INDUSTRY AND REGULATORY NEWS YOU CAN USE

Read recent articles and other information of interest to employers, plan sponsors, participants and industry professionals. 

26 Apr 2015 02:12:37 Z

"Fund expenses are coming down, but don't thank the financial services industry -- pat yourself on the back.... [I]nvestors have overwhelmingly favored low-cost index funds and exchange-traded funds over the past five years -- index funds, for the most part, but low-cost actively managed funds, too. All but 5 percent of the money going into funds went to products with expenses in the lowest 20 percent of the fund universe." (Bloomberg)

26 Apr 2015 02:12:37 Z

"With 10 years of history, there's now enough of a track record to judge just how well investors are doing in target-date funds. The average per-year return over the past decade was 5 percent ... Stock funds were up an annual 7.5 percent over the past decade, while bond funds were up an average 4.4 percent.... But target-date funds have one big advantage over other kinds of mutual funds ... The average mutual fund has a flaw, which is that the average investor ... tend[s] to jump in and out of funds at the wrong time.... Investors in target-date funds, at least so far, seem to have avoided this curse." (Bloomberg)

26 Apr 2015 02:12:37 Z

"Labor Secretary Thomas Perez indicated Thursday that his department will not extend further the 75-day comment period for its redraft to amend the definition of fiduciary under [ERISA]. When asked ... if DOL would honor the Tuesday request by industry trade groups to extend the comment period another 45 days, Perez reiterated DOL's previously stated comment guidelines." (ThinkAdvisor)

26 Apr 2015 02:12:37 Z

7 pages. "The framework set up by the DOL could work conceptually, but in its current form, it would have the same effects as the original 2010 proposal -- cutting off the option for low and middle-income individuals and small businesses to receive personalized investment assistance.... The re-proposal [includes] an exemption from the prohibited transaction rules that could, if it worked correctly, preserve access to investment assistance. But the exemption does not work: it is extremely narrow, is not principle-based, and includes such impractical conditions that it is unusable." (Davis & Harman LLP)

26 Apr 2015 02:12:37 Z

"The DOL refers to the participants, beneficiaries, and IRA holders who will continue to receive conflicted advice under the Proposal as 'the investors [that] are particularly vulnerable to abuse.' The DOL also notes in the preamble to the Proposal that these consumers of advice services 'often do not read the legal documents.' Yet, the proposed exemption would leave these individuals to depend most substantially on the first two mechanisms to protect them: disclosure (which the DOL says they will not read) and integrity (which the DOL clearly believes investment advisors do not have ... at least, not in large enough measure).... The big difference is the ability of the DOL to get involved[.]" (Ferenczy Benefits Law Center LLP)

26 Apr 2015 02:12:37 Z

"Early assessments of the Department of Labor's fiduciary proposal find the new rules will be complicated to implement and costly for the industry, according to wealth management executives.... [A]nalysts at investment banking firm Keefe, Bruyette & Woods ... estimated that the DOL's proposal could be a 2% drag on Morgan's earnings, which the authors described as modest. For Raymond James, the analysts estimated 'roughly $2,400-$4,800 in increased compliance and litigation cost per advisor which equates to roughly $15 million to $30 million of incremental expenses.' " (On Wall Street)

26 Apr 2015 02:12:37 Z

"While Fidelity said the new IRS newsletter article 'may be indicative of the position the IRS is likely to take when reviewing plan procedures,' it said the agency's position 'does not appear to be supported by IRS regulations and is contrary to recent indications from IRS representatives suggesting that such documentation is not required.' " (Thompson's HR Compliance Expert)

26 Apr 2015 02:12:37 Z

"In the retirement industry, the government has ready-made allies in the brother vs. brother conflict wrought by the Great Fiduciary Debate. Yes, statists can sprinkle in fresh gunpowder to spark a more heated exchange, but it is the beauty of insiders revealing each others' best kept secrets that remains the most effective way to discredit the entire private retirement industry." (Christopher Carosa, via National Association of Plan Advisors [NAPA])

26 Apr 2015 02:12:37 Z

"The DOL mentioned and solicited advice with regard to, but did not formally propose, a 'streamlined' exemption which would allow advisers to receive compensation in connection with a plan's or IRA's purchase of certain high-quality, low-fee investment options, which might include mutual funds which are index funds or certain target date funds." (Ropes & Gray LLP)

26 Apr 2015 02:12:37 Z

"[1] Using the wrong table to determine your life expectancy factor.... [2] Taking your RMD from the wrong type of account.... [3] Failing to adjust your prior year-end balance for an outstanding rollover or transfer.... [4] Failing to adjust your prior year-end balance for a recharacterization of a Roth IRA conversion made in the year after conversion.... [5] Taking your RMD from your spouse's retirement account.... [6] Forgetting to take your RMD altogether.... [7] Failing to timely correct any mistakes you uncover." (Slott Report)

26 Apr 2015 02:12:37 Z

"Target date funds produced a second consecutive quarter of positive results, posting an average return of 2.4%. Diversification into non-core asset classes continues to be a headwind as large-cap stocks outperformed most equity asset classes and core bonds outperformed most bond asset classes. Over the last 12 months the average target date fund returned 6.2%." (Ibbotson Associates, Inc.)

26 Apr 2015 02:12:37 Z

"[W]hile the traditional 'rule of thumb' for asset location is that tax-inefficient bonds go into an IRA, while equities eligible for preferential tax rates go into a brokerage account, the reality is that for investors with long time horizons the optimal solution may be the opposite. Once stock dividends and portfolio turnover are considered, the ongoing 'tax drag' of the portfolio can be so damaging to long-term returns that placing equities into an IRA may be more efficient, even though they are ultimately taxed at higher rates! ... [In] the end, good asset location decisions depend not only on returns and tax efficiency, but an investor's time horizon as well!" (Michael Kitces in Nerd's Eye View)

26 Apr 2015 02:12:37 Z

"While a clean fiduciary standard offers brokers and insurance agents a straight-forward path for delivering conflict-free investment plan advice, a 'best interest contract exemption' makes that path fuzzy and subject to attack in court. That may not be a bad thing.... [R]etirement plan lawsuits, brought by lawyers like Jerry Schlichter, have been more successful in driving down excessive 401k fees than DOL fee disclosure regulations. Maybe a fuzzy fiduciary standard will fuel more suits that drive the cost of advice lower than a clean fiduciary standard would?" (Employee Fiduciary)

26 Apr 2015 02:12:37 Z

5 pages. "[It] appears possible to avoid fiduciary status when providing participants with [1] the list of plan options, and [2] tools for identifying the type and amount of assets that should achieve desired goals, respectively -- but not when furnishing these two types of material in tandem. The need to separate this information may reduce its value to participants." (Buck Consultants at Xerox)

26 Apr 2015 02:12:37 Z

"[T]he proposal does not require a meeting of the minds as to the extent to which the recipient will actually rely on the advice, but the parties must agree or understand that the advice is individualized or specifically directed to the particular advice recipient for consideration in making investment decisions.... [T]here is no requirement that the advice be specific to the needs of the plan, participant or beneficiary or IRA owner; rather, the advice only needs to be specifically directed to such recipient.... By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer's ERISA Practice Center)

26 Apr 2015 02:12:37 Z

"The breadth of the general definition makes it vital to come within the terms of a carve-out if one is available. However, the carve-outs are not available to a person who admits to being an ERISA fiduciary.... [E]ven for advisers and financial institutions that undertake the many compliance duties and disclosures necessary to come within the 'best interest contract' exemption, in the end, the exemption only exempts the person from the prohibited transaction rules, including potential excise taxes for IRAs under the Internal Revenue Code.... [T]he exemption does not exempt a person... from the general fiduciary duties under ERISA ... or from potential civil liability to make up any loss to the plan resulting from a breach of those duties." (Dentons)

26 Apr 2015 02:12:37 Z

"DOL made a legitimate effort, from its frame of reference, to address a number of criticisms of the earlier proposal made formally during the 2010-2011 rulemaking process and informally during the intervening years.... On balance, however, there is substantial reason to question both the justification for and the execution of the reproposal. At bottom, the reproposal does not target 'bad actors' for reform. Instead, it would materially modify otherwise permissible practices in the affected industries and impose substantial compliance costs, uncertainties and exposure on 'good actors.' Consequently, important interests of plan sponsors, participants, IRA owners, financial services providers and the retirement system as a whole are in play." (Sutherland Asbill & Brennan LLP)

26 Apr 2015 02:12:37 Z

"James Altucher, in a short video on Business Insider, is telling young people not to invest in a 401(k). This is terrible counsel on many levels. The disappearance of pensions and underfunding of Social Security have made the 401(k) our de-facto national savings plan. Altucher's recklessness is exacerbated by an implication that 401(k) accounts are some sort of black box -- 'you have no idea what's happening to that money,' he says darkly. His timing couldn't be worse, as new graduates who soon land in the workforce will pay dearly if they do as he says." (Barrons)

26 Apr 2015 02:12:37 Z

"The percentage of workers confident about having enough money for a comfortable retirement, at record lows between 2009 and 2013, increased in 2014 and again in 2015.... The increased confidence since 2013 is strongly related to retirement plan participation.... Cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 50 percent of workers citing these factors.... Seven in 10 (69 percent) state they could save $25 a week more than they are currently saving for retirement." (Employee Benefit Research Institute [EBRI])

26 Apr 2015 02:12:37 Z

"The 'best interest' standard of the exemption is particularly important for IRA owners. Fiduciaries to ERISA-covered plans are already subject to duties of prudence and loyalty, but IRA fiduciaries are not subject to similar standards under the Code. By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer Rose LLP)

26 Apr 2015 02:12:37 Z

"The IRS greatly reduced the filing fees for loans in violation of Internal Revenue Code Section 72(p) and for late minimum required distributions ... [and] added a correction method for elective deferral failures in plans with automatic contribution arrangements ... For failures to implement deferral elections discovered within three months, no corrective contribution is required if the deferrals are restarted by the first payroll period after the three-month anniversary of the failure.... The IRS created a new safe harbor for failures to implement deferral elections when the error is found after three months." (Thompson Hine)

26 Apr 2015 02:12:37 Z

"[O]nly in the most unique circumstances would demographics alone warrant a custom glidepath, and there is a sufficient array of commercially available glidepaths to fit the demographic needs of most plan populations. However, there may be broader applicability for the use of custom target date options for plan sponsors that wish to utilize their own core investment lineup, that have a specific view on active management, or that value a larger allocation to non-traditional asset classes." (Rocaton Investment Advisors, LLC)

26 Apr 2015 02:12:37 Z

"[M]illions of investors, holding a combined $7 trillion of individual retirement account assets, will be empowered for the first time to file class actions against advisors and their broker-dealers whom they believe have failed to put their interests first.... The financial services industry has been anticipating stiff 401(k) rules for years. Even so, the 120-page proposed rule was a shocker, carrying an IRA bombshell and a brand new 'best interest standard' for brokers.... For an industry accustomed to muddy rules and a focus on funneling the fury of ERISA toward 401(k) plans, not IRAs, the long-awaited proposal seems harsh, unforgiving and out of left field, according to broker-dealers and advocacy groups." (RIABiz)

26 Apr 2015 02:12:37 Z

"The [IRS] recently published a newsletter article indicating that documentation must be received and maintained related to hardship distributions and loans and that electronic self-certification is not sufficient to substantiate a participant's hardship.... This position does not appear to be supported by IRS regulations and is contrary to recent indications from IRS representatives suggesting that such documentation is not required.... We are working with industry and plan sponsor groups to get the IRS to modify or withdraw the article until formal guidance is issued." (Fidelity Investments)

26 Apr 2015 02:12:37 Z

"The IRS found in its 401(k) Nonqualified Plans Project that plan sponsors sometimes enter information on the form that indicate that their plan is not qualified.... [T]he project showed that sponsors of the sampled 401(k) plans made mistakes when describing their plan characteristics and listed 3C, showing their plan was a 401(k) plan not intended to be qualified under the Internal Revenue Code.... The few plans that correctly indicated they were nonqualified 401(k) plans were those plans only intended to be qualified by the Hacienda, Puerto Rico's tax authority, and not under the Internal Revenue Code." (American Society of Pension Professionals & Actuaries [ASPPA])

26 Apr 2015 02:12:37 Z

"Leaving aside the overblown rhetoric -- really, all American savers, including people with a deposit account in a bank, will suffer if brokers adhere a fiduciary standard?--the critics of a fiduciary rule have a point. There are some protections for investors who receive poor broker-provided advice on their retirement accounts. And smart people can poke some holes in the Administration's economic arguments in favor of the fiduciary rule.... [T]he issue comes down to the harm that can and does come to individual retirement investors in the absence of the fiduciary rule." (Morningstar)

26 Apr 2015 02:12:37 Z

"The DOL's position is that the suitability standard is not sufficient to prevent the rendering of conflicted advice that it believes costs retirees billions of dollars in inappropriate fees. The brokerage industry contends, in part, that the cost of compliance with the new rule, the enhanced risk of litigation, and the fact that fees must necessarily be higher to provide advice on an individual basis make the rule unworkable and that small plans and small investors will lose the ability to obtain investment advice and to continue to work with a trusted advisor. At a minimum, compliance with the new rule is expected to alter the way that brokerage houses do business." (Benefits Bryan Cave)

26 Apr 2015 02:12:37 Z

7-page chart details the current prohibited transaction exemption and proposed changes, and provides commentary. A more detailed summary and analysis of each PTE is also available: [1] Best Interest Contract Exemption (11 pages); [2] Pre-Existing Transaction Exemption (2 pages); [3] Insurance and Annuity Exemption (2 pages); [4] Principal Transactions in Debt Securities Exemption (5 pages). (Groom Law Group)

26 Apr 2015 02:12:37 Z

"Section 7 of the RIA discusses the regulatory alternatives that the DOL considered before settling on the 2015 Proposed Regulation. Although it appears that DOL considered a number of alternatives, some appearing more credible than others, DOL concluded that that none would protect plan and IRA investors as effectively as the 2015 Proposed Regulation." (Groom Law Group)

26 Apr 2015 02:12:37 Z

6 pages. "The changes proposed by the DOL to the fiduciary definition will expand the universe of individuals and entities viewed as investment advice fiduciaries to ERISA retirement plans and IRAs. While the proposal includes some helpful exceptions to the application of the new fiduciary definition, these exceptions are relatively narrow. As a result, certain sales activities, and consulting, recordkeeping, participant education and valuation services that do not currently give rise to fiduciary status, would do so under the proposal." (Groom Law Group)

26 Apr 2015 02:12:37 Z

"Adding rollovers and IRAs to the definition of fiduciary duties, the U.S. Department of Labor's new proposed rule could have a huge impact on firms in a fast-growing and profitable segment of the retirement savings industry. The new proposal will permit broker commissions if certain conditions are met for those advising individuals or small plans rolling over from company 401(k) plans to particular IRAs. The inclusion means that broker dealers and advisors would have to disclose, for instance, if a client would be putting their money in an investment vehicle with a higher fee[.]" (On Wall Street)

26 Apr 2015 02:12:37 Z

"[An] administrative dataset tracks several hundred plans over 5 years, showing that 20% borrow at any given time, and almost 40% do at some point over five years. Employer policies influence borrowing behavior, in that workers are more likely to borrow and borrow more in aggregate, when a plan permits multiple loans. [The authors] estimate loan default 'leakage' at $6 billion annually, more than prior studies." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

26 Apr 2015 02:12:37 Z

"This paper tracks how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu, tiering options in an easier-to-understand format.... [S]treamlined participants' new allocations exhibited significantly lower turnover rates and expense ratios; based on reasonable assumptions, this could lead to additional aggregate savings for these participants over a 20-year period of $20.2M, or in excess of $9,400 per participant." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

26 Apr 2015 02:12:37 Z

"Although some Wall Street interests are attacking the rule already, those attacks ignore numerous provisions specifically designed to accommodate their concerns.... This rule promises to be a major improvement over the status quo, which allows too many financial professionals to offer self-serving investment advice at the expense of their clients' retirement security." (Save Our Retirement Coalition, via Pension Rights Center)

26 Apr 2015 02:12:37 Z

"Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $53,000. However, few owners of small businesses are aware of the extent to which certain types of 'leveraging' are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees." (Retirement Management Services)

26 Apr 2015 02:12:37 Z

"The proposal includes a revised and broader definition of activities that would result in fiduciary status, a series of limited exceptions to fiduciary status, a package of new prohibited transaction exemptions, amendments to current exemptions for existing and newly covered fiduciaries (as well as nonfiduciaries), and a new regulatory impact analysis." (Morgan Lewis)

26 Apr 2015 02:12:37 Z

"Much like the 2010 Proposed Rule, the 2015 Proposed Rule is focused more on regulating conduct between retail investors and their advisors than between institutional investors and their advisors. These distinctions appear to be drawn more sharply in the 2015 Proposed Rule." (Fried, Frank, Harris, Shriver & Jacobson LLP)

26 Apr 2015 02:12:37 Z

"Some 55% of plan participants in auto-enrollment employer plans -- which are becoming more and more popular -- are contributing less to their employer-sponsored retirement plan than the amount they need to contribute in order to receive the maximum employer-provided matching contribution. This is strong evidence that these participants are basically 'going with the flow' and choosing the default contribution rate selected by their employer rather than actually taking the time to figure out which contribution rate will be most beneficial." (Slott Report)

26 Apr 2015 02:12:37 Z

"[T]he carve-outs would cover seven activities of persons who do not represent themselves as ERISA fiduciaries. [1] Seller's Carve-out....[2] Swaps.... [3] Plan Sponsor Employees.... [4] Investment Platform Providers.... [5] Objective Criteria or Financial Data.... [6] ESOP Appraisals ... [7] Investment Education." (fi360)

26 Apr 2015 02:12:37 Z

"Nearly every major retirement plan provider now offers a data analytics tool that purports to help plan sponsors determine how best to improve their plan design and participant outcomes. But how do data analytics work, and how can sponsors use such tools to perfect their plans?" (PLANSPONSOR)

26 Apr 2015 02:12:37 Z

"ERISA Section 601 exempts brokers from fiduciary status as long as they follow investment advice provided by third-party computer models -- a ruling which encompasses what we now know as robo advisors.... The other workaround is to forego a plan fee and instead be named the fiduciary advisor to participants, as also described in ERISA Section 601.... The risk is that all levels of employees may take you up on your offer for advice, since you may not exclude those with lower balances. One emerging option is to encourage the plan sponsor to add a cost-effective financial wellness or education program for those with simple investment issues or those with minimal assets and significant debt and budgetary issues." (Financial Planning)

26 Apr 2015 02:12:37 Z

"Fiduciary advocates, in particular, will worry that the proposal, unveiled Wednesday, waters down the fiduciary standard currently applicable to fiduciaries under ERISA, and that some of the exemptions provided could be so expansively interpreted that they permit the egregious conduct that bona fide fiduciary standards are designed to constrain.... If enacted, the new proposal could dramatically change the landscape for providers of advice to retirement plan sponsors, retirement plan participants, and IRA account holders. However, enactment of a final version of the rule is far from certain, as the 2015 Proposed Rule will likely receive intense opposition from SIFMA, the American Council of Life Insurers, and many of the players associated with broker-dealer firms and life insurers." (Financial Planning)

26 Apr 2015 02:12:37 Z

"[T]he DOL proposal would require conflicts-related disclosures from many advisors who are not currently subject to this requirement, and it would also put pressure on broker-dealers and insurance firms to more closely monitor and limit the levels of variable compensation earned by their registered representatives and agents. If adopted, the DOL proposal may significantly increase compliance costs for these firms and their retirement businesses.... [It] may be difficult for firms to determine if they have adequately mitigated the conflicts arising from the payment of differential compensation to their individual advisors ... [S]ome individual advisors may decide to become RIAs (or investment adviser representative of RIAs), on the grounds that they would be subject to the same fiduciary standard anyway. Those who switch to a RIA service model would, of course, have to forfeit their right to receive any commissions." (The Wagner Law Group)

26 Apr 2015 02:12:37 Z

11 pages. "This is an ambitious proposal that makes a genuine attempt to eliminate or mitigate the effects of conflicts of interest in ALL retirement plans, including IRAs. It is too soon to tell if the proposal, in its current form, will actually accomplish this goal, or what t he intended and unintended consequences might be ... We in the retirement industry now have the obligation to find the flaws and unintended consequences in the proposal and work with our partners in government to achieve a final regulation and/or effective legislative alternatives that truly serve the country's best interests. The purpose of this article is to provide a technical, 'first glance' overview of the proposal and some early thoughts about possible ramifications." (Pentegra Retirement Services)

26 Apr 2015 02:12:37 Z

"Revenue Procedure 2015-28 modifies and improves the Employee Plans Compliance Resolution System (EPCRS) by providing a new safe harbor relating to automatic contribution features (including automatic enrollment and automatic escalation of elective deferrals) and a separate new special safe harbor correction method for faulty elective deferrals that occur over a period of limited duration." (Milliman)

26 Apr 2015 02:12:37 Z

"[B]rokers would have a legal duty to put clients' interests first, a shift that could reshape how they steer clients and collect fees, and potentially create winners and losers among mutual funds and other products.... Brokers won concessions, including a framework that would let them continue selling bonds out of their own inventory.... Compliance costs for the industry would be $2.4 billion to $5.7 billion over 10 years, according to the Labor Department." (Bloomberg)

26 Apr 2015 02:12:37 Z

250 pages (!) "In developing the new proposal, the Department conducted an in-depth economic assessment of current market conditions and the likely effects of reform. As further discussed [in this analysis], the Department found that conflicted advice is widespread, causing serious harm to plan and IRA investors, and that disclosing conflicts alone would fail to adequately mitigate the conflicts or remedy the harm. By extending fiduciary status to more advice and providing flexible and protective PTEs that apply to a broad array of compensation arrangements, the new proposal will mitigate conflicts, support consumer choice, and deliver substantial gains for retirement investors and economic benefits that more than justify its costs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

40 pages. "The ERISA and Code provisions at issue generally prohibit fiduciaries with respect to employee benefit plans and individual retirement accounts (IRAs) from engaging in self-dealing in connection with transactions involving these plans and IRAs. The exemption allows fiduciaries to receive compensation when plans and IRAs enter into certain insurance and mutual fund transactions recommended by the fiduciaries as well as certain related transactions. The proposed amendments would increase the safeguards of the exemption. This document also contains a notice of pendency before the Department of the proposed revocation of the exemption as it applies to IRA purchases of mutual fund shares and certain annuity contracts. The amendment and revocations would affect participants and beneficiaries of plans, IRA owners and certain fiduciaries of plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

27 pages. "These existing exemptions generally permit fiduciaries to receive compensation or other benefits as a result of the use of their fiduciary authority, control or responsibility in connection with investment transactions involving plans or IRAs. The proposed amendments would require the fiduciaries to satisfy uniform Impartial Conduct Standards in order to obtain the relief available under each exemption. The proposed amendments would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

58 pages. "The ERISA and Code provisions at issue generally prohibit fiduciaries with respect to employee benefit plans and individual retirement accounts (IRAs) from engaging in self-dealing in connection with transactions involving plans and IRAs. The exemptions allow fiduciaries to receive compensation in connection with certain securities transactions entered into by plans and IRAs. The proposed amendments would increase the safeguards of the exemptions. This document also contains a notice of pendency before the Department of the proposed revocation of PTE 86-128 with respect to transactions involving investment advice fiduciaries and IRAs, and of PTE 75-1, Part II(2), and PTE 75-1, Parts I(b) and I(c) [as amended], as duplicative in light of existing or newly proposed relief. The amendments and revocations would affect participants and beneficiaries of plans, IRA owners and certain fiduciaries of plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

25 pages. "PTE 75-1, Part V, [as amended] permits the extension of credit to a plan or IRA by a broker-dealer in connection with the purchase or sale of securities; however, it does not permit the receipt of compensation for an extension of credit by broker-dealers that are fiduciaries with respect to the assets involved in the transaction. The amendment proposed in this notice would permit investment advice fiduciaries to receive compensation when they extend credit to plans and IRAs to avoid a failed securities transaction. The proposed amendment would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

60 pages. "This document contains a notice of pendency before the [DOL] of a proposed exemption from certain prohibited transactions provisions of [ERISA] and the Internal Revenue Code ... The provisions at issue generally prohibit fiduciaries with respect to employee benefit plans and individual retirement accounts (IRAs) from purchasing and selling securities when the fiduciaries are acting on behalf of their own accounts (principal transactions). The exemption proposed in this notice would permit principal transactions in certain debt securities between a plan, plan participant or beneficiary account, or an IRA, and a fiduciary that provides investment advice to the plan or IRA, under conditions to safeguard the interests of these investors. The proposed exemption would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

114 pages. "This document contains a notice of pendency before the [DOL] of a proposed exemption from certain prohibited transactions provisions of [ERISA] and the Internal Revenue Code ... The provisions at issue generally prohibit fiduciaries with respect to employee benefit plans and individual retirement accounts (IRAs) from engaging in self-dealing and receiving compensation from third parties in connection with transactions involving the plans and IRAs. The exemption proposed in this notice would allow entities such as broker-dealers and insurance agents that are fiduciaries by reason of the provision of investment advice to receive such compensation when plan participants and beneficiaries, IRA owners, and certain small plans purchase, hold or sell certain investment products in accordance with the fiduciaries' advice, under protective conditions to safeguard the interests of the plans, participants and beneficiaries, and IRA owners. The proposed exemption would affect participants and beneficiaries of plans, IRA owners and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

120 pages. "This document contains a proposed regulation defining who is a 'fiduciary' of an employee benefit plan under [ERISA] as a result of giving investment advice to a plan or its participants or beneficiaries. The proposal also applies to the definition of a 'fiduciary' of a plan (including an individual retirement account (IRA)) under section 4975 of the Internal Revenue Code ... If adopted, the proposal would treat persons who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner as fiduciaries under ERISA and the Code in a wider array of advice relationships than the existing ERISA and Code regulations, which would be replaced. The proposed rule, and related exemptions, would increase consumer protection for plan sponsors, fiduciaries, participants, beneficiaries and IRA owners. This document also withdraws a prior proposed regulation published in 2010 ... concerning this same subject matter." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

26 Apr 2015 02:12:37 Z

(BenefitsLink)

26 Apr 2015 02:12:37 Z

"Today's proposed rule would ensure that the people providing you with retirement investment advice are working in your best interest. And it includes streamlined, flexible ways to comply with that goal, for example by allowing advisers to enter into a new and enforceable best interest contract before they can receive any payments that might bias their advice. It's a straightforward agreement so you know you'll get advice on investing your retirement savings that puts your interests first. The many advisers already putting their customers' best interest first deserve the level playing field for offering quality advice that this rule will provide." (U.S. Department of Labor [DOL] Blog)

26 Apr 2015 02:12:37 Z

"It encourages emotional decision making, a.k.a., the 'I never paid fees before. Why should I pay fees now?' myth ... It gives the appearance of the fees have the 401k equivalent of the 'Good Housekeeping Seal of Approval' ... Disclosure is either ignored or misunderstood ... It can discourage saving ... It can cause the employee to forgo free money ... It encourages the fallacy of 'cheaper is better' leading to worse service ... Fees are not reported with any context ... It takes the 401k plan participant's eye off the ball ... If plan sponsors don't understand 401k fees, how can we expect plan participants to understand 401k fees? ... It emphasizes the wrong thing." (Fiduciary News)

26 Apr 2015 02:12:37 Z

"It would appear that it does not make sense for any 401(k) plan to continue to offer a prime money market fund after October 2016.... Government money market funds are exempt from these new changes ... However, their yields are even lower than non-government money market funds.... Plan participants may value their money market or stable value option more than any other fund in your plan. It is likely that you will see a high level of plan participant interest in these changes." (Lawton Retirement Plan Consultants)

26 Apr 2015 02:12:37 Z

"The proposed rules ... are likely to intensify significant pushback from Wall Street firms which say they already face robust regulation and warn the rules' costs will make it uneconomical for brokers to serve lower-balance accounts.... The Labor Department rules are expected to be more flexible than a 2010 proposal the department withdrew amid an outcry from Wall Street, which complained it would have barred many routine payments to brokers, including commissions." (The Wall Street Journal; subscription may be required)

26 Apr 2015 02:12:37 Z

"Traditionally, [EBSA] has focused on retirement plan sponsors; service providers would come onto its radar screen for specific reasons, such as whistleblower complaints, or during a plan audit. That began to change in 2013, when the EBSA launched its fiduciary service provider compensation enforcement project.... Compensation practices also have caught the eye of enforcers at the [SEC], who say that in 2015 they will focus on money managers with conflicts of interest over compensation and how well they disclose them." (Pensions & Investments)

Verisight: truthful insight.
"Veri" stems from veritas, Latin for truth.
"Sight" derived from "insight", the ability to perceive clearly and deeply.


WHAT'S NEW?

November 18, 2014
Verisight, Inc., a recognized leader in comprehensive retirement plan services and consulting solutions, announced today that Laura Ramanis will join the organization’s leadership team as Chief Operating Officer, effective November 17, 2014. Read the full release.

October 24, 2014
The 2015 Cost of Living Adjustments have been released by the Internal Revenue Service. Each year, the IRS is required to review and adjust the dollar limitations on benefits and contributions under qualified retirement plans to account for cost of living increases. Some limitations will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment. However, other limitations will increase for 2015. View the 2015 limits.

October 23, 2014
Verisight will be hosting a series of 401(k) Boot Camps in November for our 401(k) plan sponsor clients.  Invitations to this 3 part series can be downloaded here.

This program will provide tools to help in-house plan sponsor staff operate their retirement plan correctly. Over the course of 3 webcasts, Verisight will cover basic in-house 401(k) operations from the employer’s perspective to give your team information to help avoid common operational errors.

October 15, 2014
The Newport Group, Inc. and Verisight, Inc. today announced they will be joining forces to increase the size, scale and reach of their respective businesses. Under the terms of the agreement, the holding company of Verisight. Read the full release.