The Duty of Prudence and the Net Cost of Investments
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June 22, 2015
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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
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,
The ABB case has been thoroughly analyzed and widely discussed. Most of that analysis and discussion, though, has been about expenses and revenue sharing. This email focuses on the duty to follow the terms of investment policy statements (IPS). More technically, section 404(a)(1)(D) of ERISA requires that fiduciaries follow the
In my last post—about the selection and monitoring of target date funds (TDFs), I said that I would also discuss the DOL’s recent guidance on that subject… here it is. Earlier this year, the DOL published “Target Date Retirement Funds—Tips for ERISA Plan Fiduciaries.” You should read the full Tips
As I review investment policy statements for participant-directed plans, I see a number of common deficiencies. This email is about one of those—the selection and monitoring of target date funds (“TDFs”). In my experience, most IPS’ say little or nothing about the criteria to be applied to TDFs. For example,
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
This article was prepared by Fred Reish, Bruce Ashton and Josh Waldbeser. Letters to 6,000 sponsors of 401(k) plans, sent out by a Yale law school professor several weeks ago, generated considerable comment and controversy. Some of the letters we reviewed suggested that the recipients were operating a “potentially high-cost plan”
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:
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
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