Compliance June 9, 2009

N.C. Company Owner Fined in 401(k) Embezzlement Case

The owner of defunct Concord, North Carolina, sign firm has been ordered by a federal judge to pay $57,089 to the company’s 401(k) and health plans.
Reported by

He was also sentenced to five years of supervised release.

According to a Department of Labor (DoL) news release, Mitchell Messer, majority owner and president of Wesco Signs Inc., also must perform 416 hours of community service.

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Messer was indicted by a federal grand jury August 26, 2008, on two counts of embezzling assets from employee benefit plans governed by the Employee Retirement Income Security Act (ERISA). The indictment charged Messer with embezzlement of $19,286.21 in 401(k) assets and $5,583.38 in health care premiums.

According to the allegations, from February 4 through June 17, 2005, he failed to forward retirement plan contributions deducted from employees’ paychecks and also did not forward health care premiums withheld from employee wages from July 11 to November 4, 2005.

Data & Research June 9, 2009

Advisers Will Have Trouble Dabbling in Retirement

Increasingly complex market trends will make it impossible for financial professionals to dabble in the retirement space, a new report says.
Reported by

The report, “Retirement Market in Focus,” released by RG Wuelfing and Associates and Retirement Research Inc., says that growing regulatory complexity, fiduciary requirements, adviser compensation transparency, the move to a fee-based compensation model, open architecture, and the provider consolidation have conspired to favor the retirement plan specialist, or “the ‘heavy’ adviser whose business model may hardly be distinguishable from that of the traditional fee-based vendor selection consultant.” (See “Audio Interview with Fred Reish.”)

The changing role of advisers will also drive a simultaneous change in the wholesale channel. The report says, “We think the combination of changing adviser needs and serious pressure on provider margins will conspire to generate major changes in distribution strategy, structure, and resources in the years immediately ahead.”

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Changing 403(b) Landscape

Labeling the 403(b) space “arguably the most dynamic retirement market sector,” the report predicts the pace of transition and turnover by 403(b) providers is likely to pick up in coming months.

The report notes that “marginal providers” have already exited from the 403(b) custody business, or at least the multivendor 403(b) space, and anticipates that to increase (see “The New 403(b) Model: Exclusive versus Multiple Vendor Programs’). In the next year or two, more providers will likely get out, outsource, or stay and acquire 403(b) competitors, the report asserts.

The size of the roster of 403(b) providers is also being driven by plan sponsor moves to cut back their vendor lists or move to a single provider as a result of new 403(b) rules, according to the report.

Get Ready for Fee Disclosure

Finally, the report says retirement service providers are mindful of the rapidly changing rulemaking/legislative landscape regarding fee disclosure (see “Fees are the Word” and “EBSA Again Delays Effective Date of Advice Rule“)

While the competitive drama in Washington between the DoL and Congressional interests continues to play out, plan sponsors and their advisers are increasingly treating full fee disclosure as a given—certainly in the mid through large plan markets and increasingly in the smaller plan market as well, the report states. “Naturally enough, service providers are accommodating those needs, though being careful about making systems investments pending the legislative/regulatory dictate.”

Information about ordering a copy of the report is available here.

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