It is easy to forget that the fiduciary’s exclusive obligation is to provide retirement income from these plans. ERISA is pretty clear that even 401(k) plans and 403(b) plans are actually meant to provide retirement income. They are “employee pension benefit plans” under ERISA Section 3(2)(A) which each “provides retirement income to employees, or results in a deferral of income by employees for periods extending to the termination of covered employment or beyond.” In the day to day operation of a plan loan program, this raises a troubling issue- particularly when a plan design forces an loan default offset of a participants accrued benefit following an involuntary employment (such as a layoff, death or disability), where the retirement benefit is lost under difficult circumstances where there is little chance to recover.
Continue Reading The Fiduciary Underpinnings of Plan Loans
A Potential Impact of the 403(b) University Lawsuits on 401(k) Self Directed Brokerage Accounts
There is a potential impact of the 403(b) University Lawsuits on the ability of 401(k) plans to maintain self-directed brokerage accounts. These 403(b) plans, with their wide variety of investments which are subject only to the control of the participants, are essentially structured in the same manner as SBDAs (without many of the security law protections that are given 403(b) participants). Should the plaintiffs succeed in their calms that it was imprudent to permit employees the ability to invest in a wide range of securities without fiduciary oversight, this may well be the death knell of SBDAs.
Continue Reading A Potential Impact of the 403(b) University Lawsuits on 401(k) Self Directed Brokerage Accounts
403(b) and the Fiduciary Rule
As in all things 403(b), it seems, retirement rules of generally applicability take unusual twists when applied to 403(b)plans. The DOL’s fiduciary rule is not saved from that same problem. A close look reveals interesting twists in the manner in which the rule affects (or doesn’t at all!) 403(b) plans, which simply do not apply to other participant directed defined contribution plans.
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Website Privacy Policies and the Federal Trade Commission’s Authority over Retirement Plans
Remembering that ERISA does NOT preempt the application of other federal law (like the SEC, Anti-Money Laundering, and the Patriot Act rules-just to name a few), which we continue to learn to integrate into our practices, we now may find ourselves needing to deal with the Federal Trade Commissions standards as well. The issue arises from something as innocuous as the website privacy policies which are so commonplace on retirement plan vendor websites (you know, those things know one ever reads or pays attention to). Well, it appears to matter to the Federal Tead Commission.
Continue Reading Website Privacy Policies and the Federal Trade Commission’s Authority over Retirement Plans
DOL Provides Key ERISA Guidance on QLAC/DC Lifetime Income
The DOL just published its first serious guidance on supporting lifetime income with the publication of FAB 2015-2, guidance which is very necessary for the success of the Qualified Longevity Annuity Contracts, as well as DC lifetime income income. The FAB is an initial, but substantial, step in addressing one of the most pressing of the ERISA issues related to providing lifetime income from defined contribution plans.
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Fiduciary Liability for 403(b) Non-ERISA Plans?
In what appears to be one of the first reported appeals court cases involving school district liability under state law related to a wrongfully administered 403(b) plan a Wisconsin court found was that an action alleging a failure to exercise ordinary care in the administration of a 403(b) plan, if proven, could be a fiduciary breach under state law. This breach then may entitle the participants relief in state court.
Continue Reading Fiduciary Liability for 403(b) Non-ERISA Plans?
DOL’s Proposed Fiduciary Rules May Unexpectedly Open Lifetime Income Door, If…….
With regard to the DOL’s fiduciary proposed regulations, There is much to like in the new rules; some troubling things; and, perhaps, a mistake or two which will be all flushed out in the coming months. There are a couple of technical points which are worthwhile sharing because they represent what we can expect of the “unexpected” as we work through the changes’ impact. These include the impact on lifetime income , and the application of the PT rules on the purchase of annuities-including QLACs.
Continue Reading DOL’s Proposed Fiduciary Rules May Unexpectedly Open Lifetime Income Door, If…….
Lifetime Income: Using the Statute Of Limitations to Minimize Insurer Insolvency Risk
In Lifetime Income, ERISA’s statute of limitations may serve to provide the basis for a workable standard when dealing with the long term financial risk posed to fiduciary by insurer insolvency following the purchase of an annuity.
Continue Reading Lifetime Income: Using the Statute Of Limitations to Minimize Insurer Insolvency Risk
Myth-Busting the Ratings Allure: Fiduciary Risk From Use of Ratings In Purchase of Lifetime Income Products
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
A Useful Compendium of Lifetime Income Guidance for Defined Contribution Plans
We 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 the development of more than one retirement product. If you look closely, you’ll see that that many of the major whitepapers published on lifetime income are well based on this extensive work we have published. Some of the work really is groundbreaking; for example, we propose a useful fiduciary process which can be used by fiduciaries in the purchase of annuities, in our NYU paper.
This blog has carried much of that material for the past 5 years, since February, 2009. We’ve now compiled those pieces here for use by employers, vendors, actuaries, advisers and attorneys who may be struggling to support lifetime income in defined contribution plans.Continue Reading A Useful Compendium of Lifetime Income Guidance for Defined Contribution Plans