The document discusses the steps that plan sponsors must take to comply with ERISA Service Provider Disclosure requirements. Plan sponsors must identify all covered service providers, determine what information should have been disclosed, and evaluate any disclosures received to ensure they are complete and the arrangements are reasonable. If disclosures are incomplete, plan sponsors must request missing information and potentially terminate arrangements if information is not provided. The evaluation of arrangements and compensation must consider all sources of compensation and whether conflicts of interest could harm participants.
408b2 A Look at the New DoL Disclosure and Reporting RulesBroadridge
The document discusses new Department of Labor rules regarding disclosure and reporting of financial information by retirement plans. It covers three key aspects of the new rules: 1) expanded reporting of payments for services on Schedule C of Form 5500, 2) new exemptions for prohibited transactions when parties provide services to plans, and 3) new requirements for fiduciaries to disclose cost and service information to plan participants. The rules aim to increase transparency around retirement plan fees and services. Financial services firms have adapted to the new reporting requirements, though some complex commercial relationships remain challenging to report.
DBR May 2012 The Final408(B)(2)Regulation[1]fredreish
The final 408(b)(2) regulation requires detailed disclosures from investment managers providing covered services to ERISA retirement plans. Covered services include investment management services directly to ERISA plans, services to Plan Asset Vehicles, and services by registered investment advisors. The disclosures must provide information on services, direct and indirect compensation, fiduciary status, and registration status. Failure to comply could result in excise taxes, refunding compensation plus interest, and penalties. The regulation also requires additional investment information disclosures for investments designated as participant-directed investment alternatives in 401(k) plans. Responsible plan fiduciaries must terminate contracts if required information is not provided regarding future services after a 90 day period.
Union Cabinet on 17th July 2019 approved the proposal to carry out eight amendments to the Insolvency and Bankruptcy Code, 2016. The Insolvency and Bankruptcy Code Amendment Bill, 2019 requires the approval of both the houses of Parliament. It aims to fill in the crucial gaps in the framework of CIRP to provide clarity in its implementation.
Important considerations regarding the amendments of IBC (Insolvency and Bankruptcy Code Amendment Bill, 2019)
The Enforcement of Security Interest and Recovery of Debts Laws and Miscellan...Mukesh Chand
This document summarizes key changes made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) through an amendment act passed in 2016. Some major changes include renaming securitization companies as asset reconstruction companies, allowing non-institutional investors to invest in security receipts, expanding the definition of secured creditor and secured interest, and granting additional powers to the Reserve Bank of India to regulate and audit asset reconstruction companies. The amendments updated various definitions, widened the scope of certain provisions, and exempted asset reconstruction companies from stamp duty in certain asset acquisition transactions.
Amendments to IBC vide Insolvency & Bankruptcy (Amendment) OrdinanceAlok Saksena
The document summarizes key amendments made to the Insolvency and Bankruptcy Code (IBC) through an ordinance dated June 6, 2018. Some of the major changes include:
1) Home buyers are now classified as financial creditors. The resolution period can be extended by 66% voting share instead of 75%. Withdrawal of application is allowed before invitation of expression of interest but requires 90% voting share.
2) Only shareholders can initiate insolvency proceedings for corporates. Guarantors are not covered under moratorium and can be subjected to IBC separately. There is clarity on various voting requirements and timelines.
3) Promoters of MSMEs can bid if they
bankruptcy abuse prevention and consumer protection act of 2005 presentationwcodell
The document summarizes several key changes brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), including new bankruptcy exemptions, definitions of "debt relief agencies", affirmative obligations and restrictions placed on such agencies, means testing procedures to determine eligibility for Chapter 7, and new educational requirements for debtors.
Insolvency Resolution Process of Guarantors under IBCKaran Valecha
This presentation provides for the insolvency resolution process of guarantors to a corporate debtor. It further takes into account the nature and definition of a contract of guarantee and how the same is treated under the Insolvency and Bankruptcy Code, 2016 pointing out the key case laws on the subject followed by a brief discussion on the constitutional validity of notification enabling CIRP of personal guarantors.
408b2 A Look at the New DoL Disclosure and Reporting RulesBroadridge
The document discusses new Department of Labor rules regarding disclosure and reporting of financial information by retirement plans. It covers three key aspects of the new rules: 1) expanded reporting of payments for services on Schedule C of Form 5500, 2) new exemptions for prohibited transactions when parties provide services to plans, and 3) new requirements for fiduciaries to disclose cost and service information to plan participants. The rules aim to increase transparency around retirement plan fees and services. Financial services firms have adapted to the new reporting requirements, though some complex commercial relationships remain challenging to report.
DBR May 2012 The Final408(B)(2)Regulation[1]fredreish
The final 408(b)(2) regulation requires detailed disclosures from investment managers providing covered services to ERISA retirement plans. Covered services include investment management services directly to ERISA plans, services to Plan Asset Vehicles, and services by registered investment advisors. The disclosures must provide information on services, direct and indirect compensation, fiduciary status, and registration status. Failure to comply could result in excise taxes, refunding compensation plus interest, and penalties. The regulation also requires additional investment information disclosures for investments designated as participant-directed investment alternatives in 401(k) plans. Responsible plan fiduciaries must terminate contracts if required information is not provided regarding future services after a 90 day period.
Union Cabinet on 17th July 2019 approved the proposal to carry out eight amendments to the Insolvency and Bankruptcy Code, 2016. The Insolvency and Bankruptcy Code Amendment Bill, 2019 requires the approval of both the houses of Parliament. It aims to fill in the crucial gaps in the framework of CIRP to provide clarity in its implementation.
Important considerations regarding the amendments of IBC (Insolvency and Bankruptcy Code Amendment Bill, 2019)
The Enforcement of Security Interest and Recovery of Debts Laws and Miscellan...Mukesh Chand
This document summarizes key changes made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) through an amendment act passed in 2016. Some major changes include renaming securitization companies as asset reconstruction companies, allowing non-institutional investors to invest in security receipts, expanding the definition of secured creditor and secured interest, and granting additional powers to the Reserve Bank of India to regulate and audit asset reconstruction companies. The amendments updated various definitions, widened the scope of certain provisions, and exempted asset reconstruction companies from stamp duty in certain asset acquisition transactions.
Amendments to IBC vide Insolvency & Bankruptcy (Amendment) OrdinanceAlok Saksena
The document summarizes key amendments made to the Insolvency and Bankruptcy Code (IBC) through an ordinance dated June 6, 2018. Some of the major changes include:
1) Home buyers are now classified as financial creditors. The resolution period can be extended by 66% voting share instead of 75%. Withdrawal of application is allowed before invitation of expression of interest but requires 90% voting share.
2) Only shareholders can initiate insolvency proceedings for corporates. Guarantors are not covered under moratorium and can be subjected to IBC separately. There is clarity on various voting requirements and timelines.
3) Promoters of MSMEs can bid if they
bankruptcy abuse prevention and consumer protection act of 2005 presentationwcodell
The document summarizes several key changes brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), including new bankruptcy exemptions, definitions of "debt relief agencies", affirmative obligations and restrictions placed on such agencies, means testing procedures to determine eligibility for Chapter 7, and new educational requirements for debtors.
Insolvency Resolution Process of Guarantors under IBCKaran Valecha
This presentation provides for the insolvency resolution process of guarantors to a corporate debtor. It further takes into account the nature and definition of a contract of guarantee and how the same is treated under the Insolvency and Bankruptcy Code, 2016 pointing out the key case laws on the subject followed by a brief discussion on the constitutional validity of notification enabling CIRP of personal guarantors.
Citing Private Equity Concerns, New York Department of Financial Services Pro...NationalUnderwriter
Citing Private Equity Concerns, New York Department of Financial Services Proposes Increased Scrutiny and Disclosure for Acquisitions of New York Domestic and Commercially Domiciled Insurers by Eric R. Dinallo, Thomas M. Kelly, Marilyn A. Lion, and Nicholas F. Potter.
On May 14, 2014, the New York State Department of Financial Services (“NYDFS”) proposed an amendment to the regulation that sets forth the filing and other regulatory requirements for the acquisition and retention of control of New York domestic and commercially domiciled insurers that includes specific requirements directed at acquisitions by private equity firms and other similar investors.
In the regulatory impact statement that accompanies the proposed changes, the NYDFS stated that the changes
reflect the NYDFS’ concern that private equity firms and other similar investors have a “focus on maximizing their
short-term financial returns rather than ensuring that long-term policyholders receive the insurance benefits for which
they have paid.”
The NYDFS went further to state its concern that the short-term focus may lead to “an incentive to increase investment risk and leverage in order to boost short-term returns.”
This document outlines three credit schemes to enhance access to finance for agricultural networks in Afghanistan. It discusses the goals of developing Sharia-compliant loan products and simplifying the application process. Under Credit Scheme 1, financial institutions would directly lend to entities like ag depots. Credit Scheme 2 involves a supplier providing inputs to borrowers and acting as a reference for loans. Credit Scheme 3 has suppliers receiving loans and on-lending to networks. The document provides details on eligible borrowers, required documents, potential financial products, and FAIDA's role in facilitating the application process.
This presentation is designed for those with responsibilities in the areas of compliance, human resources, lending, audit and management of Credit Unions and their mortgage lending subsidiaries. It will explain the necessary steps to take to be compliant with the new SAFE Act requirements.
Mardia chemicals case by shreya a322509022Shreya Ganguly
This case involves a challenge to the validity of certain provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. [1] The Supreme Court upheld the main provisions of the Act, including Section 13 which allows secured creditors to enforce security interests without court intervention. [2] However, the Court struck down the requirement under Section 17(2) that borrowers deposit 75% of the claimed amount before appealing to the Debt Recovery Tribunal, finding it to be an arbitrary requirement. [3] Overall the judgment upheld the main structure of the Act but identified some deficiencies, such as not addressing the tension between the Act and the Companies Act regarding winding up of companies.
The presentation seeks to provide deep insight into the Pre-Packaged Insolvency Resolution Process introduced to the Insolvency and Bankruptcy Code, 2016 by way of enactment of Insolvency and Bankruptcy (Amendment) Ordinance, 2021 under Part II Chapter III-A of the Code.
This document provides definitions for terms related to legal jargon. It notes that the definitions are intended as an introduction and specific legal advice will be required due to the complex legal issues involved. Additionally, the terms and applicable laws are subject to change. The information should not be construed as legal advice. Users can suggest additional terms or clarified definitions by email.
Note on Securitisation and Reconstruction of Financial Assets and Enforcement...aarthianand
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) allows banks and financial institutions to recover non-performing assets without court intervention through securitization, asset reconstruction, or enforcing security. The Act defines banks, financial institutions, secured creditors, and borrowers. To use SARFAESI powers, an institution must fall under the definition of a bank or financial institution, which includes certain public institutions and those notified by the central government. The Ministry of Corporate Affairs also provides guidelines for an institution to be declared a public financial institution.
This memorandum discusses the advantages of establishing a Personal Pension Plan (PPP) for business owners and incorporated professionals. A PPP allows for greater retirement savings than a RRSP by permitting larger tax-deductible contributions and more flexible investment options. It provides seven additional ways to reduce taxes while saving for retirement. Administration of the PPP is handled by INTEGRIS to alleviate complexity. Legally, a PPP is a registered pension plan governed by the Income Tax Act and registered pension plan regulations.
The document discusses securitization and asset reconstruction in India. It states that Section 5 of the Securitization and Reconstruction of Financial Assets and Enforcement Security Interest Act mandates that only banks and financial institutions can securitize their financial assets. It provides an example of how a bank called XYZ Bank can securitize its loan assets by transferring them to a special purpose vehicle, removing the assets from its books and freeing up capital for new lending. The special purpose vehicle then issues securities to investors to raise funds that are passed back to the originating bank.
The document discusses banking and financing regulations and practices in Tanzania. It covers requirements for bank and non-bank lenders, types of security that can be taken over different asset classes, guarantees, enforcement of contracts and security, bankruptcy processes, and trends in cross-border financing. Key points include that banks must be licensed by the Bank of Tanzania, security can be taken through charges, pledges, mortgages and assignments but require registration, and insolvency processes provide for compromise arrangements, administration and winding up but creditors can influence the process.
Insolvency and bankruptcy code analysis of a selected few ordersShruti Jadhav
The document provides an introduction and overview of key provisions of the Insolvency and Bankruptcy Code of India relating to corporate insolvency resolution processes. It discusses who can initiate insolvency proceedings under the Code, including financial creditors owed financial debt, operational creditors owed operational debt, and corporate debtors themselves. It also summarizes relevant definitions from the Code, such as what constitutes a debt and default. The document aims to analyze select orders from National Company Law Tribunals and the National Company Law Appellate Tribunal to understand how provisions of the Code have been interpreted in practice.
Taxmann's Guide to SARFAESI Act 2002 & Recovery of Debts and Bankruptcy Act 1993Taxmann
This document provides an overview of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It discusses the background and objectives of the Act, key features such as enforcement of security, securitization, and asset reconstruction. It also examines related topics such as the constitutional validity of the Act, applicability to different entities, and interactions with other laws like the Recovery of Debts and Bankruptcy Act, 1993 and Insolvency and Bankruptcy Code, 2016. The document outlines the procedures for enforcement of security, sale of secured assets, appeals and penalties under the SARFAESI Act.
The National Reverse Mortgage Lenders Association wrote a letter to the Chairman of the California State Insurance Committee to express concerns about Assembly Bill 793. The bill aims to protect senior homeowners but is too broad and vague. It does not provide clear guidance and could dictate how seniors use their own funds. The letter outlines challenges with the bill, existing laws that offer protections, potential unintended consequences, and alternative proposals that meet the goals of protecting seniors without limiting choices or business activity.
This document discusses professional opportunities available under India's Insolvency and Bankruptcy Code (IBC). It notes that the IBC provides a comprehensive framework for insolvency and bankruptcy proceedings for both individuals and companies. Some key professional roles under the IBC include serving as an interim resolution professional, resolution professional, liquidator, bankruptcy trustee, and providing advisory services. The document provides a list of 21 specific professional opportunities and areas of practice under the IBC, such as advising secured creditors, acting as a mediator, drafting legal documents, and assisting with claims filing. It also summarizes some of the major amendments made to the IBC since its enactment to strengthen processes and address emerging issues.
The document discusses key aspects and opportunities provided by the Insolvency and Bankruptcy Code, 2016 (IBC) in India:
- IBC provides a timely resolution process for lenders to preserve the value of borrowers' businesses while controlling the process. It avoids value destruction caused by delays.
- Resolution is a business decision made by lenders, with an adjudicator only overseeing the process. IBC distinguishes between business failure and malfeasance.
- Creditors are in control and must manage the business during resolution. Insolvency professionals drive the process and need support from accounting, legal and business professionals to maximize value.
- IBC aims to create an '
ERISA Retirement Service Providers November 2012fredreish
This newsletter provides information for service providers to ERISA-governed retirement plans. It focuses on recent legal issues impacting these service providers. Now that service providers have disclosed their services, status, and compensation to plan sponsors, as required under 408(b)(2), plan sponsors must review and evaluate these disclosures. However, many sponsors lack the expertise to properly do this. As a result, service providers will need to help their sponsor clients with this process. Additionally, the Department of Labor recently issued guidance on disclosure requirements for investments made through brokerage windows but then retreated from this position due to criticism. While the guidance was revised, the issue is not fully resolved and plans/providers should consider why the DOL pursued
August 2012 Just Out Of Reish Plan Sponsorfredreish
1) Past 401(k) litigation has involved company stock cases where large losses occurred and revenue sharing cases where excessive fees were paid from mutual funds.
2) Future litigation risks include unfair allocation of plan expenses among participants and fiduciaries failing to properly evaluate and make prudent decisions about revenue sharing amounts.
3) Litigation risks increase when money is moving between parties without clear disclosure and oversight by fiduciaries.
The document discusses two potential areas of 401(k) plan litigation: excessive payments to service providers and high expense ratios of mutual funds. If plan sponsors fail to properly evaluate service provider payments and fund expenses, it could lead to litigation. Additionally, if a case reaches the Supreme Court regarding fiduciary responsibility to monitor fund expenses, it could increase scrutiny of plan sponsors' practices. While revenue sharing to pay for plan costs is allowed, amounts must be reasonable and fund expenses appropriate relative to plan size. Overall the article advises plan sponsors to focus on these issues to manage litigation risks.
ERISA For Retirement Service Providers[1]fredreish
The newsletter provides information for ERISA retirement plan service providers on recent legal issues. Upcoming, Fred Reish and Bradford Campbell will discuss developments in Washington D.C. regarding mandated participant disclosures and lawsuits about indirect payments to service providers. The articles discuss issues like whether service providers need to offset indirect compensation against direct compensation due to new disclosure rules, and specific guidance from the DOL on disclosing asset allocation models and handling "float" income.
Citing Private Equity Concerns, New York Department of Financial Services Pro...NationalUnderwriter
Citing Private Equity Concerns, New York Department of Financial Services Proposes Increased Scrutiny and Disclosure for Acquisitions of New York Domestic and Commercially Domiciled Insurers by Eric R. Dinallo, Thomas M. Kelly, Marilyn A. Lion, and Nicholas F. Potter.
On May 14, 2014, the New York State Department of Financial Services (“NYDFS”) proposed an amendment to the regulation that sets forth the filing and other regulatory requirements for the acquisition and retention of control of New York domestic and commercially domiciled insurers that includes specific requirements directed at acquisitions by private equity firms and other similar investors.
In the regulatory impact statement that accompanies the proposed changes, the NYDFS stated that the changes
reflect the NYDFS’ concern that private equity firms and other similar investors have a “focus on maximizing their
short-term financial returns rather than ensuring that long-term policyholders receive the insurance benefits for which
they have paid.”
The NYDFS went further to state its concern that the short-term focus may lead to “an incentive to increase investment risk and leverage in order to boost short-term returns.”
This document outlines three credit schemes to enhance access to finance for agricultural networks in Afghanistan. It discusses the goals of developing Sharia-compliant loan products and simplifying the application process. Under Credit Scheme 1, financial institutions would directly lend to entities like ag depots. Credit Scheme 2 involves a supplier providing inputs to borrowers and acting as a reference for loans. Credit Scheme 3 has suppliers receiving loans and on-lending to networks. The document provides details on eligible borrowers, required documents, potential financial products, and FAIDA's role in facilitating the application process.
This presentation is designed for those with responsibilities in the areas of compliance, human resources, lending, audit and management of Credit Unions and their mortgage lending subsidiaries. It will explain the necessary steps to take to be compliant with the new SAFE Act requirements.
Mardia chemicals case by shreya a322509022Shreya Ganguly
This case involves a challenge to the validity of certain provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. [1] The Supreme Court upheld the main provisions of the Act, including Section 13 which allows secured creditors to enforce security interests without court intervention. [2] However, the Court struck down the requirement under Section 17(2) that borrowers deposit 75% of the claimed amount before appealing to the Debt Recovery Tribunal, finding it to be an arbitrary requirement. [3] Overall the judgment upheld the main structure of the Act but identified some deficiencies, such as not addressing the tension between the Act and the Companies Act regarding winding up of companies.
The presentation seeks to provide deep insight into the Pre-Packaged Insolvency Resolution Process introduced to the Insolvency and Bankruptcy Code, 2016 by way of enactment of Insolvency and Bankruptcy (Amendment) Ordinance, 2021 under Part II Chapter III-A of the Code.
This document provides definitions for terms related to legal jargon. It notes that the definitions are intended as an introduction and specific legal advice will be required due to the complex legal issues involved. Additionally, the terms and applicable laws are subject to change. The information should not be construed as legal advice. Users can suggest additional terms or clarified definitions by email.
Note on Securitisation and Reconstruction of Financial Assets and Enforcement...aarthianand
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) allows banks and financial institutions to recover non-performing assets without court intervention through securitization, asset reconstruction, or enforcing security. The Act defines banks, financial institutions, secured creditors, and borrowers. To use SARFAESI powers, an institution must fall under the definition of a bank or financial institution, which includes certain public institutions and those notified by the central government. The Ministry of Corporate Affairs also provides guidelines for an institution to be declared a public financial institution.
This memorandum discusses the advantages of establishing a Personal Pension Plan (PPP) for business owners and incorporated professionals. A PPP allows for greater retirement savings than a RRSP by permitting larger tax-deductible contributions and more flexible investment options. It provides seven additional ways to reduce taxes while saving for retirement. Administration of the PPP is handled by INTEGRIS to alleviate complexity. Legally, a PPP is a registered pension plan governed by the Income Tax Act and registered pension plan regulations.
The document discusses securitization and asset reconstruction in India. It states that Section 5 of the Securitization and Reconstruction of Financial Assets and Enforcement Security Interest Act mandates that only banks and financial institutions can securitize their financial assets. It provides an example of how a bank called XYZ Bank can securitize its loan assets by transferring them to a special purpose vehicle, removing the assets from its books and freeing up capital for new lending. The special purpose vehicle then issues securities to investors to raise funds that are passed back to the originating bank.
The document discusses banking and financing regulations and practices in Tanzania. It covers requirements for bank and non-bank lenders, types of security that can be taken over different asset classes, guarantees, enforcement of contracts and security, bankruptcy processes, and trends in cross-border financing. Key points include that banks must be licensed by the Bank of Tanzania, security can be taken through charges, pledges, mortgages and assignments but require registration, and insolvency processes provide for compromise arrangements, administration and winding up but creditors can influence the process.
Insolvency and bankruptcy code analysis of a selected few ordersShruti Jadhav
The document provides an introduction and overview of key provisions of the Insolvency and Bankruptcy Code of India relating to corporate insolvency resolution processes. It discusses who can initiate insolvency proceedings under the Code, including financial creditors owed financial debt, operational creditors owed operational debt, and corporate debtors themselves. It also summarizes relevant definitions from the Code, such as what constitutes a debt and default. The document aims to analyze select orders from National Company Law Tribunals and the National Company Law Appellate Tribunal to understand how provisions of the Code have been interpreted in practice.
Taxmann's Guide to SARFAESI Act 2002 & Recovery of Debts and Bankruptcy Act 1993Taxmann
This document provides an overview of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It discusses the background and objectives of the Act, key features such as enforcement of security, securitization, and asset reconstruction. It also examines related topics such as the constitutional validity of the Act, applicability to different entities, and interactions with other laws like the Recovery of Debts and Bankruptcy Act, 1993 and Insolvency and Bankruptcy Code, 2016. The document outlines the procedures for enforcement of security, sale of secured assets, appeals and penalties under the SARFAESI Act.
The National Reverse Mortgage Lenders Association wrote a letter to the Chairman of the California State Insurance Committee to express concerns about Assembly Bill 793. The bill aims to protect senior homeowners but is too broad and vague. It does not provide clear guidance and could dictate how seniors use their own funds. The letter outlines challenges with the bill, existing laws that offer protections, potential unintended consequences, and alternative proposals that meet the goals of protecting seniors without limiting choices or business activity.
This document discusses professional opportunities available under India's Insolvency and Bankruptcy Code (IBC). It notes that the IBC provides a comprehensive framework for insolvency and bankruptcy proceedings for both individuals and companies. Some key professional roles under the IBC include serving as an interim resolution professional, resolution professional, liquidator, bankruptcy trustee, and providing advisory services. The document provides a list of 21 specific professional opportunities and areas of practice under the IBC, such as advising secured creditors, acting as a mediator, drafting legal documents, and assisting with claims filing. It also summarizes some of the major amendments made to the IBC since its enactment to strengthen processes and address emerging issues.
The document discusses key aspects and opportunities provided by the Insolvency and Bankruptcy Code, 2016 (IBC) in India:
- IBC provides a timely resolution process for lenders to preserve the value of borrowers' businesses while controlling the process. It avoids value destruction caused by delays.
- Resolution is a business decision made by lenders, with an adjudicator only overseeing the process. IBC distinguishes between business failure and malfeasance.
- Creditors are in control and must manage the business during resolution. Insolvency professionals drive the process and need support from accounting, legal and business professionals to maximize value.
- IBC aims to create an '
ERISA Retirement Service Providers November 2012fredreish
This newsletter provides information for service providers to ERISA-governed retirement plans. It focuses on recent legal issues impacting these service providers. Now that service providers have disclosed their services, status, and compensation to plan sponsors, as required under 408(b)(2), plan sponsors must review and evaluate these disclosures. However, many sponsors lack the expertise to properly do this. As a result, service providers will need to help their sponsor clients with this process. Additionally, the Department of Labor recently issued guidance on disclosure requirements for investments made through brokerage windows but then retreated from this position due to criticism. While the guidance was revised, the issue is not fully resolved and plans/providers should consider why the DOL pursued
August 2012 Just Out Of Reish Plan Sponsorfredreish
1) Past 401(k) litigation has involved company stock cases where large losses occurred and revenue sharing cases where excessive fees were paid from mutual funds.
2) Future litigation risks include unfair allocation of plan expenses among participants and fiduciaries failing to properly evaluate and make prudent decisions about revenue sharing amounts.
3) Litigation risks increase when money is moving between parties without clear disclosure and oversight by fiduciaries.
The document discusses two potential areas of 401(k) plan litigation: excessive payments to service providers and high expense ratios of mutual funds. If plan sponsors fail to properly evaluate service provider payments and fund expenses, it could lead to litigation. Additionally, if a case reaches the Supreme Court regarding fiduciary responsibility to monitor fund expenses, it could increase scrutiny of plan sponsors' practices. While revenue sharing to pay for plan costs is allowed, amounts must be reasonable and fund expenses appropriate relative to plan size. Overall the article advises plan sponsors to focus on these issues to manage litigation risks.
ERISA For Retirement Service Providers[1]fredreish
The newsletter provides information for ERISA retirement plan service providers on recent legal issues. Upcoming, Fred Reish and Bradford Campbell will discuss developments in Washington D.C. regarding mandated participant disclosures and lawsuits about indirect payments to service providers. The articles discuss issues like whether service providers need to offset indirect compensation against direct compensation due to new disclosure rules, and specific guidance from the DOL on disclosing asset allocation models and handling "float" income.
The document discusses using qualified default investment alternatives (QDIAs) to improve 401(k) participant investment returns. When plans switch providers, moving participants' investments into a QDIA rather than directly mapping them can provide fiduciary protections for sponsors and better outcomes for participants. Data from one large recordkeeper showed that around 80% of assets remained in QDIAs 18 months after conversion, indicating QDIAs can successfully improve long-term investing for most participants in a protected manner.
The aging of the American workforce will have significant implications for employers and employees. People are living longer, with some estimates that over 600,000 Americans will be over 100 years old by 2050. There is now a 31% chance that at least one spouse in a married couple will live past 95 if they retire at 65. This means employees may need to plan for 30 years of retirement. However, retiring at 65 is very expensive to fund for most people. As a result, 70 or 72 is becoming the new standard retirement age. This aging trend presents challenges for employers to support longer working and retirement periods.
The document discusses how the definition of a successful 401(k) plan is evolving from measuring features and participation rates to measuring whether the plan will generate adequate lifetime retirement income for participants. It recommends that plans provide gap analysis to help participants determine if they are on track to have sufficient retirement savings. It also suggests plans offer investments and services like annuities that can help participants convert their savings into reliable retirement income to last 30 years or more. The new measure of a plan's success will be whether it produces benefits participants can live on rather than just the size of their account balances.
IRS Regulation 408(b) is expected to take affect in early 2012. Retirement educator Eric Roberts will present the 10 questions you should be asking your defined contribution plan vendor that will help you understand the actual fees and costs associated with your current benefit. Knowing what to ask is half the battle. All attendees of the program will receive Nyhart’s 408(b)2 Guide that includes a checklist of fees to look for and disclosure statements you should be get from your vendor to affirm the actual costs of your plan in preparation of the new regulations taking effect.
1) Plan fiduciaries must evaluate all plan expenses, including administrative and investment fees, to ensure they are reasonable and do not negatively impact investment returns. This duty stems from ERISA's exclusive benefit rule.
2) For defined contribution plans, expenses paid from plan assets reduce participant benefits, so fees must be closely monitored. Defined benefit plan expenses ultimately impact the plan sponsor.
3) When evaluating administrative expenses, fiduciaries should ensure services are necessary, not duplicative, and costs are reasonable given the plan's size and complexity. Investment expenses like revenue sharing and share classes should also be examined.
4) Fiduciaries have flexibility as long as they determine fees are reasonable through competitive bids, expense benchmarking
This document discusses the growing issue of 401(k) lawsuits against employers for fiduciary breaches and excessive fees. It notes that lawsuits were initially focused on large companies but are now targeting smaller plans as well. The document outlines fiduciary responsibilities and various types of fees associated with 401(k) plans to help plan sponsors avoid litigation and comply with Department of Labor regulations.
The Department of Labor is adopting a final rule that expands the definition of a fiduciary under ERISA and the Internal Revenue Code as a result of giving investment advice. The final rule treats those who provide investment advice or recommendations for a fee as fiduciaries in a wider array of advice relationships. The rule aims to require advisers and their firms to give advice that is in the best interest of their customers without prohibiting common compensation arrangements by allowing such arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing. The rule is effective on April 10, 2017, with the Department providing compliance assistance to help affected parties transition to the new regulatory regime.
Capstone Financial 408(b)(2) disclosures and agreementsdavidm10182
The document discusses the new 408(b)(2) regulation which requires plan service providers to disclose fees, compensation, and conflicts of interest to plan sponsors by April 2012. Plan sponsors will now be liable for evaluating the reasonableness of all plan expenses and ensuring participants are not paying excessive fees. The regulation requires detailed disclosure of all direct and indirect fees on participant statements. Plan sponsors must review these disclosures, evaluate service providers, and make changes to ensure the plan is operating in the best interests of participants and not in breach of fiduciary duties.
Capstone financial 401k rules and regulationsdavidm10182
The document discusses new Department of Labor regulations requiring plan service providers to disclose compensation and potential conflicts of interest to fiduciaries by April 2012. It notes that fiduciaries will now be responsible for evaluating the reasonableness of all plan expenses, including fees from service providers, investments, and administrative costs. The regulations aim to increase transparency around retirement plan fees and ensure fiduciaries have the information needed to prudently manage their plans.
QP Steno offers a unique tool that can assist with the evaluation of a service provider’s fees. The reports generated by this tool give plan sponsors the ability to see how much time, effort and cost is going into each of the provider’s activities, and it can break out the provider’s gross compensation across different activities and convert such compensation into an hourly rate, project rate, or per-participant rate.
What Plan Fiduciaries can Expect with 404(a)(5) DisclosuresBroadridge
This document discusses the Department of Labor's 404(a)(5) disclosure regulations for participant-directed retirement plans. The regulations aim to provide plan participants with sufficient information about fees, expenses, and investment options so they can make informed decisions. Key requirements include disclosing:
1) General plan information like investment instructions and restrictions
2) Administrative and individual expenses allocated to participant accounts
3) Investment-related information for each option like name, type, performance history, benchmarks, and fees.
Plan administrators must provide this information initially and annually, as well as upon request or if any details change. The regulations seek to help participants while not overburdening plan administrators by allowing reliance on information from service
Achieve greater certainty through pension deriskingLori Jones
The presentation provided an overview of the changing landscape for defined benefit pension plans including higher PBGC premiums, new mortality tables and improved funding status as a result of favorable investment performance. These changing conditions have encouraged plan sponsors to consider “de-risking” defined benefit pension plans through annuitization and lump sum windows.
Lori provided insight into legal issues within the context of de-risking including a background of applicable ERISA fiduciary rules, recently issued recommendations from the ERISA Advisory Council, IRS private letter rulings and a pending case involving Verizon’s annuitization of its pension plan.
ERISA Fiduciary Issues: A Guide for AdvisorsBroadridge
The role, expectations and legal requirements for ERISA fiduciary advisors is changing. Plan sponsors are increasingly looking to retirement plan advisors for guidance. This brings potential business opportunities but also more regulatory scrutiny. This paper provides advisors with guidelines to understand the plan sponsor role as fiduciaries and the steps to take to avoid breaching their duties.
New Department of Labor rules will increase transparency around 401(k) fees paid by participants. Rule 408(b)(2) will require service providers to disclose their fees and whether they act as fiduciaries. Rule 404(a) will require quarterly reports to participants on plan costs. This increased transparency is expected to lead to fee reductions as pricing models are modified, and some participants may be surprised by costs. Standards of full fee transparency and elimination of revenue sharing are expected to emerge, allowing for more reasonable pricing of plan components.
Employee Benefit Plan Errors - Marshall HarveyDecosimoCPAs
This document discusses common errors made in employee benefit plans and provides guidance on corrections. It outlines issues such as late or incorrect calculations of contributions and distributions, failure to follow the plan document, and noncompliance with reporting and bonding requirements. Examples of contribution errors given include failing to use the plan's compensation definition and not calculating true-up contributions correctly. The document provides resources for determining how to correct errors and become compliant.
The document discusses the first year of compliance with new regulations requiring retirement plan administrators to disclose fee information to participants. An estimated 72 million participants received these disclosures last year. While the primary objective was to ensure participants have information to make wise decisions, there is skepticism that participants will understand or act on the often lengthy and technical disclosures. The costs of implementing the disclosures are estimated at $425 million initially but expected to be outweighed by $14.9 billion in reduced fees over 10 years due to increased fee transparency and competition. Measuring the impact of the disclosures will require collecting data on whether participants understood and acted upon the information. Early surveys suggest few plan or participant changes so far.
This document summarizes key aspects of the Department of Labor's (DOL) final definition of "fiduciary" under the Employee Retirement Income Security Act of 1974 (ERISA). It outlines who will be considered a fiduciary based on the types of accounts, investments, and transactions involved. It also discusses what constitutes a "recommendation" and how to determine if a communication is a recommendation. The document notes disclosure alone is not effective at mitigating conflicts of interest in advice and describes some of the disclosure requirements under the new rule and exemptions, such as the Best Interest Contract Exemption. It provides details on the transition period for compliance with the new regulations.
Wind_Energy_Law_2014_Amanda James_Overcoming Wind Energy Project Financing Ob...Amanda James
The document discusses key considerations for setting up the legal structure and financing of a wind energy project. It addresses:
1) Choosing an appropriate business entity that provides liability protection while optimizing tax treatment and eligibility for incentives. Common options include general partnerships, LLCs, LPs, and cooperatives.
2) Crafting long-term power purchase agreements with creditworthy utilities that specify pricing, production commitments, delivery points, default provisions, and risk allocation to provide predictable revenue essential for securing financing.
3) Negotiating other important contracts like engineering, construction, turbine supply, and O&M agreements that allocate costs, risks and warranties to support the project's viability.
A guide to help advisors understand the proposed Department of Labor changes to the fiduciary definition regulations.
The DOL’s proposed changes to the fiduciary definition regulations are causing financial advisors to re-examine their business models and to determine whether they may be a fiduciary to the plan and participants under the proposed regulations. These proposed changes will not only impact qualified retirement plans, but non-qualified plans too, such as IRAs. There could be major implications for how advisors will work with IRAs if these changes are implemented. This Practice Guide provides a framework to help advisors understand this issue by addressing the following questions:
What are the rules today?
What is being proposed?
How would some of the proposed changes impact an advisor’s practice?
Are there any action steps an advisor can take today in anticipation of the new rules?
This document provides guidance to mortgage servicers on implementing the Home Affordable Foreclosure Alternatives (HAFA) program, which offers incentives for short sales and deeds-in-lieu of foreclosure for homeowners who are at risk of foreclosure but ineligible for the Home Affordable Modification Program (HAMP). It outlines eligibility requirements and evaluation processes servicers must follow to determine if a borrower qualifies for a short sale or deed-in-lieu under HAFA. Servicers must consider borrowers for HAFA within 30 days if they do not qualify for or fail HAMP modifications before allowing a foreclosure to proceed. The guidance standardizes short sale and deed-in-lieu processes
Similar to DBR July 2012 Erisa Service Provider Disclosures (20)
1. Client Bulletin
July 2012
ERISA Service Provider Disclosures:
What Plan Sponsors Need to Do Now
By Fred Reish, Joan Neri, Joshua Waldbeser, and Bruce Ashton
July 1 was a watershed date in the ERISA world. By that date, covered service providers to
ERISA-governed retirement plans1 had to provide written disclosures about their services,
fiduciary status and compensation to the “responsible plan fiduciary” for all their existing
plan clients. Failure to do so made their service arrangements prohibited transactions
under ERISA.
We have passed that deadline, and the focus now shifts from the providers to plan
sponsors.2 So now what? This Bulletin describes the steps that plan sponsors must take
to review the disclosures they received, and how to proceed appropriately in cases where
the disclosures were not furnished. This is important because, if a plan sponsor fails to
engage in a prudent process to evaluate disclosures provided by a service provider, or
fails to identify required disclosures that are missing or deficient and take affirmative
action, it will have engaged in a breach of fiduciary duty and, possibly, a prohibited
transaction.
Key Considerations for Plan Sponsors:
>> Required disclosures vary significantly depending on the services provided and the sources of the
provider’s compensation; therefore, the plan sponsor may need to engage an attorney or consultant to
evaluate the completeness of the disclosure.
>> If required information was not provided by July 1, 2012, specific procedures must be timely
undertaken in order to avoid engaging in a fiduciary breach and, possibly, a prohibited transaction, and
in some cases the arrangement may need to be terminated.
>> The plan sponsor must evaluate the disclosures and may need to renegotiate the contract or terminate
it in order to avoid engaging in a fiduciary breach.
1
Covered plans include both defined benefit and defined contribution plans, including ERISA-covered 403(b)
plans; covered plans do not include governmental plans, non-electing church plans, IRAs or retirement plans that
allow employers to contribute to IRAs set up for employees (referred to as SEPs or SIMPLEs).
2
The disclosures under the final regulation must be made to the “responsible plan fiduciary,” defined as a fiduciary
with the authority to cause a covered plan to enter into a service arrangement. While the responsible plan
fiduciary is often an identified person or group, such as a plan committee, for ease of reference, we have elected
to use the term “plan sponsor” to refer to the responsible plan fiduciary.
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2. ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now July 2012
Background
The final service provider disclosure regulation extended the compliance effective date
from April 1, 2012 to July 1, 2012 and made certain other changes. (For information on
the impact on plan sponsors of the prior “interim final” regulation, see our October 2011
bulletin at: http://www.drinkerbiddle.com/Templates/media/files/publications/2011/
service-provider-disclosures-the-impact-on-plan-sponsors.pdf.)
The final regulation was issued under ERISA Section 408(b)(2), which provides an
exemption for “reasonable” contracts and arrangements for plan services that would
otherwise be prohibited transactions. The exemption is not new – plan fiduciaries have
always had a duty to enter into “reasonable” service arrangements. What has changed is
that the final regulation states that no contract or arrangement with a “covered” service
provider will be reasonable unless the required disclosures are furnished. It also makes
clear that a failure by the plan sponsor to take the actions prescribed by the regulation
if the disclosure requirements are not satisfied will result in a fiduciary breach and,
possibly, a prohibited transaction.
The disclosure must be made by “covered” service providers to the plan and must include
detailed information about services, compensation and whether the provider is an ERISA
fiduciary and/or an investment adviser registered under the Investment Advisers Act
of 1940 or state law (an “RIA”). The disclosure is intended to provide plan sponsors
with the information needed to make prudent judgments, as fiduciaries, as to the
reasonableness of service arrangements.3 Plan sponsors can also use the information
to complete Schedule C of the Plan annual return (Form 5500), which generally requires
plans that covered 100 or more participants at the beginning of the plan year to report
information about all service providers that received $5,000 or more in direct and indirect
compensation during that year.
To fully appreciate the steps required of plan sponsors, it is important to understand how
the prohibited transaction rule for services to a plan works under ERISA. First, the rule
says a fiduciary cannot cause a plan to receive services from, or pay compensation to, a
provider at all. However, Section 408(b)(2) provides an exemption from this prohibition
so long as the arrangement is reasonable and the service provider receives no more
than reasonable compensation. If all the mandatory disclosures are made and the
arrangement is otherwise reasonable, the fiduciary is protected. But if the disclosures are
not made and the fiduciary permits the plan to enter into or continue the arrangement
with the service provider, the fiduciary has engaged in a breach of duty and a prohibited
transaction.
3
Note: More specifically, the disclosures are designed to provide responsible plan fiduciaries with information
about (i) the services being provided, so the fiduciaries can determine whether they are necessary and appropriate;
(ii) whether the provider is an ERISA fiduciary or RIA, and will therefore be held to a fiduciary standard under
ERISA or securities laws; (iii) all the provider’s compensation, so the fiduciaries can determine whether it is
reasonable in the aggregate (as opposed to only the fees paid directly by the plan or plan sponsor); and in some
cases, (iv) conflicts of interest, so that they can be managed in a way to minimize any potential negative impact
on plan participants and beneficiaries.
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3. ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now July 2012
What To Do Now
There are three steps plan sponsors should take now in preparation to review the
disclosures:
>> Identify all covered service providers;
>> Determine what the disclosures should contain; and
>> If necessary, engage ERISA attorneys and/or consultants to assist in this process.
Identify Covered Service Providers. The disclosure requirements apply only to service
providers that provide “covered services” to the plan. Generally speaking, “covered
services” include:
>> Services provided as a fiduciary, either to the plan or to an investment vehicle
that holds plan assets and in which the plan has a direct equity investment, or as
an RIA;
>> Recordkeeping and brokerage services provided to participant-directed defined
contribution plans, if one or more designated investment alternatives will be
made available in connection with such services; and
>> Most other services provided to plans, but only if the provider receives “indirect
compensation” – that is, compensation from sources other than the plan or plan
sponsor.
There are many factors that must be taken into account in determining whether a
service provider is covered by the final regulation. One challenge for plan sponsors will
be determining which investment providers are fiduciaries. Under ERISA, mutual fund
managers are not fiduciaries, but advisers and managers for other investment products
(for example, for fi360 Regarding Broker-Dealers: depending on the product, its
Comments collective trusts or hedge funds) may be,
investments, and how much of the investment in the product is from employee benefit
plans. (Note that in the case of collective trusts, only plans may invest in them, so
the trustee and advisers to the trusts will always be fiduciaries.) Likewise, it will be
challenging to determine whether service providers are covered by reason of having
received indirect compensation of which the plan sponsor may not be aware.
Determine What the Disclosure Must Contain. The information that must be furnished
includes:
>> A description of the services provided;
>> Information regarding the covered service provider’s compensation, whether it is
received directly from the plan or indirectly from a source other than the plan or
plan sponsor (for example, from mutual funds, or their managers or affiliates);
and
>> Whether the covered service provider is an ERISA fiduciary and/or an RIA for the
plan.
The specific requirements on the information that must be furnished are even more
complex than those governing covered service provider status. For example, additional
disclosures are required with respect to indirect compensation, including descriptions
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4. ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now July 2012
of the payor and the arrangement between the covered service provider and payor
– the rationale being that plan sponsors may be unaware of indirect compensation
payments, since they are not “billed” directly to the plan or sponsor. Understanding
the “arrangement” with the payor will also help the fiduciaries understand and evaluate
potential conflicts of interest. There are also several special rules that apply only to
recordkeepers and certain investment providers.
Engage Attorneys or Consultants to Assist. Plan Sponsors must be prepared to deal
with the complexity of these requirements so as to avoid engaging in a fiduciary breach
and a prohibited transaction. As indicated in the preamble to the final regulation, the
Department of Labor does not consider ignorance of these disclosure rules to be a basis
for relief from ERISA’s prohibited transaction rules:
Comments for fi360:
“The Department does not believe that responsible plan fiduciaries should be
entitled to relief…absent a reasonable belief that disclosures required to be
provided to the covered plan are complete…Fiduciaries should be able to, at a
minimum, compare the disclosures they receive from a covered service provider
to the requirements of the regulation and form a reasonable belief that the
required disclosures have been made.”
In order to fulfill this obligation, a plan sponsor should seek the assistance of legal
counsel in understanding the scope and specifics of these requirements and should also
seek the assistance of consultants who can assist in the evaluation process once the
disclosures are obtained (discussed further below).
What To Do Upon Receipt of the Disclosures
Upon receipt of the disclosures, plan sponsors should undertake the following action
plan in order to avoid a fiduciary breach and engaging in a prohibited transaction:
>> Determine whether all disclosures from covered service providers have been
made;
>> Evaluate the disclosures to determine whether they are complete;
>> If the disclosure is incomplete, carry out the steps necessary to obtain relief from
the prohibited transaction rules (discussed below); and
>> Evaluate the disclosures to determine whether the arrangement is reasonable.
Incomplete Disclosures - Obtaining Relief from the Prohibited Transaction Rules.
Upon determining that a disclosure is incomplete – or if no disclosures are received from
a covered service provider4 -- the plan sponsor will not be deemed to be engaged in a
prohibited transaction if:
4
Keep in mind that some entities that provide services to a plan are not “covered service providers” – e.g.,
an entity providing third party administration services that receive only direct compensation from the plan.
Therefore, the fact that a service entity fails to provide disclosures does not necessarily mean that it has violated
the regulation., but this puts the plan sponsor on notice to find out. Also, all service providers, regardless
of whether they are “covered,” are subject to ERISA Section 408(b)(2). Accordingly, while the disclosure
requirements do not apply to “non-covered” providers, fiduciaries are well-advised to request similar disclosures
to the extent necessary to ensure that the arrangements are reasonable and pay the providers no more than
reasonable compensation.
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5. ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now July 2012
>> The plan sponsor did not know that the service provider failed to make required
disclosures and reasonably believed that it did disclose the required information.
This condition may not be satisfied if no disclosures whatsoever were furnished.
>> The plan sponsor requests the missing information in writing upon discovering
the failure. No explicit time limit is provided, but this should be done as soon as
possible.
>> If the covered service provider does not provide the requested information
within 90 days, the plan sponsor sends a written notice to the DOL. The
final regulation describes the information that must be included in the notice
and specifies that it must be filed within 30 days after (i) the covered service
provider’s refusal to supply the information or (ii) the end of the 90-day period,
whichever is earlier. The DOL has provided a model form for this purpose on its
website.
>> If the covered service provider does not provide the information promptly after
the 90 day period, and the requested information relates to “future services,”
the plan sponsor terminates the arrangement as “expeditiously as possible”
while still being prudent. In other words, the plan sponsor must act quickly,
but should not terminate an arrangement in a manner that would harm plan
participants. If the information is not provided within the 90 day period but
does not relate to future services, the plan sponsor must make a prudent
judgment as to whether the arrangement should be terminated. The preamble
to the final regulation notes that fiduciaries are expected to take into account
certain factors in making this decision, such as the nature of the failure and the
availability and costs of a replacement service provider. It is not clear exactly
what is meant by “future services,” but plan sponsors should err on the side of
caution. It may be reasonable to construe this term as not including discrete
projects the provider has already undertaken, but an arrangement for ongoing
services almost certainly cannot be maintained for a significant period of time if
the disclosures are not furnished.
Also, sponsors of plans that are required to file Schedule C with their Form 5500,
which are generally those that covered 100 or more participants at the beginning of the
plan year, must request any information necessary to complete the Schedule C from a
fiduciary or other provider that does not furnish it automatically. If the fiduciary or other
provider still does not provide the necessary information, they must be reported on
Schedule C as having failed to do so.
Evaluate the Disclosures. Once the plan sponsor has the disclosure, the next step is
to review it to determine whether the arrangement and compensation are reasonable, in
accordance with ERISA’s “prudent man” standard.
While the evaluation of the reasonableness of compensation may be undertaken without
assistance, courts tend to agree that it is a “best practice” to work with a knowledgeable
and independent adviser to assist in this process. Many plan sponsors use independent
benchmarking services, and we recommend those that utilize “peer data” to determine
whether compensation is reasonable in light of the services provided, as compared to
other plans of similar size, type, and with like characteristics (It is critical that a plan’s
data be compared to data for an appropriate peer group. If the comparative data is
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6. ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now July 2012
based on a benchmarking group that is not consistent with the characteristics of the
sponsor’s plan, the evaluation may be flawed and may not satisfy the prudence standard).
A second option is using an RFP (Request for Proposal) process, but while effective, RFPs
can be expensive and time-consuming. There are other options as well – in reviewing
investment services and compensation, a knowledgeable consultant can help gauge if the
plan’s service agreements and compensation are supportable under industry standards.
The evaluation of the disclosure should take into account factors such as:
>> All sources of compensation – not just the fees paid directly by the plan or plan
sponsor. For instance, revenue sharing from mutual funds and many other
forms of compensation ultimately come from the plan, and typically are sourced,
directly or indirectly, from the participants’ investment returns;
>> Whether the services are appropriate for the plan and meet the needs of the
participants;
>> Whether there are any conflicts of interest that have the potential to adversely
affect the participants’ best interests and if so, whether they are, or can be,
managed appropriately;
>> For defined contribution plans, whether the investment-related information
provided is adequate for the plan sponsor to comply with its own obligations
under the participant disclosure rules; and
>> Whether the arrangement provides for termination on reasonably short notice
and without penalty to the plan.
If a plan sponsor determines that an arrangement is not reasonable, the plan sponsor
may have to terminate the arrangement. While the best interests of plan participants
need to be taken into consideration in deciding whether to retain or terminate a service
provider, an arrangement that is not reasonable cannot continue because it will be a
prohibited transaction under ERISA.
Finally, the plan sponsor should document this process in evaluating the disclosure
information and underlying contracts and arrangements, noting the reasons for each
decision and any reliance on the advice of the attorneys and consultants. In the event of
a DOL investigation (or litigation), the plan sponsor’s fiduciary process is only as good as
can be proved.
Plan sponsors should prepare for the challenges presented by the final 408(b)(2)
disclosure regulation. Understand that avoiding prohibited transactions is only part of
the equation – the plan sponsor’s duty to exercise prudence extends to all plan service
providers (even those not covered by the disclosure requirements). For this reason, the
plan sponsor may wish to review all plan service arrangements with the same level of
rigor as is required under the regulation.
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