Fiduciary Duties

[Opinion] The Evolving Standards of Fiduciary Care
Excerpt:"At issue is a regulatory environment that has lagged the changes in the marketplace. The current defining fiduciary standard was developed by [DOL] in 1975 shortly after the passage of [ERISA]. Since then, the retirement plan landscape and the needs of plan sponsors have changed dramatically."(Finance Behavior)

[Opinion] Vanguard Comment Letter to DOL on Proposals Relating to Service Provider Fee Disclosure
Excerpt:"[T]his comment letter generally supports the regulation as drafted, but we have also noted opportunities for the DOL to provide additional clarity."(The Vanguard Group, Inc.)

Better Pension Plan Governance Needed
8 minutes. Excerpt:"Too often, multinational companies are content to leave unsupervised governance of their defined-benefit plans in the hands of personnel in various countries, who may not have the best expertise. With the volatile economy over this decade, that has opened up their organizations to more risk -- both financial and reputational."(Human Resource Executive Online)

Employers on the Hook for 401(k) Fees
Excerpt:"In a batch of class-action lawsuits, employees are holding their employers liable for high fees and poor disclosure in 401(k) plans. While the suits have produced mixed results, experts warn that companies may be more vulnerable to lawsuits than they realize."(Philadelphia Business Journal via American City Business Journals)

[Opinion] Advisor Groups Spar Over Fiduciary Solution
Excerpt:"Two advisor trade groups - the Securities Industry and Financial Markets Association and Financial Planning Coalition, which consists of the Certified Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors - finally sent in their comment letters to the Securities and Exchange Commission regarding Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or what the commission should do about enforcing a blanket fiduciary standard for all financial advisors."(Financial Planning)

Public Comments on Reasonable Contract or Arrangement Under Section 408(b)(2): Fee Disclosure Interim Final Rule
The page links to the 44 comments received by DOL. (U.S. Employee Benefits Security Administration)

A Conversation on 401(k) Advice vs. Guidance: PPA Fiduciary Adviser v. The DOL 96-1 Opinion
Excerpt:"Since guidance versus advice has been easily confused, the following is a mock conversation designed to clarify what is and isn't, should and shouldn't, be taking place with participants so to protect the plan sponsor from fiduciary liability . . . ."(BeManaged)

[Guidance Overview] DOL's Interim Final Fee Disclosure Regulations (PDF)
6 pages. (Buck Consultants)

The Fiduciary Reference: Selected Articles on Fiduciary Duties Applicable to Personalized Investment Advice (PDF)
30 pages. [The target page is a compilation of academic white papers] to aid the SEC as it studies whether to extend the fiduciary standard to brokers who provide advice to investors. (The Committee for the Fiduciary Standard)

Court Finds Plan Trustee Could not Act on Knowledge of Breaches
Excerpt:"A federal court in Illinois has ruled that participants of the Antioch Company Employee Stock Ownership Plan are not time-barred from moving forward with their claim that company fiduciaries and GreatBanc Trust Co. breached their duties under [ERISA]."(PLANSPONSOR.com)

[Guidance Overview] SEC's Proposed Revisions to Mutual Fund Distribution Fees and Disclosure (PDF)
7 pages. Excerpt:"The Proposal has widespread implications not only for mutual funds and their boards of directors and investment advisers, but also for broker-dealers and other financial intermediaries that sell fund shares or service fund shareholder accounts."(Morgan, Lewis&Bockius LLP)

[Guidance Overview] Fee Disclosure Regulation: DOL Provides Leverage for Plan Sponsors
Excerpt:"The Regulation thus shifts the balance of power between the plan fiduciary who is charged with understanding fees that its plans will pay and the service providers that generate those fees. Although a plan fiduciary retains responsibility if it uses plan assets to pay unreasonable fees, the Regulation enhances the fiduciary's ability to obtain the information it needs to determine reasonableness."(Jones Day)

Industry Groups Weigh In ? Heavily ? on Fiduciary Provision
Excerpt:"Monday marked the last day the public could offer comments on whether the SEC should adopt a universal fiduciary standard for both investment advisers and broker-dealers -- a highly controversial proposition for those in the financial advice business."(Investment News; free registration required)

What Matters Most? An Analysis of Investment Committee Hire/Fire Decisions
Excerpt:"Hiring investment managers is harder than firing them, according to Vanguard's second annual survey of investment committee members. At the same time, committees that find manager evaluation more difficult also have a significantly lower rate of manager turnover which, in turn, can reduce investment management costs."(The Vanguard Group, Inc.)

[Guidance Overview] New Retirement Plan Fee Disclosures: Getting Ahead of the July 16, 2011, Deadline
Excerpt:"Although the Schedule C fee reporting rules and the new fee disclosure regulations are similar, the disclosure and reporting requirements imposed by the fee disclosure regulations place significant new burdens on service providers to disclose the fees they expect to receive from retirement plans. In addition, plan sponsors must confirm that proper disclosures are made. Accordingly, both retirement plan sponsors and retirement plan service providers need to be prepared to identify, track and properly disclose compensation paid for services provided to retirement plans."(Thompson Hine LLP)

A Blueprint for Monitoring and Managing Your Plan Investments
Excerpt:"The plan sponsor drafts the investment policy usually with the help of an attorney, a consultant, or a plan provider. There are no specific guidelines in place for what is required to be included in the policy. The recommended approach is to provide an investment strategy and practice understandable to a third party that is flexible enough that it can be implemented in a complex financial environment but not so detailed that it requires constant revisions and updates."(National Association of Government Defined Contribution Administrators)

[Guidance Overview] Service Provider Fee Disclosure Regulations: Service Provider Categories
Excerpt:"The fiduciary/registered investment adviser category consists of three sub-groups: (1) plan fiduciaries; (2) fiduciaries to investment contracts, products, or entities that hold plan assets; and (3) registered investment advisers."(SunGard Relius)

[Guidance Overview] DOL Releases Interim Final Service Provider Disclosure Regulation
Excerpt:"In the attached article, the authors provide below an overview of the Regulation, and then discuss how it may be expected to affect plan service providers and plan fiduciaries, noting some of the topics that remain unclear or could be the subject of comments."(Groom Law Group)

[Guidance Overview] Hodgson Russ LLP - Employee Benefits Developments August 2010
Nice summaries of important recent ERISA cases. (Hodgson Russ)

Judge Rules Lawsuit by Ohio Pension Systems Against Bank of America and Merrill Lynch Can Continue
Excerpt:"A federal judge yesterday allowed Ohio pension systems to proceed with their legal claims [alleging] that Bank of America paid billions of dollars in bonuses to executives of a firm it was absorbing without informing shareholders . . . ."(Columbus Dispatch)

[Official Guidance] Text of Proposed DOL Regs Restating and Amending Procedures for Prohibited Transaction Exemptions (PDF)
22 pages. Excerpt:"[T]he Department would require the disclosure of the following information from a qualified independent fiduciary: A copy of such fiduciary's engagement letter with the plan describing the duties the fiduciary will undertake on behalf of the plan; a detailed explanation of why the proposed transaction is in the interests of the participants and beneficiaries; a statement that, in instances where the transaction is ongoing, the fiduciary agrees to monitor the proposed transaction throughout its duration on behalf of the plan, taking any appropriate action to safeguard the interests of the plan; what qualifications the fiduciary has to perform these duties on behalf of the plan and the level of ERISA experience the person has; and a representation to the effect that such fiduciary understands and acknowledges his or her ERISA duties and responsibilities in acting as a fiduciary on behalf of the plan. . . . As a general matter, an independent fiduciary retained in connection with an exemption transaction must receive no more than a de minimis amount of compensation from the parties in interest to the transaction or their affiliates."(Employee Benefits Security Administration, U.S. Department of Labor)

[Opinion] 10 Signs Your 401(k) Plan Is a Clunker
Excerpt:"High costs . . . . No investment advice . . . . Revenue-sharing and hidden mark-ups . . . . The plan adviser is not a'real'fiduciary . . . ."(Daily Finance)

SEC's Target Date Fund Proposal Garners Little Response
Excerpt:"The low number of responses is interesting given the fact that target date funds'prominence in retirement portfolios continues to grow. Today, according to the SEC, assets of target date funds registered with the SEC total approximately $270 billion."(Investment Advisor)

[Guidance Overview] Impact on Registered Investment Advisers of DOL's 408(b)(2) Regulation (PDF)
5 pages. Excerpt:"This article focuses on the impact of the regulation on independent (not affiliated with a broker-dealer, mutual fund management complex or recordkeeper) registered investment advisers that provide nondiscretionary advisory services (as opposed to discretionary investment management services) to plan fiduciaries."(Reish&Reicher)

[Guidance Overview] Service Provider Fee Disclosure Regulations: Covered Plans and Service Providers
Excerpt:"What service providers are covered by the regulations? A'covered service provider'is a service provider that: (1) enters into a contract or arrangement with a covered plan; (2) reasonably expects to receive $1,000 or more in direct or indirect compensation; and (3) provides services to the plan in one of the categories described in the regulations."(SunGard Relius)

Dodd-Frank Meets ERISA: The Impact of Wall Street Reform on Plan Investments
Excerpt:"Paraphrasing the words of the President -- for all those employee benefit plan fiduciaries who are wondering what Wall Street reform means for you, here's what you can expect. . . . Nevertheless, there are a few steps plan fiduciaries should consider taking now, and some things to keep in mind for the future. Please view the linked ['Pension&Benefits Reporter'] article for further discussion."(Groom Law Group)

Lawmakers Respond to SEC Proposed Rules for Target-Date Funds
Excerpt:"In the letter, [the three Senators] recommended that the SEC both broaden the application of the rule to non-mutual funds and require the inclusion of additional disclosures in marketing materials [and] they urged the SEC, together with the Department of Labor, to remind plan fiduciaries of their duty to prudently select and monitor target-date funds offered to participants in defined contribution pension plans."(PLANSPONSOR.com)

New White Paper Reveals Three Greatest Fiduciary Liability Threats to 401(k) Plan Sponsors
Excerpt:"The Chubb Group of Insurance Companies and Morgan, Lewis&Bockius LLP recently released a special report on the risk of fiduciary liability lawsuits that may just scare the you-know-what out of the average 401k plan sponsor."(Fiduciary News)

Who May Sue You and Why: How to Reduce Your ERISA Risks and the Role of Fiduciary Liability Insurance (PDF)
32 pages. Excerpt:"In a press release dated August 12th, Chubb states'The U.S. Labor Department reported 910 corrected violations resulting from the 1,042 investigations of violations of the Employee Retirement Income Security Act (ERISA) it conducted in 2009.'"(Chubb Group of Insurance Companes)

[Opinion] What Plan Sponsors Don't Know May Hurt You
Excerpt:"[I]t's what plan sponsors don't know that worries them. Three out of four respondents confessed that they lacked significant knowledge of ERISA fiduciary requirements, and little over half felt that they had adequate knowledge of the administrative and investment fees associated with their plan."(Briskin Consulting)

[Guidance Overview] Failure to Substantially Comply with Claims Procedures Proves Costly to Health Plan
Excerpt:"The plan fiduciary's failure to follow the claims regulations had a surprisingly harsh effect on the outcome in this recent claim for benefits case. Neither the standard of review nor the contractual limitations period served to deflect an award of benefits, attorneys'fees and costs in favor of the claimant."(Roy Harmon via Health Plan Law)

[Guidance Overview] Decision to Invest in 401(k) Plan Fund With Higher Fees Was Breach of ERISA Fiduciary Duty
Excerpt:"Importantly, the court did not hold that the choice of retail shares over institutional shares presumptively violates ERISA's fiduciary duty of prudence. Rather, the court faulted the fiduciaries'failure to fully evaluate the fund classes, noting that had this analysis been performed, the fiduciaries would have discovered that the institutional funds offered the same investment at a lower cost than the retail funds."(Employee Benefits Institute of America)

Excessive Plan Fees Cost Companies $31.6M
Excerpt:"Caterpillar, Inc., just agreed to pay $16.5 million to settle an excessive fee lawsuit in federal court, and General Dynamics Corporation just agreed pay $15.1 million to settle a similar lawsuit. Both companies were charged with running 401(k) plans that charged participants excessive investment fees."(HR Morning)

[Opinion] SEC's 12(b)-1 Proposal: Does It Actually Increase 401k Fiduciary Liability?
Excerpt:"Under the current SEC proposal, the migration from the 12b-1 distribution model to the fee-based model may become the predominant strategy for this simple reason: Even if some distribution system incorporating the new 12b-2 model emerges, 401k plans will have to change their recordkeeping systems to account for individual lots. This accounting method ? which may represent a costly change ? is currently not done for retirement plans."(Fiduciary News)

Employee Benefits Update, August 2010 (PDF)
The eight-page newsletter presents select compliance deadlines and reminders; retirement plan developments; health and welfare plan developments, and, general developments. (Reinhart Boerner Van Deuren s.c.)

Performance that Plan Sponsors Value Most
Excerpt:"Advisors would like to think that investment performance sells plans. This is not the case. While 77% of respondents were dissatisfied with returns from the investment options in their plans ? who wouldn't be, in this market? ? only 48% considered underperformance to be a'major concern.'Compare this to the 74% who were very worried about meeting their fiduciary obligations and the 87% who were struggling to keep up with ever-changing Department of Labor regulations."(Advisor Perspectives, Inc.)

[Guidance Overview] Court Dismisses Plan Sponsor Claims against State Street over Mortgage-Backed Investments
Excerpt:"[The court] ruled that State Street could be considered a fiduciary under [ERISA] because it provided investment advice to F.W. Webb Company for a fee, but State Street did not breach its fiduciary duties because at the time the Yield Plus Fund changed investment strategies its duties to the company's retirement plan had passed to CitiStreet."(PLANSPONSOR.com)

The Gospel According to 401(k) Reformer Matthew Hutcheson
Excerpt:"An advocate . . . for higher fiduciary standards and greater fee transparency throughout the financial services industry, [Matthew Hutcheson] has testified before Congress, written articles and books, helped start the 401(k) rating service, Brightscope.com, and been active in the year-old Committee for the Fiduciary Standard."(Retirement Income Journal)

[Guidance Overview] Service Provider Fee Disclosure Regulations: The Context
Excerpt:"This Technical Update explains the basis for the DOL's issuance of the regulations and the overall purpose of the regulations."(SunGard Relius)

Disclosure of Contributions Is Proposed for Candidates Running for Boards of CalPERS, CalSTRS
The bill passed the California Assembly almost unanimously, and now goes to the California Senate. (AP via New York Times; free registration required)

[Guidance Overview] Summary of Four Different Proposed or Final Rules Relating to 401(k) Fee Disclosure or Investment Advice Guidance (PDF)
6 pages. (Charles C. Shulman, Esq.)

Law Firm Probes Drugmaker for 401(k) Missteps
Excerpt:"A news release from the Stull, Stull&Brody firm said it is looking into whether the company ran afoul of ERISA by not disclosing its true operating condition to participants and beneficiaries. Those disclosures included information about the safety of Avandia, a diabetes drug."(PLANSPONSOR.com)

[Guidance Overview] Interim Final DOL Regulations Requiring New Fee Disclosures by Pension Plan Service Providers
Excerpt:"The Interim Final Regulations also continue the existing rule (without revision) that no contract or arrangement is'reasonable'if it does not permit termination by the plan without penalty to the plan on reasonably short notice under the circumstances to prevent the plan from becoming locked into an arrangement that has become disadvantageous."(Proskauer Rose LLP)

[Guidance Overview] New Regulation, Effective July 16, 2011, for Both New and Existing Arrangements Between a'Covered Plan'and a'Covered Service Provider'
Excerpt:"The regulation states:'No contract or arrangement for services between a'covered plan'and a'covered service provider,'nor any extension or renewal, is reasonable within the meaning of section 408(b)(2)'unless certain disclosures are made to the responsible plan fiduciary."(Reish&Reicher)

How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance (PDF)
32 pages. This white paper discusses the responsibilities of ERISA fiduciaries, the types of litigation that may be brought against them, and practical suggestions on plan design and administration. (Chubb Group of Insurance Companes)

[Opinion] Investors Misled by Brokers Masquerading as Fiduciaries
Excerpt:"[B]rokers often subscribe to a more lax'suitability'standard--meaning they are free to promote products that benefit the broker, and brokerage, more than the client, as long as those products are not blatantly unsuitable."(Forbes.com)

The 401(k) Gospel according to Matthew Hutcheson
Excerpt:"The 40-year-old leader of the'independent fiduciary movement'is passionate about making retirement plans more responsive to the needs of participants."(Retirement Income Journal)

[Guidance Overview] Service Provider Fee Disclosure Regulations: The Context
Excerpt:"This is the first in a series of Technical Updates relating to the recently released DOL regulations relating to service provider contracts with plans covered by the regulations. This Technical Update explains the basis for the DOL's issuance of the regulations and the overall purpose of the regulations."(SunGard Relius)

Questions and Answers on Monitoring Client and Investment Fees
Excerpt:"In this post, you'll find answers to the majority of questions submitted during the [fi360 webinar session on the topic] written by the panelists from the original webinar."(fi360)

More Things You're Probably Still Doing Wrong As a Plan Fiduciary
Excerpt:"[T]his is a compilation based on my experience, the experiences of a group of experts who conducted a panel by the same title at the PLANSPONSOR National Conference in June, and a list of'Common Plan Mistakes'from none other than the Internal Revenue Service itself."(PLANSPONSOR.com)

[Guidance Overview] Bank's Seizure of Sponsor's Bank Account Not Violative of ERISA
See item #12 in the newsletter. Excerpt:"Current and former employees of JetDirect Aviation . . . brought a class action, pursuant to [ERISA, alleging] that JetDirect improperly withheld and diverted employee benefit plan funds from their paychecks to meet JetDirect's obligations to its creditors."(Cypen&Cypen)

[Opinion] Illinois Public Employees Who Think State Constitution Guarantees They'll Get All Their Pension Benefits May Have Another Think Coming
Excerpt:"[A legal opinion from a Chicago law firm] acknowledges that the constitution creates a contractual agreement between the workers and the state's employee pension funds. But it concludes that neither the constitution nor the law say the state is a guarantor of that obligation."(Chicago Tribune)

[Guidance Overview] DOL Commences Proxy Voting Inquiry to Access the Level of Compliance with ERISA (PDF)
2 pages. (Sutherland Asbill&Brennan LLP)

Evaluating Retirement Plan Advisors: A Dynamic Guide to Help Plan Sponsors Fulfill Their Fudiciary Duty&Avoid Liability (PDF)
69 pages. Excerpt:"One of the key features of this guide is the place it reserves for the frequent updating of standards and its recognition that the phrase,'once and done,'is not something that can be applied in the ERISA context."(Center for Due Diligence)

General Dynamics Settles 401(k) Fee Suit
Excerpt:"General Dynamics Corp. . . . and Fiduciary Asset Management tentatively agreed to a $15.15 million settlement to resolve a class-action lawsuit alleging GD violated its fiduciary responsibilities by allowing Fiduciary Asset Management to charge excessive fees to participants in two GD 401(k) plans."(Pensions&Investments; registration may be required)

Proskauer Rose's ERISA Litigation Newsletter, August 2010
Excerpt:"[The Edison case, being the first'excessive fees'case to go to judgment following a trial,] illustrates that it may be worthwhile for plan sponsors to consider structuring their plans so that the plan's administrative costs are borne by the plan, not the plan sponsor. Such a structure can lessen or eliminate claims of conflicts when revenue sharing is used to effectively lower a plan's administrative expenses."(Proskauer Rose)

Small DC Plans May Need 12b2 Exemption
Excerpt:"A key issue in coming months is whether the [SEC] exempts small defined contribution plans from its proposed rule about moving assets with 12b-1 fees higher than 25 basis points to a share class without an ongoing sales commission . . . ."(PLANSPONSOR.com)

[Guidance Overview] DOL Takes Aim at Hidden Retirement Plan Fees
Excerpt:"It remains difficult for plan fiduciaries to know exactly what many service providers are paid for their services, given the use of revenue sharing and arrangements that charge service provider fees against the investment return of an investment fund. In this context, DOL has issued interim final regulations . . . ."(Kilpatrick Stockton LLP)

[Guidance Overview] Fiduciaries Held Liable for Selecting Retail Mutual Funds
Excerpt:"[S]everal courts are dealing with class action lawsuits claiming that ERISA fiduciaries breached duties of prudence and loyalty by selecting 401(k) investment options with unreasonably high fees and failing to disclose those fees properly to participants. . . . One of these plan fee cases has now been tried . . . and the outcome gives fiduciaries guidance on evaluating and negotiating 401(k) plan fees."(McGuireWoods LLP)

[Opinion] Opinion: Why New Rules for 401(k) Fee Disclosures Dont Go Nearly Far Enough
Excerpt:"Only in the perverse world of the securities industry would candid disclosure of fees paid to vendors be considered a victory. In all other areas of commerce, it's not an issue. How would you feel if your car dealer refused to give you the price he's charging for your car?"(Daily Finance)