Compliance March 3, 2011

Subtracting “Surprise” from the Equation

The American Society of Pension Professionals and Actuaries (ASPPA) presented a statement this week at a Department of Labor-sponsored hearing regarding proposed changes to the definition of “fiduciary.”
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Brian Graff, Executive Director/CEO of ASPPA, spoke in front of the Employee Benefits Security Administration (EBSA) panel. The ASPPA statement highlighted two areas of the proposal that would bring improvements to the retirement industry, as well as two areas of it that may be damaging.

The first improvement ASPPA would like to see enacted relates to clarifying whether advice is “ERISA-covered” or not—a topic that would confuse many plan sponsors.  As Graff stated: “When a broker/adviser is helping a small business owner set up a 401(k) plan and says to the owner, ‘these are the 20 investment options that you should offer in your plan,’ that owner naturally thinks he or she is getting advice… In our members’ experience, these small business owners are surprised when they find out the ‘advice’ they have received for their ERISA-covered 401(k) plan is not actually ERISA-covered investment advice. We urge the DoL to remove this confusion by clarifying the definition so all parties—particularly plan sponsors can be sure they receiving the full protections under ERISA.”

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The second area in which ASPPA and the DoL are in agreement is to discard the requirement that says advice must be given more than one time for it to be counted toward the five-part fiduciary test. “We agree that requiring advice be provided more than once to result in fiduciary status is inconsistent with the reasonable expectations of plan fiduciaries and simply makes no sense,” the statement said.

ASPPA changed its tune when it came to how broker/dealers (B/Ds) should disclose their intent. “…we believe the recommended disclosures required for commission-based brokers/advisers in the proposed regulation is over broad and unduly harsh. We suggest the DoL provide a model disclosure that explains: (1) the broker/adviser is not acting as ERISA fiduciary; (2) the advice may not be impartial if a commission is received, and (3) disclose compensation the broker/adviser will receive based on the investments selected.”

Lastly, ASPPA strongly urged the DoL to not include individual retirement accounts (IRAs) in the regulation due to “the fundamental differences between IRAs and qualified retirement plans.”

ASPPA’s complete statement can be seen here.

Deals & People March 3, 2011

Reish & Reicher Realigns

There are some changes afoot at one of the nation’s premier ERISA legal firms. 

 

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The Los Angeles-based law firm of Reish & Reicher, “home” to renowned ERISA attorneys Fred Reish and Bruce Ashton, is splitting up, and the two halves will be joining other firms. 

According to an announcement, Reish & Reicher will stop practicing law at the end of the day on March 15, 2011, and on the morning of the 16th, the firm’s attorneys will be joining two other law firms.  “In other words, there will not be any disruption in our practice of law or the representation of our clients,” according to the firm. 

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One group will be joining the national law firm of Drinker Biddle & Reath (DBR).  The other will join the Southern California law firm of Silver & Freedman (S&F).  The partners who will be joining DBR are long-time PLANSPONSOR columnist Fred Reish, Bruce Ashton, Lee Reicher, Mark Terman, Mike Vanic, Joe Faucher and Pascal Benyamini.  The partners joining S&F are Jon Karp, Jeff Lewis and Gary Wexler.  In addition to the partners, other attorneys at the firm will be included in the transition. 

The attorneys going to DBR are those who practice in the areas of employee benefits, ERISA litigation, employment law/litigation, tax and estate planning, corporate and real estate.  The attorneys joining S&F practice in the areas of transactions, business, taxation, estate planning, and business and real estate litigation. 

“While we are proud of our long standing association and close relationships among the partners, we feel that this transition is important for our legal practices and our clients,” the firm said in the announcement.  “The relationships among the partners remain strong, and we will work in a cooperative spirit to ensure that our clients come first and that there is no disruption to the work being done for them.  The partners will continue to work together on appropriate matters and refer work to each other, even while working at different firms, so that client needs continue to be satisfied.”  

DBR has nearly 650 lawyers in 11 offices located in: Philadelphia, Washington, San Francisco, Los Angeles, New York, Chicago, Albany, Milwaukee, Florham Park and Princeton, New Jersey, Berwyn, Pennsylvania, and Wilmington, Delaware. 

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