DOL Fiduciary Rule Delayed: Future Still Remains Unclear

On April 4th, th2017_COLA_limitse Department of Labor (DOL) announced that it would be delaying the applicability date of its Conflict of

Interest Rule (also known asthe Fiduciary Rule) by 60 days. This moves the applicability date of the rule back from April 10th to June 9th.

Next, the DOL will be considering whether to leave the rule unchanged, to revise the rule, or to rescind the rule all together. It’s unclear whether this determination can be made within 60 days or whether the DOL will pursue an additional delay in the applicability date. Continue reading

The Responsibility of Plan Fiduciaries

Protecting against the Self-Interest of Others for the Good of Participants

Fiduciaries of the JP Morgan Chase 401(k) Savings Plan have recently been sued by Plan participants. Listed allegations include:

  • failing to monitor and evaluate the cost of investment options
  • imprudently allowing the Plan’s assets to remain in various proprietary (JPMorgan) investment vehicles rather than lower fee, similar investment vehicles, and
  • failing to remove fiduciaries whose performance was sub-par.[1]

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Turbulent and Uncertain Future for the Fiduciary Rule

Turbulent Uncertain Future for Fiduciary RuleAfter more than six years of work, much anticipation, and monumental changes in the financial industry in preparation, the Department of Labor’s Conflicts of Interest Rule (also referred to as the Fiduciary Rule) is set to become applicable on April 10th, 2017.  However, it is unlikely that this fledgling rule will ever actually see the light of day.

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Checksmart Excessive Fee Suit Requires Closer Look at Fund Performance

Excessive Fee Lawsuit FiledA recently filed lawsuit attempts to hold plan fiduciaries to what has been an unprecedented standard until now. Previous lawsuits accused plan fiduciaries (with a slight amount of industry knowledge) of what could be considered “a no brainer”: don’t pay too much. If there is an identical or nearly identical investment option offered at a lower cost, choose the lowest cost option. If it is not feasible to switch to the lowest cost option, retain the fund but rebate revenue sharing. Simple, provided you know what you’re looking for. This new lawsuit requires fiduciaries to put more thought into the plan’s fund lineup, particularly with respect to fund expenses relative to fund performance. Continue reading

IRS Makes Prompt Correction of Elective Deferral Errors Less Expensive

As anyone who deals with the administration of qualified retirement plans knows, mistakes happen.  This is a fact that the IRS is well aware of, and the last thing that the Service wants to do is harm participants by disqualifying their company’s retirement plan.  For this reason, the IRS has established the Employee Plans Compliance Resolution System (“EPCRS”).  This system allows plan administrators to make voluntary corrections without risking disqualification of their plan. Continue reading

Quick Compensation Primer – The Basics

Compensation errors are one of the most common plan administration related errors that the Department of Labor (DOL) and the Internal Revenue Service (IRS) find when auditing qualified retirement plans. One of the best ways to avoid compensation errors is to first truly understand what your plan’s definition of compensation actually provides. Understanding the basics is crucial because if you don’t know how your plan defines compensation, the risk of errors in operating the plan is sure to increase.

So, how exactly does your plan document define compensation? Is it clearly defined as “Code § 3401(a)”? “W-2 wages”? “415 simplified compensation”? Or is it more detailed than that, specifically detailing what is to be included/excluded in a long, difficult-to-decipher definition? If it’s the latter and you’re not entirely sure what your definition of compensation entails, be sure to seek guidance on the matter. Continue reading

Yet Another Excessive Fee Lawsuit is Settled

Excessive Fee LawsuitIn 2013 MassMutual was sued by a class of over 14,000 participants of its own 401(k) plan for charging the Plan excessive fees for record keeping services, among other things. The case was filed by the St. Louis based law firm Schlichter, Bogard & Denton, and was recently settled for $30.9 million[1]. Continue reading

Lawsuit threats no longer remote possibility for small and mid-sized retirement plans

Lawsuit threats a potential reality for small and mid-size retirement plansThere are three sources of threats to any qualified plan: the DOL, the IRS, and lawsuits. Until recently, lawsuits had only been filed against plans with assets in the billions and had only been filed by Schlichter, a St. Louis-based firm.  The threat of lawsuits seemed remote to small and mid-sized plans; a reality for larger plans only until just recently. On May 18, 2016, a lawsuit was filed in Minnesota by a law firm named Madia, LLC on behalf of Participants of the LaMettry’s Collision, Inc. 401k plan.  The LaMettry’s plan has $9.2 million in assets.  No longer can smaller plans pull the covers over their heads.

The threat of a lawsuit is now real to plans of all sizes.

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