The Markets August 11, 2009

Adviser Explains Reason for Rejecting 403(b)

An investment adviser for a public access television station in Enid, Oklahoma, explained that costs were behind the decision to ditch a 403(b) plan for employees in favor of a SIMPLE IRA.

Reported by

“Our local providers … were far too costly for PEGASYS’ retirement plan budget,” Robbie Bullis with Edward Jones told PLANSPONSOR. A local newspaper had reported that the change was recommended by an accountant, who told the station’s board that the 403(b) plan was no longer suitable for nonprofits (see “Public Access TV Station Rejects 403(b) in Favor of SIMPLE IRA”).

Bullis cleared up that the decision was not based on the suitability for all nonprofits, but only for this particular situation.

Bullis explained that PEGASYS felt it needed to turn to a third-party administrator to comply with new 403(b) regulations, such as the new plan document requirement and additional recordkeeping rules, and the services could be costly. In addition, the plan provider offered through Edward Jones, 403b ASP, also charges participants an annual fee of $40 plus 10 basis points to maintain the account, he said.

“This was the deciding factor when we turned to the SIMPLE plan through the same mutual fund provider that we had been using for years,” Bullis said, explaining that the recommendation was jointly made by himself and the accounting firm hired by PEGASYS. The provider of the SIMPLE IRA plan charges an annual fee of $10 per participant and no recordkeeping/TPA fees.

The station has five full-time and three part-time employees, according to the PEGASYS Web site.

Compliance August 11, 2009

Judge Delays BofA's Settlement with SEC

A judge has put the brakes on Bank of America’s $33-million settlement with the Securities and Exchange Commission (SEC).

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At a hearing yesterday in New York, a federal judge said he needs more information before he can approve the settlement over bonuses paid to Merrill Lynch & Co. executives at the time of its acquisition by Bank of America (BofA) (see “SEC Charges BofA $33M for Violations Related to Merrill Deal”).

“I am concerned that we have not yet ferreted out all that the court needs to know,” U.S. District Judge Jed Rakoff said, as reported by the Associated Press. Rakoff ordered both sides to provide more information in the next two weeks.

An SEC complaint alleged that BofA did not inform its shareholders of the $5.8 billion in bonuses promised to Merrill Lynch executives. BofA agreed to a settlement without admitting or denying the charges.

Rakoff probed the SEC about its “bare bones complaint” and asked SEC officials who approved the year-end bonuses, according to the AP. “Was this some sort of ghost that performed these actions?” Rakoff asked David Rosenfeld, the associate regional director in the SEC’s New York office. “Or were there human beings who wrote these documents?”

Rakoff also wanted to know how the SEC decided on $33 million (suggesting it might not be enough if what the SEC alleged is true) and whether BofA would pay for it with taxpayer dollars, according to the news report. BofA has received $45 billion in federal aid.

BofA said in a statement that the money would not come out of taxpayer dollars, the AP reported. BofA’s attorney also defended the bonuses a retention tool—which was also met with skepticism by Rakoff: “How many banks were hiring new people at this time?…Or how many brokerage firms, assuming any were left, were hiring at this time?”

Some BofA shareholders were angered over the bonuses and have tried to oust BofA CEO Kenneth Lewis (see “Some BofA Shareholders Want Lewis Out”).




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