of the breadth of the definition, it is almost impossible to be an advisor to a plan without becoming a fiduciary. Under the old rules advisors would provide investment information that, at least arguably, was not fiduciary investment advice. However, under the new definition, where an advisor provides information about investments, it’s possible, perhaps even … Read More »


What’s Hot . . . in the First Quarter of 2015?

Posted on April 28, 2015, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, Plan Sponsors, Recordkeeper. Comments Off on What’s Hot . . . in the First Quarter of 2015?

Over the last few months, the most common questions asked by clients . . . and most of my work . . . have been about three issues:

The DOL’s new fiduciary proposal . . . not surprising.
Capturing rollovers from retirement plans. Again, not surprising because of the large amount of money coming out of plans and in light of the attention being given to rollovers by the SEC, FINRA, DOL and GAO.
The use and allocation of revenue sharing in 401(k) plans.

I will be writing about the first two points in the future, so let’s focus on the third one now.

For about 20 years, mutual funds have paid revenue sharing to 401(k) recordkeepers for services provided to the mutual funds. That includes 12b-1 shareholder servicing fees, 12b-1 distribution fees, and subtransfer agency fees. The view was that the money was paid … Read More »


Aging Boomers and Rollovers to IRAs

Posted on November 12, 2014, by Fred Reish in DOL Activity, fiduciary, Plan Sponsors, Recordkeeper, Registered Investment Advisers, Service Providers. Comments Off on Aging Boomers and Rollovers to IRAs

As baby boomers approach retirement in a defined contribution world, the regulators are focusing on distributions and rollovers to IRAs. The SEC, FINRA, DOL and GAO have all spoken on the subject. Their conclusion appears to be that plan fiduciaries, advisors and recordkeepers need to reconsider their current practices and, in some cases, change their practices.

Why? The reason is relatively straightforward. As large numbers of 401(k) and 403(b) participants approach retirement, regulators are becoming increasingly aware that they will be moving from a plan environment where they are “bubble wrapped” by plan fiduciaries . . . and have the benefit of being able to select from investments that have been vetted by the fiduciaries and that are, as a result, good quality and relatively low-cost investments. Based on current practices, most of those participants will rollover into IRAs with investments … Read More »


Advisory Opinion 2013-03A

Posted on May 28, 2014, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, prudent, Recordkeeper, Registered Investment Advisers, RIA. Comments Off on Advisory Opinion 2013-03A

In Advisory Opinion 2013-03A, the Department of Labor said: “This letter also does not address any fiduciary issues that may arise from the allocation of revenue sharing among plan expenses or individual participant accounts . . .”

In effect, the DOL was saying that it has not issued any guidance—and is not prepared to issue guidance—concerning the allocation of revenue sharing. That is a reminder that there isn’t any explicit guidance on how to allocate revenue sharing. As a result, fiduciaries need to engage in a prudent process to make that decision.

In most cases, revenue sharing is used to pay the cost of recordkeeping. In effect, it is arguable that, when the recordkeeper keeps the money, it is a pro rata allocation among the participants’ accounts. That is because the most common way of allocating expenses (for example, recordkeeping or RIA … Read More »


Responsible Plan Fiduciaries and Disclosure Issues

Posted on September 4, 2013, by Fred Reish in 408(b)(2), Broker-Dealers, fiduciary, Plan Sponsors, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on Responsible Plan Fiduciaries and Disclosure Issues

The 408(b)(2) regulation requires that its service, status and compensation disclosures be made to “responsible plan fiduciaries” or “RPFs.” In the rush to make the 408(b)(2) disclosures, most recordkeepers, broker-dealers and RIAs sent their disclosure documents to their primary contact at the plan sponsor. In at least some of those cases, the primary contact was not the RPF. As a result, we added language to our clients’ disclosures to the effect that, if the recipient was not the RPF, the written disclosure should immediately be forwarded to the RPF.

The regulation defines RPF as “a fiduciary with authority to cause the covered plan to enter into, or extend or renew, the contract or arrangement.” In other words, it is the person or committee who has the power to hire and fire the particular service provider, e.g., the broker-dealer, recordkeeper or RIA.

Because … Read More »


Mass Mailing to Plan Sponsors About Excess Fund Fees

Posted on July 16, 2013, by Fred Reish in Plan Sponsors, prudent, Recordkeeper. Comments Off on Mass Mailing to Plan Sponsors About Excess Fund Fees

This article was prepared by Fred Reish, Bruce Ashton and Josh Waldbeser.

A Yale law professor is sending letters to many (perhaps thousands of) 401(k) plan sponsors telling them they may have breached their fiduciary duties because they are offering a potentially high-cost plan.   For example, in one letter, he said:  “Among plans of comparable size (measured by total net assets), your plan ranked worse than 78 percent of plans.”  He then added, “We wanted to inform you that we are planning to publicize the results of our study in the Spring of 2014.  We will make our results available to newspapers (including the New York Times and Wall Street Journal), as well as disseminate the results via Twitter with a separate hashtag for your company.”

His allegation is based on a study using data compiled by BrightScope, though we understand that BrightScope … Read More »


Managing Plan Costs

Posted on June 12, 2013, by Fred Reish in 404a-5, DOL Activity, fiduciary, Plan Sponsors, Recordkeeper, Registered Investment Advisers, Service Providers. Comments Off on Managing Plan Costs

Many recordkeepers and bundled providers charge plans based on the number of participant accounts. Many others do not explicitly charge on a per-participant basis, but incorporate the number of accounts (and possibly the average account balances) into their pricing. It is likely that this practice will increase in the future . . . due to the new 404a-5 participant disclosures, which must be made to every eligible employee, as well as to every participant of an account balance.

With that in mind, advisers, recordkeepers and plan sponsors should consider mandatory distributions of small account balances (that is, $5,000 or less) to manage plan costs.

If a plan has the required provisions, and if the provisions have been appropriately communicated to eligible employees and beneficiaries through summary plan descriptions, plans can make distributions of account balances of $5,000 or less. If the participants … Read More »


408(b)(2) Violations and Service Provider Correction Program

Posted on October 18, 2012, by Fred Reish in 408(b)(2), Broker-Dealers, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on 408(b)(2) Violations and Service Provider Correction Program

The failure of a covered service provider (for example, a broker-dealer, RIA or recordkeeper) to provide adequate 408(b)(2) disclosures results in a prohibited transaction . . . for both service providers and plan sponsors. While the regulation has an exemption for plan sponsors (if they follow certain steps), there is no similar exemption for covered service providers. 


When are AAMs Considered DIAs?

Posted on April 19, 2012, by Fred Reish in 404a-5, 408(b)(2), Broker-Dealers, fiduciary, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on When are AAMs Considered DIAs?

There is an emerging issue under both the participant and plan disclosure rules concerning the information that must be provided for asset allocation models (AAMs).

It appears that some DOL officials are of the opinion that asset allocation models—at least under certain circumstances—are “designated investment alternatives” or DIAs. If AAMs are classified as DIAs, they are subject to disclosure requirements under both the plan and participant disclosure rules. As a practical matter, it may be impractical or even impossible for recordkeepers, broker-dealers and RIAs to provide that information.




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