According to a DoL press release, this regulation implements the DoL’s authority to assess civil penalties against plan administrators who fail to disclose certain documents to participants, beneficiaries and others as required by the Employee Retirement Income Security Act, as amended by the Pension Protection Act (PPA).
The DoL notes that the PPA established new disclosure provisions relating to:
funding-based limits on benefit accruals and certain forms of benefit distributions;
plan actuarial and financial reports;
withdrawal liability of contributing employers; and
participants’ rights and obligations under automatic contribution arrangements.
The PPA also gave the DoL authority to assess civil monetary penalties of up to $1,000 per day per violation against plan administrators for violations of the new disclosure requirements.
The final regulation sets forth the administrative procedures for assessing and contesting such penalties and does not address the substantive provisions of the new disclosure requirements.
This final regulation is to be published in the January 2, 2009 Federal Register.
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Smith Barney is also unveiling a one-time award recognizing long-term adviser loyalty.
The move to trim payouts for lower producers from both firms comes at the same time as much speculation that more advisers will be interested in the independent route (see “Competition for Advisers Heats Up“).
Merrill Lynch upped the payout grid for higher producers and lowered it for lower-end producers, according to published reports and confirmed by a Merrill Lynch spokesperson. The retention package resulting from Merrill’s sale to Bank of America rewarded high producers as well (see “BoA, Merrill Retention Package Rewards Top Producers“).
Merrill’s new payout grid—which is now the same across all products—will look like the following:
50% for $5 million in production
48% for $3 to $4.99 million
47% for $2 to $2.99 million
46% for $1.5 to $1.99 million
43% for $1 to $1.49 million
42% for $800,000 to $999,000
41% for $600,000 to $799,000
40% for $400,000 to $599,000
38% for $300,000 to $399,000
37% for $200,000 to $299,000
36% for $0 to $199,000.
Merrill is upping payouts for some advisers; however, brokers who have been at the firm for six years and produce less than $300,000 are being penalized. They now receive a 25% payout for production of $200,000 to $299,000 and 20% for under $200,000.
Additionally, advisers who produce $1.5 million have a “Step Up” grid applied for productivity. Financial advisers at $5 million and above get a 50% payout and 6% in long-term productivity.
As far as a length of service (LOS) bonus, advisers who have been at Merrill Lynch for five or six years and have at least $500,000 in production receive a 1% bonus on production. Advisers with seven to nine years and $750,000 in production receive a 1.25% bonus. Advisers producing $1 million or more with 10 to 14 years at the firm receive 1.5%, and advisers producing $1.75 million or more with 15 years or more at the firm receive a 2% bonus.
Also, Merrill financial advisers will be awarded for bringing in new clients with at least $250,000 in household assets, and the minimum for getting paid for business for households in the U.S. is $100,000.
Merrill Lynch also replaced its Focus on Growth bonus with a Strategic Premium Award, which gives advisers more choice in how to allocate their award (choosing from restricted units with three-year vesting or a selection of funds with eight-year cliff vesting).
Smith Barney
Similar to Merrill, Smith Barney is cutting payouts for some lower-producing advisers.
Smith Barney is keeping its compensation for advisers producing $400,000 or more, and lowering the payout by 2% to 4% for advisers making less than $400,000, depending on length of service.
The 2009 grid breaks down as follows (based on length of service):
54% to 59% for $5 million or more
52% to 57.5% for $3 to $4.9 million
51.5% to 56.5% for $2.5 to $2.9 million
50.5% to 55% for $2 to $2.49 million
50% to 54% for $1.5 to $1.99 million
49% to 52.5% for $1 to $1.49 million
46% to 49% for $750,000 to $999,000
44.5% to 47.5% for $500,000 to $749,000
40.5 to 42% for $400,000 to $499,000.
Advisers below the $400,000 mark start out at a 39% payout, which decreases over time. For example an adviser with the firm for five years doing $300,000 in production will receive a 33% payout.
Smith Barney also changed the household minimum to $75,000 and $25,000 for investment advisory accounts.
The firm is also offering its advisers a one-time award, the SB Partners Award, in the form of a zero interest six-year loan, equivalent to five times the LOS bonus. The award is available to advisers making more than $400,000 in production with an LOS of five years or more.
“The 2009 Smith Barney Compensation Plan rewards our best Financial Advisors for their productivity and longevity with the industry’s best plan,” said a spokesperson for Smith Barney in a statement. “We will continue to invest in our wealth advisory platform and focus on a superior experience for our clients.”
