PANC 2009: How to Stay out of Trouble on the Fiduciary Front

These days, everything is being challenged as a fiduciary duty for retirement plans, said Chad J. Larsen, President, Moreton Retirement Partners, an NRP member firm, opening a panel discussion at PLANADVISER's National Conference in Orlando, Florida.

To cover themselves on the fiduciary front, Stace A. Hilbrant, Managing Director, 401(k) Advisors, LLC, an NRP member firm, suggested advisers start with a service agreement with their plan sponsor clients that details roles and fiduciary responsibilities.

The Investment Committee

John Cate, senior vice president and wealth advisor at Morgan Stanley Smith Barney, advocated establishing an investment committee at the plan sponsor and an investment policy statement (IPS). The committee should meet quarterly and should keep minutes in a fiduciary file. Cate warned that the Department of Labor is “digging into everything.” He said a client of his was audited and the DoL looked back nine years, particularly interested in prohibited transactions.

Larsen contended that it is not the committee’s job to make sure everything discussed is done. Advisers should set the meeting agenda, take minutes, and distribute the minutes to committee members. In addition, Larsen said advisers should train committee members on fiduciary responsibility. He noted that if committee members have to sign a fiduciary acknowledgement, it changes their mindset.

Michael Case Smith, vice president of Institutional Strategies, Avatar Associates, said plan design is key to staying out of trouble. There is less risk of liability if participants have less choice, but advisers should make sure that fits with their business model and with client need. Smith also said advisers should ensure justifications for investment selections are documented, and for target-date funds that might entail mean drilling down to the glide paths to be sure plan sponsors understand what choice they are making.

Hilbrant noted that NRP has a fiduciary checklist to minimize fiduciary risk. There must be a process in place and all steps must be documented, he said. It is not all about self-protection, Hilbrant said, but being a good fiduciary also results in a better plan for participants.

PANC 2009: Getting Ahead of the 2009 Schedule C

For plan years beginning in 2009, the Department of Labor (DoL) has revised the fee disclosure schedule for Form 5500.

Jason K. Bortz, Partner, Davis & Harman, LLC, told attendees at the PLANADVISER National Conference in Orlando, Florida, that Schedule C (for plans with more than 100 participants) is an annual review of fees and a tool for the DoL to see who to audit and to enforce the Employee Retirement Income Security Act (ERISA). It is not just to disclose fees to plan sponsors, but to reveal potential conflicts of interest and revenue sharing. Further, it will be posted on the Internet for everyone to see, Bortz explained.

According to Douglas Prince, managing director, Stifel Nicolaus, an adviser’s job is to help sponsors get information together and understand all fees, including those paid to the adviser. Advisers may do an auditor search. If advisers do not take the lead in helping sponsors, others will, Prince warned.

Gary Plourde, senior vice president, Sales and Distribution, DailyAccess Corporation, suggested advisers should go over Schedule C line by line with clients. He noted that, for help, pensiongovernance.com has listed 58 codes of potential services to plans for which to disclose fees.

Preparing sponsors for Schedule C reporting is also a time when advisers can and should review with their clients their own services provided and fees received. Bortz reminded advisers that they are only responsible for reporting their own, or their companies’, fees to sponsors, not the fees of other providers.

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