Products June 4, 2014

Employee Fiduciary Offers Fee Comparison Service

Employee Fiduciary LLC is now offering a fee comparison service for 401(k) plan sponsors.
Reported by

The company will review and interpret a service provider’s Employee Retirement Income Security Act (ERISA) Section 408(b)(2) fee disclosure document and plainly summarize its fees in dollars, both direct fees and indirect fees paid by mutual fund companies. There will be no cost for this service.

The company will also summarize its fees for providing the same services in the same format, allowing for a side-by-side comparison. Employee Fiduciary proposed a similar fee summary in their response to the Department of Labor’s request for comments related to 401(k) fee disclosure reform.

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“Current fee disclosure regulations only address a small part of the needs of 401(k) plan fiduciaries,” says Eric Droblyen, president of Employee Fiduciary, based in Mobile, Alabama. “Because the disclosure document’s format is open to broad interpretation, many providers have used this discretion to effectively bury fees in pages of dense language. Plan fiduciaries are unable to sort out the fees they are paying. Our service is a direct response to overcoming the inadequacies of the current regulations.”

Plan sponsors may request the new service online at http://www.employeefiduciary.com/401k-fee-comparison/.

Employee Fiduciary is a 401(k) plan provider for small businesses, offering retirement plan recordkeeping and administration services.

Compliance June 4, 2014

DOL Resolves Valuation Issues with ESOP Transaction

The Department of Labor (DOL) reached a $5.25 million settlement with GreatBanc Trust Co., resolving allegations the Lisle, Illinois-based company violated the Employee Retirement Income Security Act (ERISA).
Reported by

In 2006, GreatBanc, as trustee to the Sierra Aluminum Co. Employee Stock Ownership Plan (ESOP), allegedly allowed the plan to purchase stock from Sierra Aluminum’s co-founders and top executives for more than fair market value.

GreatBanc and its insurers will make $4,772,727.27 in payments to the ESOP and pay $477,272.73 in civil penalties. The company will also put safeguards in place whenever the company is a trustee or fiduciary to an ESOP that is engaging in transactions involving the purchase or sale of employer securities that are not publicly traded.

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These safeguards include requirements for: the selection of a valuation adviser and the oversight of the adviser; the analysis required as part of the fiduciary review process; and the required documentation of the valuation analysis.

The settlement resolves a 2012 lawsuit, filed by the DOL, that alleged GreatBanc failed to adequately inquire into an appraisal that presented unrealistic and aggressively optimistic projections of Sierra Aluminum’s future earnings and profitability. GreatBanc allegedly failed to investigate the credibility of the assumptions, factual bases and adjustments to financial statements that went into the appraisal. The suit also alleged that GreatBanc asked for a revised valuation opinion in order to reconcile the ESOP’s higher purchase price with the lower fair market value of the company stock.

Sierra Aluminum is based in Riverside, California. The company produces extruded aluminum products for use in various industries, such as construction and transportation. The ESOP had 385 participants as of the end of December 2012, according to the DOL.

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