If The SEC Is Telling You To Ask Your Financial Advisor These Questions, You Probably Should

The SEC has issued a four-part rules package for broker-dealers and investment advisers that includes the new Form CRS Regulation. The regulation requires broker-dealers and investment advisers to give short disclosure documents to all customers and potential customers beginning June 30, 2020.

The rule also requires that the new disclosure document provide investors with a series of questions that they should ask their adviser. Don’t you think you should know what those questions are . . . before you’re asked? The questions and my comments are in an article I wrote for my Forbes blog.

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Best Practices for Plan Sponsors #9

Lessons Learned from Litigation (#2)—the Vanderbilt Case

This is the ninth of the series about Best Practices for Plan Sponsors.

Plan sponsors should be aware of the latest trends in fiduciary litigation in order to manage the risk of being sued and, if sued, of being liable. In my post, Best Practices for Plan Sponsors #8, I discussed the lessons from the settlement of the Anthem case. The Vanderbilt settlement is another example of the importance of using appropriate share classes and of a good process for selecting investments and monitoring service providers. This article discusses the Vanderbilt lawsuit and the conditions in the settlement agreement.

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Best Interest Standard of Care for Advisors #8

Senior Clients: The SEC is looking at practices of RIAs

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the eighth of the series about Best Interest Standard of Care for Advisors.

The SEC has initiated examinations of investment advisers concerning their practices in working with Senior Clients. According to the SEC, a “ ‘Senior Client’ is defined as any retail advisory client who is age 62 or older, retired, or transitioning to retirement, including accounts of deceased clients, and retail clients in joint accounts with at least one individual meeting this definition.”

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Best Practices for Plan Sponsors #8

Lessons Learned from Litigation #1—the Anthem Case

This is the eighth of the series about Best Practices for Plan Sponsors.

Plan sponsors should be aware of the latest trends in fiduciary litigation in order to develop practices to manage the risk of being sued and, if sued, of being liable. The recent settlement of the Anthem case is a good example of the importance of using appropriate share classes and of other practices in selecting investments and monitoring service providers. This article discusses the complaint, the settlement and risk management for plan sponsors and their fiduciary committees.

To start at the beginning, Anthem and its fiduciary plan committee were sued based on allegations that they selected overly expensive share classes (considering what was available to a multi-billion dollar plan); that they overpaid the recordkeeper; and that they offered a money market fund rather than a stable value fund.

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Fred Reish Featured on the Cover of 401(k) Specialist Magazine

Los Angeles partner Fred Reish was featured on the cover of 401(k) Specialist Magazine, and was quoted extensively in the cover story titled “Fred Knows 401k Fiduciary.” The article states that after the demise of the Department of Labor’s Conflict of Interest Rule, Fred is “about as close as one can get to someone ‘in the know.’ His expertise and experience have him (always) in demand.”

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Best Practices for Plan Sponsors #7

Plan Success by the Numbers (Part 1)

This is the seventh of the series about Best Practices for Plan Sponsors.

Most companies have budgets for their business operations . . . and then regularly compare budget-to-actual. In other words, they compare their actual expenses to the budgeted amounts to see if they are on track to accomplish their financial goals. That’s pretty standard, and there is nothing remarkable about it. But, why don’t plan sponsors and fiduciaries, for example, plan committees, use that same approach for their 401(k) plans? I have a theory about that. But, before I explain my theory, let me say that I believe that plan committees should have budgets, or goals, and should measure their success in reaching those goals.

My theory is that 401(k) plans don’t set goals for plan success because 401(k) plans were originally viewed as the “employees’ plan.” The idea was that employees could do what they wanted to do, since the plan was a supplemental savings plan. That approach made sense when pension plans were more popular. However, now that 401(k) plans have become the primary retirement plan for most employers and employees, it seems fairly obvious that the burden of success of 401(k) plans needs to fall primarily on employers and fiduciaries.

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Alert: FINRA’s 529 Plan Share Class Initiative to Self-Report

FINRA is taking the position that broker-dealers need to evaluate the long-term costs of different share classes in 529 plans. In effect, FINRA is imposing a “best interest” standard on 529 recommendations. For a description of FINRA’s expectations and its new self-disclosure program, here is an article by several of our Drinker Biddle attorneys, including me: FINRA’s 529 Plan Share Class Initiative to Self-Report

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Open Questions on Open MEPs

One of the shiny new coins of the 401(k) realm is “Open MEPs.” It’s anticipated that Congress will pass legislation this year that permits Open MEPs. Legislation is needed because of DOL guidance that, in essence, prohibits MEPs that are “open” to all employers. But, what is an Open Multiple Employer Plan? What other kinds of MEPs are there? How do the people that set up MEPs get paid? Here is an article that I, and my partners, Bruce Ashton and Josh Waldbeser, wrote on that subject for ASPPA.
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Best Practices for Plan Sponsors #6

Why Wait Until After You are Sued?

This is the sixth of the series about Best Practices for Plan Sponsors.

I am surprised that, after all of the fiduciary litigation against 401(k) plan sponsors, many plan sponsors and their committees have not taken the basic steps to minimize the risk of being sued, or if sued, of being liable. In most of the settled cases, the plaintiffs’ class action attorneys require that certain conditions—or “best practices”—be adopted by the plan fiduciaries. And, in settlement after settlement, those conditions are, by and large, the same. That raises the obvious question, why haven’t plan committees reviewed these cases and instituted the practices required by the settlement agreements?

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