Financial Services ERISA

The operation of a retirement plan requires the services of a wide array of providers, including recordkeepers, bundled providers, broker-dealers or investment advisers, consultants, investment managers, mutual fund advisory firms, bank trust departments and trust companies, and third party administrators. All of these providers to ERISA-governed retirement plans need to comply, to a greater or lesser degree, with ERISA’s reporting and disclosure, prohibited transactions and fiduciary rules. In addition, many are closely regulated by other laws and agencies—for example, the SEC, FINRA and state and federal banking authorities.

Because of these complexities, service providers to ERISA plans need legal representation that focuses on their needs and delivers advice that is based on knowledge of their business and of the governing regulatory authorities. To deliver that level of service, Faegre Drinker has assembled a group of benefits lawyers who focus on representing plan service providers and who practice across the legal silos in a way that can provide effective and comprehensive representation.

We actively work with our clients to anticipate their needs rather than simply react to them. When there is an important development in the law, we strive to immediately help our clients understand how those changes will impact their organizations and their businesses. We provide individual counseling, send timely and informative client alerts, hold frequent and regular client briefings, and design customized training sessions.

We help clients throughout the United States achieve their business objectives in these extensively regulated areas. Our clients include bundled providers and independent recordkeepers, broker-dealers, registered investment advisory firms, investment managers, banks and trust companies, insurance companies, mutual fund and other investment entities, and third party administrators.

Fiduciary Status

A critical issue for many providers is whether they are providing fiduciary services. For some, such as broker-dealers, hedge fund managers and insurance companies, the objective may be to avoid fiduciary status. We assist those clients in developing services, products and programs, agreements, disclosure documents and marketing materials that are consistent with non-fiduciary status. For others, such as investment advisers and managers of collective investment trusts, we help them accept and define their fiduciary status in a way that complies with the law, but also prudently restricts the scope of their potential fiduciary liability.

Prohibited Transactions

Perhaps the greatest risk for service providers is that they will inadvertently engage in a prohibited transaction under ERISA and the Internal Revenue Code. Prohibited transactions, which are often difficult to determine, can result in damages, penalties, taxes and interest. Generally speaking, the reasonableness of the transaction (or even profit by the plan) is not a defense. The prohibited transaction rules apply to both service providers and fiduciaries. As a result, the rules do not require fiduciary status to apply (although certain of the prohibited transaction rules are unique to fiduciaries and absolutely prohibit many conflicts of interest that are acceptable with disclosures, under other laws).

Our Financial Services ERISA Team practices extensively in this area, assisting clients in avoiding prohibited transactions or, where one has occurred, in correcting the violation.

Compliance with Disclosure Requirements

The U.S. Department of Labor has issued a complex regulation requiring extensive written disclosures by “covered service providers.” The disclosures must be made by January 1, 2012, and to all new plan clients thereafter. The burden of proof of compliance is on the service provider and failure to comply results in a prohibited transaction.

Almost all service providers are “covered” by the regulation. For example, it includes anyone who serves as a fiduciary, which could include hedge fund advisers and managers and would include bank and trust company trustees; anyone acting as a registered investment adviser; recordkeepers and broker-dealers for most 401(k) plans; investment managers for collective investment trusts and for retirement plans; and most other providers, such as consultants, third party administrators and broker-dealers, if they receive “indirect” compensation. Such compensation can include commissions, revenue sharing, 12b-1 fees and provider payments.

Our Financial Services ERISA Team consults with clients about whether they are covered by the regulation and, if so, how to comply with the disclosure requirements, including forms, agreements and procedures.

Our teams works closely with a number of practice groups in the firm. For example, we work with Drinker Biddle’s Corporate and Securities Practice Group on securities, insurance and banking regulation, and with the firm’s Investment Management Practice Group when ERISA issues arise in connection with the investment or money held by employee benefit plans and individual retirement accounts in mutual funds, other investment entities, and in managed accounts.

For more information, contact Fred Reish at