Compliance January 13, 2012

EBSA Announces Voluntary Correction Program Events

The Department of Labor (DOL) announced upcoming voluntary fiduciary correction program workshops in three states.
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An Employee Benefit Security Administration (EBSA) Voluntary Fiduciary Correction Program (VFCP) Workshop will be held in Pasadena, California, on January 26, and Voluntary Fiduciary Correction Program and Abandoned Plan Workshops will be held in Detroit, Michigan, on March 20, and in Fort Wright, Kentucky, on January 27 and April 23.     

 The workshops will discuss the following Employee Retirement Income Security Act (ERISA) transactions that are eligible for correction under the VFCP: 

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 • Delinquent Participant Contributions to Retirement Plans, or Insured Welfare Plans, or Welfare Plan Trusts.  

 • Fair Market Interest Rate Loans Between Employee Benefit Plans and Parties-in-Interest (PIIs).  

 • Below Market Interest Rate Loans with Parties-in-Interest, or Nonparties-in-Interest.  

 • Below Market Interest Rate Loans to PIIs or Non PIIs due to delays in perfecting loan collateral security.  

 • Participant Loan Amount Exceeds Plan Limitations.  

 • Participant Loan Duration Exceeds Plan Limitations.  

 • Default Participant Loans.  

 • Purchase of Assets by Plans from Parties-in-Interest.  

 • Sale of Assets by Plans to Parties-in-Interest.  

 • Sale and Leaseback of Property to Sponsoring Employers.  

 • Purchase of Assets from Non PIIs at other than Fair Market Value (FMV).  

 • Sale of Assets to Non PII at other than FMV.  

 • Holding of Illiquid Assets Previously Purchased by Plan Benefit Payments based on improper Valuation of Plan assets.  

 • Payment from a Plan of duplicate, excessive, or unnecessary compensation.  

 • Expenses Improperly Paid by a Plan including Settlor fees.  

 • Payment from a Plan of dual compensation to Plan fiduciaries.  

 In addition, the workshops in Detroit and Fort Wright will cover the DoL’s Abandoned Plan Program and who may qualify as a Qualified Termination Administrator (QTA).   

 Attendees can receive one-on-one assistance with respect to either the Voluntary Fiduciary Correction or Abandoned Plan Programs.  

 More about the Pasadena event is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpCA012612.pdf.  

 More about the Detroit event is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpABPlanMI.pdf.  

More about the Fort Wright events is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpABPlanKY.pdf.
Data & Research January 13, 2012

The Difference an Adviser Can Make

Partnering with a professional retirement plan adviser offers benefits for plan sponsors, according to a study for the Retirement Advisor Council. 
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However, only 25% of 401(k) and 403(b) plan sponsors, with 100 or more employees and plan assets between $5 million and $500 million, partner with a professional retirement plan adviser. Most of the others do business with a generalist adviser; some do not use an adviser or consultant at all. Laura White, vice president at Diversified, a partner in the research, told PLANADVISER, historically, advisers other than professional retirement plan advisers have held a larger share of the not-for-profit market, but Diversified expects the gap will close with time.   

Half of respondents who use a professional retirement plan adviser say it is a necessity to retain the advisers’ services for their plans. Forty-four percent say retaining the services is very beneficial to their plans. In addition, 16% of respondents with no adviser said retaining one is a necessity and 59% said retaining a professional retirement plan adviser would be very beneficial.  

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Overall, 46% of plan sponsors have measured the retirement readiness of their participant population more than once. Clients of professionals are unique in that 75% monitor year-over-year changes and 31% say more than 70% of their participants are on-track to achieve a successful retirement. These superior outcomes may be the result of plan designs that encourage saving. Another contributing factor could be new ideas that clients of professionals adopt more readily than other plan sponsors.  

More than any other category of plan sponsors, clients of professionals rely on a retirement plan committee that meets regularly to make plan decisions. White said 74% with a professional retirement plan adviser state a committee who meets at regular intervals makes decisions regarding the design of the plan or array of investment options. In addition, 70% complete an investment review at least twice a year; 40% twice a quarter.  

Only 41% of those with another adviser type complete a periodic review of investment options with their adviser as compared to 79% with a professional retirement plan adviser; 73% of those with a professional retirement plan adviser state it’s absolutely critical to review investment options periodically, White said.  

 

She added that clients of professional retirement plan advisers offer an average of 13 fund types, and most offer 10 or fewer, compared to between 14 and 15 offered by those who do not partner with a professional. This is important because overwhelmed employees may not invest correctly or may even choose not to enroll in the plan, White noted.  

Clients of professionals have a better understanding of fees. Over 80% of plan sponsors either agree or strongly agree that their fees are reasonable. However, according to White, the study found 35% to 45% of plan sponsors, regardless of the type of advisers they use, have a good handle on the fees their service provider and investment managers are charging; less so among plan sponsors that do not partner with an adviser.  

More than half of plan sponsors who use an adviser other than a retirement plan professional met their adviser after a cold-call from the adviser. On the other hand, 43% of plans that rely on a professional conducted a formal search using a request-for-proposal process.  

The survey of 409 employers offering a 401(k) or a 403(b) plan was conducted online between September 6 and September 27, 2011, with funding and research oversight by Diversified, Franklin Templeton Investments, John Hancock Funds, MFS Investment Management, and MassMutual Retirement Services. An executive summary of the research is available at http://dcpicadvisors.com/researchreports.html.

Retirement plan advisers PLANADVISER spoke to listed a number of ways an adviser can add value for a retirement plan sponsor.  

  

 

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