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Category Archives: Fiduciary Issues

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Myth-Busting the Ratings Allure: Fiduciary Risk From Use of Ratings In Purchase of Lifetime Income Products

Posted in Fiduciary Issues, Lifetime Income
 Guaranteed lifetime income from a DC plan requires a contract with a life insurance company. Period. Even if the program is provided by a mutual fund company, a bank, or any other non-governmental entity, insurance companies are the only businesses which can issue to DC plans a contract guaranteeing lifetime income. Choosing the right insurer … Continue Reading

A Useful Compendium of Lifetime Income Guidance for Defined Contribution Plans

Posted in Fiduciary Issues, Lifetime Income
bookshelves sizedWe have been extensively researching, writing on and developing the concept of providing lifetime income from defined contribution plans for some 15 years. The work has resulted in a patent; several major independantly published research papers; the  outlining of some of the important concepts which underline the proposed QLAC regs and its key revenue ruling; and … Continue Reading

Aggregation Models, Plan Loan Insurance, Lifetime Income Patents: Addressing Retirement Security by “Looking Through the Wrong End of a Telescope”

Posted in Fiduciary Issues, Lifetime Income, Multiple Employer Plans
In an almost stealth-like way, innovation is creeping into the marketplace and creating ways to address critical retirement issues, even without an incubator. Though these programs can do little to address what I view as the basic retirement inadequacy issue-that is, employers are generally moving away from the traditional notion of building adequate retirement programs into their employment models-they are making progress toward making the best of what we've got… Continue Reading

The “Stable Value” Guaranteed Separate Account; Greetings to the TE/GE Councils Annual Meeting

Posted in Fiduciary Issues, Lifetime Income
There are many insurance separate accounts which really are invested like stable value funds from collective trusts, for example. But if it has guarantees of principal or interest-the "guaranteed separate account"-the risk just moves down a level, and the investor in the guaranteed separate account is still subject to an insurer's insolvency risk. So, instead of the insurer standing up for the value of the guarantees, and how well the insolvency risk is managed and priced into the product, the risk is instead hidden and not discussed… Continue Reading

Re-Thinking Fiduciary Allocations under ERISA Sections 402 and 405: Back to the Future

Posted in Fiduciary Issues
The growing complication of the ERISA regulatory scheme is causing many retirement plan sponsors to seek some measure of regulatory relief. This, in turn, is the basis for the popularity of MEPs and PEOs, as a number of service providers seek to fulfill this market demand for a new kind of professional fiduciary which address these employer concerns… Continue Reading

Keeping 12b-1 Basics in View When Reviewing Plan Revenue Sharing

Posted in Fiduciary Issues
I have noticed a curious perception with regard to all of this activity related to 12b-1 arrangements, which gives me some pause. There seems to be a growing sense of entitlement, that somehow plans are entitled to revenue sharing, that there is some sort of innate (and perhaps legal) entitlement plans have to the 12b-1 and service fee payments generated under these programs. It seems that often this is where the conversations begin, and is even seems to be creeping into some of the DOL's own approach to these things… Continue Reading

“Overstating” the 404a-5 Non-Electing Participant Disclosure: Its a Question of When, not If…

Posted in 404a-5, Fiduciary Issues
A number of friends, and other commentators, had suggested to me that I was perhaps “overstating” the position I had discussed on my last blog regarding the delivery of 404a-5 notices to non-electing participants in an elective deferral plan. It was a very kind way of saying that I was wrong. After looking at the … 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

Bidwell and the “Darker Side” of the QDIA

Posted in Fiduciary Issues
A couple of decades ago, I attended an ERISA litigation conference where one of the topics of discussion was the potential for lawsuits from participants who were placed in stable value (then known as "fixed funds") investment funds in a 401(k) plan, who would claim somehow that it was a fiduciary obligation to optimize gains … Continue Reading

FAB 2012-2/ Q15′s Impact on 403(b)

Posted in 403(b), Fiduciary Issues
One of the more difficult questions that has arisen under the 404a-5 participant disclosure rules is related to those pesky "old" 403(b) contracts. In the multiple vendor ERISA world, where a number of vendors have been in and out of the plan over decades, the question becomes whether-and to what extent-the 404a-5 disclosures have to … 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

For Guaranteed Lifetime Income in DC Plans: (ITS) Time Has Come Today

Posted in Fiduciary Issues, Lifetime Income
But, first, another note of introduction…… It is with great pleasure to announce that my friend and fellow pink-shirted compatriot (many of our industry colleagues may fondly remember THAT story!) Sandy Koeppel has decided to join us as Of Counsel, and to have some fun following his illustrious career at Prudential.  Together with myself, Phil … Continue Reading
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