Articles Library
Fiduciary Issues << Back
U.S. Department of Labor announces final rule on default investment alternatives for participant-directed plans - 10/23/2007
Summary: U.S. Secretary of Labor Elaine L. Chao unveiled a final rule establishing qualified default investment alternatives, making it easier for employers to automatically enroll workers in their 401k and other defined-contribution plans. Located at: U.S. Department of Labor. Click on headline for full article.
U.S. Supreme Court Agrees to Hear Key 401(k) Fiduciary Breach Case - 6/19/2007
In a closely watched case that could settle a key area of pension law affecting 401(k) plans, the U.S. Supreme Court will decide whether participants can sue to restore their account balances when a fiduciary breach caused them to lose money. Monday's decision means the high court could shape participants' power to remedy situations where they charge an Employee Retirement Income Security Act (ERISA) fiduciary breach caused their 401(k) balance to fall below what it would have been without the breach. Earlier this year, justices asked the U.S. Solicitor General for input on whether ERISA Section 502(a)(3) permits a participant to sue to recover funds the participant says were lost when his or her account was mishandled. "It makes little sense that plans and their participants should be left with no relief when plan assets are lost through fiduciary mismanagement," U.S. Solicitor General Paul Clement responded in legal briefs filed with the court. Located At: Plansponsor.com
Fees and expenses: It’s about fiduciary responsibility - 3/26/2007
Summary: One of the most pressing issues in the investment industry today is retirement plan fees and expenses. A lot of questions have been raised about them recently, all of which can be answered simply à la college basketball commentator Dick Vitale: "It's about fiduciary responsibility, baby!" Located at: Investmentnews.com (free registration may be required). Click on headline for full article.
401(k) Fees: The Next Big Thing - 2/17/2007
Excerpt: "This column focuses on the basic steps that fiduciaries need to take to protect themselves -- and, of course, to best serve their beneficiaries -- the participants. As a starting point, let's look at what the DOL's ERISA Advisory Council said in 2004." (Reish Luftman Reicher & Cohen)
Court OKs Class Action in Aon 401(k) Company Stock Suit - 12/15/2006
A federal judge in Chicago has certified as a class action a lawsuit against Aon Corp. over allegations 401(k) participants lost ten of millions of dollars when its overvalued company stock price collapsed two years ago. US District Judge Charles Norgle of the US District Court for the Northern District of Illinois turned away arguments by the company that many of the potential class members didn't have the requisite legal standing because they had already taken distributions from their 401(k) accounts. In their lawsuit, the participants charged that Aon, its board of directors, and members of the plan's administrative and investment committees breached their ERISA fiduciary duties by imprudently permitting the plan to hold Aon stock and by failing to provide participants with complete and accurate information regarding the risks associated with investing in Aon stock. MORE
Report Of The Working Group On Prudent Investment Process - 11/30/2006
Summary: This just released report from November 2006 was produced by the 2006 ERISA Advisory Council's Working Group on Prudent Investment Process. The desired result of the Working Group was to discover and present matters that would enhance the ability of fiduciaries to execute their responsibilities under ERISA. Located at: U.S. Department of Labor.
Uncovering and Understanding Hidden Fees in Qualified Retirement Plans - 11/29/2006
Summary: This paper will explore the five specific types of fees that are frequently considered to be "hidden" because of their difficulty in being recognized, quantified and monitored. It will also address their historical genesis and development, significance to a retirement plan's overall operational structure, fiduciary responsibilities, and their ultimate impact on the participant's financial future. Located at: 401khelpcenter.com. Click on headline for full article.
Employers expected to be responsible for 401(k)s - 11/6/2006
Summary: For employers who blow off ERISA, here's something that might get their attention: Dozens of lawsuits have been filed against employers for failing to live up to their 401k responsibilities. CEOs might assume that it's the outside 401k administrators who risk getting clobbered in court, but they are wrong. The targets of these employee lawsuits, which should continue to multiply, are the workplaces and their executive officers. Located at: Townhall.com. Click on headline for full article.
Winners and Losers: 401(k) Trading and Portfolio Performance - 11/1/2006
Summary: The risk-adjusted returns of traders are no different than those of non-traders. Yet certain types of trading such as periodic rebalancing are beneficial, while high-turnover trading is costly. Interestingly, those who hold only balanced or lifecycle funds, whom we call passive re-balancers, earn the highest risk-adjusted returns. These findings should interest participants in such plans, fiduciaries responsible for designing DC pensions, and regulators of the retirement saving environment. Located at: Pension Research Council, The Wharton School. Click on headline for full article.
Connecting the Fiduciary Dots - 9/18/2006
Summary: If you're thoroughly tired of talking about the fiduciary standards, absolutely the last person you want to talk with is Don Trone, who radiates enthusiasm for the topic the way a star radiates light. This article is a ranging discussion of fiduciary issues with Don Trone. Located at: FI360.com. Click on headline for full article.
Has the 401k Fees Litigation Wave Hit? - 9/14/2006
Summary: A plaintiffs' law firm filed the first wave of complaints involving 401k plan fees. These lawsuits all target large 401k plans sponsored by large employers. The lawsuits name the employer as defendant, and in some cases, plan fiduciary committees and their various individual members. Located at: Seyfarth Shaw LLP. Click on headline for full article.
Pension Protection Act Opens New Door to Advice - 8/18/2006
Summary: While the Pension Protection Act passed covers a wide range of issues, perhaps none is of as immediate concern to defined contribution plan sponsors and retirement plan advisors as the provisions on investment advice. Located at: Plansponsor.com (free registration may be required). Click on headline for full article.
Figuring Out How Much Your 401(k) Plan Costs You - 4/23/2006
Excerpt: "Fees for record keeping, employer education and other administrative services are hard to spot. Begin with a close look at your statement." (Los Angeles Times)
Finding 'Best Fit' in a Retirement Plan Provider through the RFP Process (PDF) - 4/5/2006
Excerpt: "No one in their right mind would buy a house on the Internet; yet this is essentially what many plan sponsors are doing when they select a plan provider on the basis of data that has been dumped into a spreadsheet.... Rather than relying upon purely quantitative comparisons of data from competing proposals, plan sponsors should base their final decision on a more balanced set of factors that can help them achieve 'best fit' with a prospective provider." (Harry Koolen and Jim Reed)
Prudence in Advice Selection - 3/15/2006
Excerpt: "Plan committees (or the responsible officers) are duty-bound by ERISA to select prudently investment options that are, individually and in the aggregate, suitable and prudent for the plan and for the participants. The failure of the committee to do a good job could result in lawsuits, and the failure of an employee to do a good job of investing can result in a diminished lifestyle during retirement." (PLANSPONSOR.com: one-time registration required)
Boomer Bucks by Barbara Whelehan -- Don't Heed this 401(k) Advice - 3/1/2006
Excerpt: "Under current law, if plan participants do receive investment advice, they have certain assurances that the advice they are getting is impartial. That's because under the rules of the Employee Retirement Income Security Act, or ERISA, anyone who dispenses investment advice to 401(k) plan participants assumes the role of a fiduciary." (Bankrate.com)
Just out of Reish: Basic Steps for Fiduciary Compliance - 2/20/2006
Excerpt: "ERISA requires that fiduciaries, such as the committee members or corporate officers who make decisions about the plans, engage in a prudent process to manage and monitor retirement plans. As a starting point, fiduciaries are required to look at the right information (substantive prudence) in the right way (procedural prudence), but that begs the question: What is 'right'?" (PLANSPONSOR.com: one-time registration required)
Managing Plan Cost - 1/15/2006
Excerpt: "Many plan sponsors assume their service providers have their best interest in mind. Service providers are for-profit companies whose main purpose is to maximize revenue for their organizations. The sooner plan sponsors understand basic service provider economics and begin to leverage their plan assets, the sooner they will drive down total plan costs and meet heir fiduciary responsibilities under ERISA." (Blue Prairie Group via 401khelpcenter.com)
Defined Contribution Industry Still Struggling with Fundamental Concept of Being a Fiduciary - 1/15/2006
Excerpt: "Over the last five years, our nation has seen favorable progress in the understanding of fiduciary concepts by those who have responsibility over qualified defined contribution plans. Thanks to many organizations such as the Center for Fiduciary Studies, ASPPA, the American Bar Association, EBRI, and the ERISA Fiduciary Guild to name a few, lay fiduciaries have a better grasp of fiduciary standards and practices than ever before." (401khelpcenter.com, LLC)
Fiduciary Responsibility: Attention to Details Can Make a Big Difference - 1/1/2006
Excerpt: "Given that an ERISA fiduciary can be held personally liable for losses that result from a breach of fiduciary duties, or the breaches of other plan fiduciaries, the New Year seems a good time for a quick review of plan governance strategies that can reduce the number of potential fiduciary defendants." (PLANSPONSOR.com: one-time registration required)
Legislation pending in Congress aims to encourage employers to adopt automatic enrollment in 401(k) plans - 12/27/2005
Excerpt: "Automatically enrolling new workers is a 'significant factor' in increasing 401(k) balances, according to a study released in July by the Employee Benefit Research Institute and Investment Company Institute. Yet some employers have held off on implementing it with new hires, out of fiduciary-liability fears or wariness about its impact on nondiscrimination testing." (PLANSPONSOR.com; one-time registration required)
Turning Workers Into Savers-- Incentives, Liquidity, and Choice in 401(k) Plan Design - 11/18/2005
42 pages. Excerpt: "This paper analyzes the design of 401(k) plans, including the size and structure of matching contributions, and the impact of matching contributions and other plan design features on employee participation and contribution rates. The paper is jointly authored by Olivia Mitchell and Stella Yang of the Wharton School and the Wharton Pension Research Council, and Stephen Utkus of the Vanguard Center for Retirement Research." (Pension Research Council via The Vanguard Center for Retirement Research)
Pensions May Go on the Balance Sheet: FASB Will Decide - 11/14/2005
Excerpt: "In a unanimous vote, the accounting standards board decided last week to look into an overhaul of the retiree-benefit accounting system. Employers would be facing a bumpy road ahead if they're no longer permitted to smooth results over a number of years when they account for the pensions and retiree health benefits they provide." (CFO.com)
Watching out for the bling bling - 10/17/2005
"Could there possibly be a fiduciary requirement to consider the bling bling? You bet - the fiduciary has the responsibility to periodically review qualitative and/or organizational changes of investment decision makers." (InvestmentNews.com)
Conducting a Meaningful Company 401(k) Plan Due Diligence Study - 10/1/2005
Excerpt: "Scandals in the financial services industry over the past few years have increased 401(k) plan sponsors' interest in conducting a meaningful due diligence. However, most sponsors are overwhelmed by the complexity of the task and end up either putting it off or conducting a cursory review, which is meaningless and a waste of time." (Employee Benefit News)
Certain Underfunded Plans Must Give Participants Funding Notice - 10/1/2005
4 pages. Excerpt: "The Pension Benefit Guaranty Corporation's (PBGC) underfunded plan notification rule applies to employers with qualified defined benefit plans that are required to pay a PBGC variable rate premium, unless they are eligible for certain exceptions. The rule does not apply to governmental plans, nonelecting church plans, and multiemployer plans." (Prudential Retirement)
Directed Trustees Not Expected to Second Guess a Plan's Named Trustee - 9/30/2005
Excerpt: "In the case of DiFelice v. US Airways Inc., US District Judge T.S. Ellis III wrote 'By including [Section] 403(a) in ERISA, Congress plainly meant to create a subset of ERISA fiduciaries with a statutorily defined duty different from and more narrowly circumscribed than the general duty of ordinary care imposed on other ERISA fiduciaries,' BNA reports." (PLANSPONSOR.com: one-time registration required)
Avoiding Risk as a Plan Service Provider (PDF) - 9/10/2005
Excerpt: "We live in a litigious society with a functional definition of ERISA fiduciary. A fiduciary is what a fiduciary does. Moreover, courts recently have been finding fiduciaries, non-fiduciaries, and even non-parties in interest to be liable in connection with prohibited transactions." (Gardner Carton & Douglas)
Before Hiring a Provider or Advisor As a Co-Fiduciary, Look Closely at What You Are Getting - 9/1/2005
Excerpt: "After the mutual fund scandals and the stock market's volatility in the past few years, more sponsors want help with selecting and monitoring plan investments. Enter the plan provider or advisor willing to sign a contract that labels it a co-fiduciary for certain tasks in those areas -- and often charging extra for it." (PLANSPONSOR.com: one-time registration required)
Fiduciary Issues for Financial Professionals under ERISA - 9/1/2005
16 pages. Excerpt: "This white paper focuses on whether, and to what extent, financial professionals-- brokers, investment professionals, consultants and other intermediaries ... take on a fiduciary role under the Employee Retirement Income Security Act of 1974 (ERISA) when they help their clients with these issues. It also discusses the implications of fiduciary status. This paper further examines certain services offered by plan providers and their value to the financial professionals." (Principal Financial Services, Inc.)
SEC and DOL Provide Guidance on Selecting and Monitoring Pension Consultants - 8/1/2005
This article examines the fiduciary role of pension consultants under the Investment Advisers Act and ERISA and explains typical circumstances where a pension consultant may have a conflict of interest that must be disclosed to the consultant's plan clients. The article also discusses "best practices" guidance jointly-issued by the SEC and the Department of Labor that provides tips for plan administrators and trustees to follow in selecting and monitoring pension consultants.
Board Member Responsibilities for ERISA Retirement Plan Management - 7/8/2005
Excerpt: "[T]he lack of a fiduciary governance safe harbor allowed service vendors to heavily influence the development of Plan Sponsor fiduciary behavior. As might be expected, the very nature of having non-fiduciary service vendors influence the evolution of the retirement industry has been counter productive to the fiduciary intent of serving as a guardian for long-term Trust assets." (Sarbanes-Oxley Compliance Journal)
Article: Self-Directed Brokerage Accounts, Retirement Success, and Plan Sponsor Liability (PDF) - 6/3/2005
7 pages. Excerpt: "Contrary to what many purveyors of brokerage services may tell plan sponsors, plan fiduciaries continue to retain significant fiduciary responsibility and liability by selecting the provider or restricting the range of investments that may be offered in a self-directed brokerage account. The plan sponsor has a fiduciary duty of prudence in the selection and retention of investment choices, including those in self-directed brokerage accounts." (Journal of Pension Benefits via Unified Trust)
Fiduciary Responsibility Linked to Increased Plan Sponsor Insomnia - 5/16/2005
Excerpt: "This is the first in a series of three articles. Class action lawsuits against plan fiduciaries and government lawsuits exposing a variety of improprieties in the investment industry have increased concern about the proper execution of fiduciary responsibilities. The issue of investment management fees charged to plan participants is getting increased attention as well." (Employee Benefit News)
Trustee/Fiduciary: Prudent Man Rules -- Few Bright Shining Lines Guide Fiduciary Concerns - 5/5/2005
Excerpt: "In one of those structural oddities, plan fiduciaries are expected to operate a plan as if they had an investment policy, but are not actually required to have reduced that policy to a formal document. Ironically, it has become something of a truism that, if a plan comes under audit by the Department of Labor, the first thing sought is an investment policy statement." (PLANSPONSOR.com; one-time registration required)
401(k) Plan Investments' Fee Disclosure Is a Balancing Act for Employers - 4/26/2005
Excerpt: "Silvia Frank likens the way employees choose investments for their 401(k) plans to how people shopped for food before products carried nutritional labels. 'Back then we had no idea what we were eating,' she says. 'All we knew was if it tasted good.' It's the same with mutual funds. 'We know it's a big name and if Morningstar gives it five stars,' she says. But ultimately, 'we don't know if we are doing anything good for our retirement.'" (Workforce Management; one-time registration required)
Three Opinion Articles on Disclosure, Brokers and Fiduciary Standards, and the State of the PBGC - 4/21/2005
Excerpt: "There are three separate articles presented [on the target page]: Louisiana First State Mandating Consultant and Manager Disclosure; Trust Me, I'm No Fiduciary; and PBGC Boss Sees No Pension Fraud or Mismanagement." (Benchmark Advisory Services, Inc., and Benchmark Financial Services, Inc.)
Are 401(k)s Headed for a Fiduciary Meltdown? - 4/7/2005
Excerpt: "Employee-benefit-plan sponsors, especially those in the 401(k) area, have had some problems in fulfilling their fiduciary responsibility, given all the regulatory attention of the past two years. Leading authorities characterize the problems according to their particular area of expertise, so it is difficult to get a consensus on what the solution might be." (Investment News; registration or subscription required)
Analysis: 401(k) Investment Issues: The Fiduciary Duty to Ask for Help - 3/14/2005
Excerpt: "Fiduciaries are held to the highest legal standard. Where they are unsure of their expertise, fiduciaries must seek the advice of experts and carefully evaluate the advice given. ERISA holds plan fiduciaries to a high legal standard ... the responsibilities of fiduciaries have been described as 'the highest known to the law.' [Donovan v. Bierwirth, 680 F.2d 263, 272 (2d Cir. 1982)] Obviously, not all fiduciaries have the skills needed to satisfy these high standards." (Journal of Pension Benefits via Reish Luftman Reicher & Cohen)
Overview: 401(k) Plan Fiduciary Best Practices: A Case Study (PDF) - 3/1/2005
3 pages. Excerpt: "Aon Consulting recently assisted a company in meeting these dual objectives. From this case study, a picture of best fiduciary practices can be gleaned. We reviewed the company's plan operations in light of prevailing fiduciary best practices in each of the following areas: identification of fiduciaries; conflicts of interest; documentation; fiduciary oversight; and investment advice. Our case study yielded the results presented in the boxes in this article." (Aon Consulting)
The Role of Company Stock in a Defined Contribution Plan - 2/17/2005
Companies may enourage employee ownership through employee-sponsored retirement plans to align the interests of employees with those of shareholders. Special tax incentives also encourage such plan designs. But tax-qualified plans invested in company stock are undergoing increasing scrutiny. Taken from: Journal of Compensation and Benefits, November/December 2004. Click on headline for full article.
Just out of Reish: Taking Stock - 2/10/2005
The number of lawsuits about company stock in 401(k) plans and KSOPs is large -- and growing almost every week. All of these share a common thread: substantial and dramatic losses in the value of company stock. .... In this article, I am focusing on two specific issues. The first is the risk of fiduciary status as a 'functional' fiduciary; the second is the importance of assisting participants in their investment decisions about company stock. Located at: Plansponsor.com. Click on headline for full article.
The Fiduciary Duty to Ask for Help - 2/2/2005
This article explains the requirement that fiduciaries seek expert advice when they are not qualified to fulfill their ERISA obligations, as well as factors that should be considered when choosing an advisor or consultant to help select and monitor investments. Located at: Reish Luftman Reicher, and Cohen. Click on headline for full article.
Retirement Plan Governance: What's a Fiduciary to do? - 11/5/2004
Summary: Are retirement plan fiduciaries safe if they are well intentioned? Regrettably, no. Amidst intensified scrutiny of retirement plan governance, there are pitfalls and liability risks even for the most well-intentioned fiduciaries. Many common activities of retirement plan sponsors and administrators could easily result in liability for a fiduciary. Located at: Mercer Human Resource Consulting. Click on headline for full article.
Recent Company Stock Litigation:An emerging trend and one bright spot for employers - 10/1/2004
Summary: This Bulletin tries to put into context the ERISA company stock cases, reports on the DOLs settlement with Global Crossing and WorldCom's Bernie Ebbers, and features a short article on the DOLs Prohibited Transaction Class Exemption for plans involved in lawsuits against sponsoring companies. Located at: Jenner & Block LLP (PDF file). Click on headline for full article.

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