Fund distributors are contractually entitled to the 12b-1 payment, not the plan, and for very specific distribution purposes. The mutual fund’s Board has already had to make a fiduciary determination that the fee is reasonable, in the best interest of the mutual fund shareholders, and that its payment complies with Rule 12b-1. Separately, the ERISA plan’s fiduciary can only permit the purchase a mutual fund which has a 12b-1 program if the amount of the 12b-1 fee is reasonable from the plan’s point of view, regardless of whether the mutual fund feels its reasonable.
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The “Stable Value” Guaranteed Separate Account; Greetings to the TE/GE Councils Annual Meeting
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.
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The Continuing Efficacy of Commission Disclosures Under PTE 84-24 After 408(b)(2)
Though disclosure may make the sales comp reasonable under 408(b)(2) (that is, if you view sales as a service), it still does relieve the 406(b)(2) adversity problem. To make any sense of this, it looks like you still need to comply with PTE 84-24 in addition to the 408(b) 2 disclosures.
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The “Best Efforts” Standard of the 403(b) EPCRS
For 403(b) late adopters of plan documents,the VCP submission is conditioned upon adoption of a plan document which is intended to comply with 403(b); the plan, in operation, must have acted in accordance with a reasonable interpretation of 403(b) during the period of time for which relief is requested; and, for that period, the plan sponsor must have engaged in a compliance review, under which it used its best efforts to find operational problems and to correct them in accordance with the principles under EPCRS. For Audit CAP, this also appears to be the required correction.
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The New 403(b) EPCRS Rules: Its, Um, Complicated…..
Be prepared to work hard when you need to take a 403(b) plan through the new EPCRS process under Rev Proc 2013-12-as many of you will need to do soon- especially if you have to use the VCP process, or are defending an audit under CAP.It is going to be complicated.This is not necessarily the fault of the drafters of the Rev Proc. They were stuck with a very difficult task: to try to make something which is fundamentally different from a 401(a) plan still fit uniformly into the 401(a) correction scheme.
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Re-Thinking Fiduciary Allocations under ERISA Sections 402 and 405: Back to the Future
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.
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Keeping Your 403(b) Plan In Control
If you have seen the November 14th edition of the IRS’ Employee Plans New, you already know that “internal controls” is the latest catchphrase. And, as the IRS ramps up its audit activity with 403(b) plans, chances are that more IRS auditors will be asking 403(b) sponsors about internal controls for their plans.
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Keeping 12b-1 Basics in View When Reviewing Plan Revenue Sharing
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.
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The EPCRS and Audit Test of the 403(b) Regulations
Now with EPCRS, we are told, being on the verge of release, and with 403(b) audits beginning to enter a new, what I would call “normalized” stage, the 2007 regs will truly be put to the test.Where this will have its impact is when you have to drill down and attempt to apply the regs in detail to any particular fact circumstance….
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MEP Reflections Following the GAO Report
The GAO issued its long awaited study on Multiple Employer Plans. It is nicely written, and for those who with an interest in such matters, it’s a good read.
It pretty well summarizes the current state of affairs related to MEPs. The report, along with our own recent review of MEPs, really demonstrates a