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Category Archives: Complex Prohibited Transactions

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Employee Asset Protection and State Auto-IRA Programs

Posted in Auto-IRA, Complex Prohibited Transactions
State based auto-IRA programs continue to pick up steam, and may soon become prominent features of the retirement security landscape. Granted, there are a number of legal and logistical issues which need to be resolved before they can be fully implemented, but things are moving quickly. So it is timely to discuss participant protections under these programs. A successful program must necessarily incorporate ways to protect employee deposits. The holding of employee deposits are not much of a concern, as employee deposits will be held in IRAs protected by highly regulated, commercial custody companies-as in any IRA program. The real challenge will be the protection of employees' payroll based deposits in getting to the IRA. … Continue Reading

The Reasonableness of Fees in Retirement Products

Posted in Complex Prohibited Transactions
In short, a retirement plan product is really a package of financial and administrative services. This knowledge is especially important when one is tasked with understanding the reasonableness of fees related to retirement products and services. Purchasing investments through a defined contribution plan is so different than an individual making purchases for their own personal account, and it is horribly misleading to suggest otherwise.… Continue Reading

Annuity Termination Charges under 408b-2: What is “Without Penalty?”

Posted in Complex Prohibited Transactions, Fiduciary Issues
Pension funds and insurance companies share a little discussed attribute, one which I have mentioned from time to time on this blog: they are both great drivers of capital formation.  One of the unique aspects of capital formation through these entities is the function of time: it takes time, to quote the bankers from the… Continue Reading

A Twist to the “Amount Involved” In a 408(b)(2) Prohibited Transaction

Posted in 408b2, Complex Prohibited Transactions
The disclosures related to 408()(2) are really just a precursor to the next step: the imposition of the prohibited transaction taxes and penalties related to compensation which fails to meet those standards.  It looks like the regs have the effect of shifting the application of the rules related to the "amount involved" in the transaction… Continue Reading

Behind 408(b)2’s Looking Glass: Parties-In-Interest, Non-CSPs and Other Complex Tales

Posted in 408b2, Complex Prohibited Transactions, Fiduciary Issues
Now that the initial 408(b)(2) disclosures are out, the challenge becomes understanding them. Beyond just understanding whether or not the fees disclosed are reasonable (a challenge in itself), the disclosures do something arguably more important: they take us behind the looking glass, opening a window to a world with which most are not familiar, but… Continue Reading

Important 408(b)(2) Relief for 403(b) Plans

Posted in 403(b), 408b2, Complex Prohibited Transactions, Fiduciary Issues
The DOL continues with its sensitivity to the challenges created for 403(b) plan sponsors in the transition to an employer accountable world. In today’s release of the final 408(b)(2) regs, the DOL provided tremendously needed relief for 403(b)plans. The language from the preamble speaks for itself: The Department was persuaded by commenters on the interim final rule… Continue Reading

Minutiae’s Triumph: The Striking Impact of Transparency, the Prohibited Transaction Rules and the Exclusive Benefit Rule

Posted in 408b2, Complex Prohibited Transactions, Fiduciary Issues
Freedom and liberty are not merely themes sounded by politicians in political campaigns, or in rousing marches by military bands (though I am personally  particularly fond of them!), nor are they ideas which you will typically see being discussed in a piece about retirement issues. But they are themes woven into the fabric of our… Continue Reading

The Flushing Effect of the 403(b) Connection Between 408(b)(2), Participant Disclosures and Plan Audits

Posted in 408b2, Complex Prohibited Transactions, Fiduciary Issues
I would think that it is a basic law of physics that, whenever you attempt to apply a number of different and complicated principles to a single object, that the consequences on that object will be hard to predict, or even readily ascertained. So it is with a potential impact 408(b)(2) may have on many… Continue Reading

ERISA Metaphysics, Mysticism and Alchemy: Sales Compensation

Posted in B/D-IA Issues, Complex Prohibited Transactions
 Generally unnoticed in the DOL’s proposed fiduciary reg was the implicit recognition that the commissioned based sales function is important to the operation of the market, and that you can “sell” until the cows come home (a good friend tells me, by the way, that the cows actually do eventually come home),  or until you… Continue Reading

Annuity Investment Accounts and 408(b)2

Posted in 408b2, B/D-IA Issues, Complex Prohibited Transactions
The DOL’s newly delayed 408(b)(2) regs are particularly striking in that they demonstrate a growing sophistication, and efficiency, on the part of the EBSA staff in its approach to retirement plan financial products and services. The regs are short, by almost any measure of federal regulations, yet they are packed with meaningful rules which will… Continue Reading

ERISA Plans’ Ultimate-and Criminal-“Prohibited Transaction” Rule of 18 USC 1954

Posted in Complex Prohibited Transactions
Lurking darkly in the background behind all the recent discussions of fee disclosure and how the prohibited transaction rules apply under 408(b)(2), is something most of us in the benefits world typically pay little attention to: the U.S. Criminal Code. We all have a general knowledge that kickbacks and racketeering schemes of any sort are… Continue Reading
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