Category: Service Providers


Best Interest and Best Practices #6

Posted on October 17, 2018, by Fred Reish in best interest, fiduciary, Plan Sponsors, prudent, Service Providers. Comments Off on Best Interest and Best Practices #6

What is the Baseline for A Committee to Act in the Best Interest of its Participants? (Part 3)

 This is the sixth of a new series of articles titled “The Bests.” The series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisors, and plan sponsors, including 401(k) and 403(b) committees.

 In my last two posts (Bests #4 and Bests #5), I discuss the NYU case and the “bad” and “good” behavior of committee members. I concluded my last post with the point that process matters. Of course, it was unspoken that I was referring to a good process. This article discusses the fundamentals of a good process and the lessons learned from the NYU decision.

The NYU committee met quarterly.

There isn’t a prescribed timing … Read More »

Share

Best Interest and Best Practices #5

Posted on October 11, 2018, by Fred Reish in 401(k), 403(b), best interest, Plan Sponsors, prudent, Service Providers. Comments Off on Best Interest and Best Practices #5

What is the Baseline for A Committee to Act in the Best Interest of Its Participants? (Part 2)

This is the fifth of a series of articles titled “The Bests.” The series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisers, and plan sponsors, including 401(k) and 403(b) committees.

This is my second article about the case of Sacerdote v. New York University. As I discussed in my last post, the Court’s opinion pointed out the deficiencies in the understandings and conduct of some committee members. However, the Court ultimately ruled in favor of the plan fiduciaries and against the plaintiffs. Why was that?

Despite the deficiencies (or “bad practices”) of some committee members, others on the committee were engaged and knowledgeable. Obviously, that was an important factor. … Read More »

Share

Best Interest and Best Practices #3

Posted on September 26, 2018, by Fred Reish in 401(k), 403(b), best interest, Plan Sponsors, Service Providers. Comments Off on Best Interest and Best Practices #3

Best Practices for Plan Sponsors: Projection of Retirement Income

This is the third of a new series of articles titled “The Bests.” This series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisors, and plan sponsors, including 401(k) committees.

My first two posts of “The Bests” were about Best Interest for advisors. In this article, I am shifting to Best Practices for plan sponsors. Keep in mind that a Best Practice is above and beyond the legal requirements. Best Practices are not mandated; they are elected.

While the most obvious Best Practices are automatic enrollment and automatic deferral increases, I want to start with the projection of retirement income for participants. That’s partially because it is in a current legislative proposal—in the Retirement Enhancement and Savings … Read More »

Share

Interesting Angles on the DOL’s Fiduciary Rule #66

Posted on October 18, 2017, by Fred Reish in 408(b)(2), Broker-Dealers, fiduciary, prudent, Registered Investment Advisers, RIA, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #66

Concerns About 408(b)(2) Disclosures

This is my 66th 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.

Because of the change in the definition of fiduciary advice (which applied on June 9, 2017), all advisors to retirement plans need to review their prior 408(b)(2) disclosures to see if changes are necessary. That particularly applies to broker-dealers and life insurance brokers and agents.

The first level of review should be to determine whether their prior 408(b)(2) disclosures to ERISA retirement plans affirmatively stated that they were not fiduciaries to the plans that they served. If so, those broker-dealers, insurance brokers and agents need to send out new 408(b)(2) disclosures that affirmatively disclose their new-found fiduciary status (assuming that their advisors … Read More »

Share

Interesting Angles on the DOL’s Fiduciary Rule #61

Posted on September 11, 2017, by Fred Reish in DOL Activity, fiduciary, prudent, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #61

The Fiduciary Rule, Distributions and Rollovers

This is my 61st 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.

Now that it seems likely that the fiduciary rule and the transition exemptions will continue “as is” until at least July 1, 2019, it’s time to re-visit the fiduciary rule and the requirements of the transition exemptions. This article focuses on the requirements for recommending that a participant take a distribution and roll it over to an IRA with a financial institution and its advisor. (Practically speaking, the financial institutions will likely be broker-dealers, RIA firms, and banks and trust departments). For ease of reading, this article uses “advisor” to refer to both the entity and the individual.

In order to … Read More »

Share

Interesting Angles on the DOL’s Fiduciary Rule #52

Posted on June 19, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prudent, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #52

The Fiduciary Rule and Exemptions: How Long Will Our Transition Be?

This is my 52nd 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.

The fiduciary regulation that dramatically expanded the definition of fiduciary investment advice went into effect on June 9. As a result, virtually all advisers to plans, participants and IRAs are now fiduciaries, or will be as soon as they make the next investment recommendation to one of those qualified accounts. At the same time—June 9, the “transition” transaction exemptions were effective.

If viewed out of context, the fiduciary regulation, as currently written, will continue in effect for years to come. However, the transition exemptions will only apply until December 31, when the full exemptions will apply, … Read More »

Share

Interesting Angles on the DOL’s Fiduciary Rule #49

Posted on May 31, 2017, by Fred Reish in 408(b)(2), Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #49

The Requirement to Disclose Fiduciary Status

This is my 49th 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.

When the new fiduciary rule applies on June 9, it will convert most non-fiduciary advisers into fiduciaries.

While there is not a disclosure requirement for new fiduciary advisers to IRAs, there is for these newly minted fiduciary advisers to plans. But it’s not part of the new regulation. Instead the requirement is found in the 408(b)(2) regulation which was effective in 2012.

As background, that regulation required that service providers to ERISA-governed retirement plans, including advisers, make written disclosures to plan fiduciaries of their services, compensation and “status.” The status requirement was that service providers disclose if they were fiduciaries under ERISA … Read More »

Share

Interesting Angles on the DOL’s Fiduciary Rule #26

Posted on November 1, 2016, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #26

Reasonable Compensation for IRAs: When and How Long?

This is my twenty-sixth article about interesting observations concerning the fiduciary rule and exemptions.

This article is a little different than most of my previous posts. However, it is equally as important. To get to the point, I am writing this article about reasonable compensation for advice to IRAs because of a common misunderstanding about the requirement.

In the last month or two, I have seen a number of articles and heard several comments to the effect that it will be difficult to determine reasonable compensation for IRAs because the rule is so new. Stated a little differently, the point is that the reasonable compensation requirement for IRAs will first become effective on April 10, 2017. That is not correct.

Section 4975(c)(1)(C) provides that the “furnishing of . . . services . . . between a … Read More »

Share

ERISA Issues for Solicitor’s Fees

Posted on December 17, 2014, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, prohibited transaction, Service Providers. Comments Off on ERISA Issues for Solicitor’s Fees

Not much has been written about ERISA considerations for referring investment managers to retirement plans . . . and the receipt of solicitor’s fees for a referral.

However, there are a host of legal issues.

First, the person making the referral is receiving “indirect” compensation (that is, the solicitor’s payment by the investment manager), which makes that person a “covered service provider” or “CSP.” As a CSP, he must make 408(b)(2) disclosures (i.e., services, status and compensation). The failure to make timely disclosures is a prohibited transaction.

Second, the compensation cannot be more than a reasonable amount . . . as measured by the value of the services to the plan. But, what if the CSP doesn’t provide any ongoing services to the plan? Does the “compensation” become unreasonable after five years of payments? Ten years? I am not aware of any guidance … Read More »

Share

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 »

Share



Recent Insights

Best Interest and Best Practices #9

What Does “Best Interest” Mean?

This is the 9th of a new series of articles titled “The Bests.” The series focuses on Best Interest...

Best Interest and Best Practices #8

Fiduciary Training: The Need for Basics

This is the 8TH of a new series of articles titled “The Bests.” The series focuses on Best...

Best Interest and Best Practices #7

SEC Best Interests . . . When? And What About the DOL

This is the 7th of a new series of articles titled “The Bests.”...