A Guide to Fiduciary Prudence, Part 4: Establishing and Operating a Committee Meeting To Ensure ERISA Compliance

In continuation of our fiduciary prudence series, the next issue of importance in complying with one’s duties as a plan fiduciary should be establishing and maintaining a retirement plan committee. The following questions will be answered in this blog post:

1. How can a retirement plan committee help manage the fiduciary oversight of a plan?
2. Who makes a good retirement plan committee member?
3. What should a committee meeting agenda be comprised of and how should committee meetings be properly memorialized?

So let the fiduciary governance discussions begin!

How can a Retirement Plan Committee help manage the fiduciary oversight of the plan?

As you may know, serving as a plan fiduciary can be a daunting task, one with a lot of risks and requirements. In fact, there are so many requirements and such a concern of risk, that one common way to reduce the fiduciary burden on one individual is by spreading the wealth of duties to other qualified individuals through the formation of a retirement plan committee.Continue reading

Pension Consultants’ Clients Review Its Services

To support our 6th guiding principle “Get Better. Get Better. Get Better.” we listened to the “voice of the client” in two ways in 2012: a focus group and an online survey. The focus group was conducted in May with a small group of clients that represented a broad spectrum of our client population: long-term and brand new clients, public and private companies, over $60 million and under $10 million in plan asset size, plan administrators and plan fiduciaries. In October, we sent an online survey to all of our plan sponsor clients. What they shared with us was reaffirming to our business model and guiding principles and it provided valuable insight into what our clients’ needs are so that we can continue to provide valuable services with the utmost professionalism. Here are the results:Continue reading

How Thought Leadership Leads to Innovation in the Retirement Planning Industry

It is part of the mission of Pension Consultants to be a thought leader in the retirement planning industry.  In this writing, I’d like to discuss what we mean by the phrase, “thought leader”, and also explain why we believe thought leadership is important to our clients.

To lead the thoughts of our industry, our consultants and analysts must be at the forefront of ideas, trends, opportunities and obstacles in their respective discipline.   To quote Wayne Gretzky, arguably the greatest hockey player ever, “A good hockey player playsContinue reading

Regulations bring transparency – and that’s a good thing in the retirement industry

To be opaque is to be in opposition to free enterprise.  Why is it then that transparency is so often abandoned by the marketplace?

Consumers of all sorts need transparency to make good decisions; however, even with perfect transparency, not all will.  Without it though, consumers are deprived of the resources needed to decide which products and services serve their best interest.

The retirement plan community is not immune from these natural forces.  In fact, our industry, our chosen profession, is awash with examples of blurring meaningful information from those who are our consumers.  Plan sponsors and fiduciaries have often had trouble understandingContinue reading

An ERISA Foundation Q&A Part 2

After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 2” of what he had to say.

Question: Can you give me some examples of what a settlor function is?

Chase:  A settlor function is one that is distinct from a fiduciary function. In other words, it’s a decision or a function that’s performed “above the plan,” and is not subject to fiduciary scrutiny because it’s a decision or an act that’s being made while the employer and the individuals who represent the employer are wearing their corporate hats. Some settler function examples include the decision to execute a merger, sell the company or acquire another company. Even though that decision is going to profoundly impact the retirement plan, the decision is still insulated from a business fiduciary standard.

So if a merger or acquisition has an incidental adverse impact to plan participants, plan participants would not be able to bring a cause of action against the employer or the plan sponsor for that merger or business transaction because the act was performed as a settlor, not as a fiduciary.

Other examples of settlor functions would be tweaking the design of the plan, removing certain benefits and features, adding a Roth feature and eliminating a match. As long as certain requirements are met because of their settlor functions, there’s not going to be fiduciary exposure for those actions.

Question:   How do I know if my trustee is directed or discretionary?

Chase:  This should be a relatively easy issue to determine. The first place to look is in the Continue reading

An ERISA Foundation Q&A Part 1

After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 1” of what he had to say.

Question: From the webinar, I learned that employees’ benefits plan provided by the state, such as a state-funded community college, are exempt from ERISA. But what about the 403(b) plans that are offered as an alternative to the employees, do they have to follow the ERISA standards?

Chase:  That’s a good question, and the short answer is, no. The 403(b) plans that are sponsored by governmental employers are exempt from ERISA’s requirements. Some types of 403(b) plans are subject to ERISA. The determining factor in whether or not ERISA is going to apply to one of these special types of plans, such as a 403(b) plan, hinges on the status of the employer. Two types of employers can sponsor a 403(b) plan, governmental plans and certain private organizations that qualify as 501(c)(3)s, charitable organizations. The charitable organizations that are private and sponsor a 403(b) plan have a choice whether or not they want the plan to be subject to ERISA.

There is an ERISA safe harbor under the 403(b) rules that allow charities to exempt their plans from ERISA if they meet a certain set of requirements. If they don’t meet those requirements, then the plan will be subject to ERISA.

Going back to the original question, if it’s clearly determined that the employer is a governmental employer, you don’t even need to look at the ERISA safe harbor for 403(b) plans. All of the plans will be exempt from ERISA by virtue of the employer’s governmental status.

Question: How do I know who to be designated a named fiduciary? What kind of guidance can you provide on that?

Chase: Who should be the named fiduciary is a different question than from who is the named fiduciary. I’ll first address how you know who the named fiduciary is under the plan. The first place to look is the plan document. Most likely in the definitional section or in the plan administration section you’ll see the employer named as the named fiduciary. Now, that’s a pretty broad, not very helpful or specific provision if it’s just the employer name. The next place to look would be at board resolution to see who the employer, as a named fiduciary, has actually delegated specific responsibilities of plan administration.

The question “who should be the fiduciary in a plan?” is going to vary depending on the size and complexity of the plan and depending on the size and complexity of the employer. In a small plan sponsored by a relatively small employer, it may be sufficient to have a single individual who’s the benefits director or who has responsibility for human resource duties to be named as the plan administrator.

I always tend to think it’s a better idea to Continue reading

Brian Allen talks about Pension Consultants

Hear our president, Brian Allen, talk about Pension Consultants in this video produced about us as a recent finalist of the 2011 W. Curtis Strube Small Business Award. The Springfield Chamber of Commerce selects the Strube Small Business Award finalist and winner based on factors such as their staying power, response to adversity, innovative products or services, business philosophy and contributions to the community.

Pension Consultants, Inc. is a Registered Investment Advisor.
Securities offered through Securities Service Network, Inc. Member FINRA/SIPC.

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.

Are you worried about compliance reviews?

People don’t always act rationally. You’ve, no doubt, experienced this reality many times in life. It will come as no surprise then to learn that retirement plan governance is not exempt from this proverb.

A recently released survey from Towers Watson (and reported on planadviser.com) says that 80% of defined benefit and defined contribution plan sponsors identified regulatory compliance as a top risk over the next two years; however, only one in four (26%) conduct regular compliance reviews.

Proper plan administration is so complex that it is virtually impossible to avoid every regulatory misstep. On-going compliance reviews are essential to identifying mistakes and correcting them timely. Conducting compliance reviews require time, energy and focus. We all struggle to find time, are usually tired as a result and therefore lose focus. So it’s really no wonder that so many plan sponsors irrationally worry about something that they do nothing about.

For those charged with running retirement plans worth millions and millions of dollars and hundreds or thousands of employees, it simply isn’t a risk worth taking. For your sake, your company’s sake, and the sake of all of the employees, take the time and commit to a regular compliance review. Seeking compliance guidance can be an enormous benefit in preparing for reviews.

It isn’t particularly rational to be seriously concerned about something and then fail to address it.

But, you knew that already.

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.

Can you count on your financial adviser?

You should be more skeptical of the people that offer advice about your company’s retirement plan. Hopefully, you already knew that.

The Huffington Post has an article, Proposal to Protect Retiree’s Nest Eggs Becomes Lobbying Flashpoint, in their June 14th online edition that outlines the current problem and the Department of Labor’s efforts to correct it. Sadly, it accurately reflects the state of the financial services industry.

Few of the so-called financial advisers in the marketplace today have any intent of serving the client’s best interest. They are simply financial salespeople. Unsuspecting retirement plan participants may seek out their “adviser” only to be sold a product that just happens to be offering an extra commission to the salesperson for the next 30 days. Conflicts of interest? You betcha. Pretending to be one thing, but really being something else? Uh huh.

The Department of Labor is trying to help the deceptive practices by issuing proposed regulations that attempt to expand the definition of “fiduciary” in ERISA (see our response to their proposal). A fiduciary must act in the best interest of the other party or they become liable for the bad advice. The proposal, should it become final, would limit financial salespeople from taking advantage of unsuspecting retirement plan participants.

Regulations such as this can help consumers by forcing industry to change its ways. That’s a good thing. But with it comes not-so-good things. The burden that regulation adds to industry, and ultimately to consumers, is substantial costs. Which way the cost-scales ultimately tip is often unknowable and makes me leery in general. No doubt that retirement plan participants deserve to know if the person that is offering them help is a salesperson or a fiduciary adviser.

The financial services industry has been unable or unwilling to act in their client’s best interest en masse. Now the government is determined to fix it. I only wish that I had confidence in their ability to do it. How about you?

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.