- August 2017
- Jul 14, 2017 Does the Fiduciary Rule Apply to Plan Sponsors and Committees? Jul 14, 2017
- Jul 13, 2017 The Importance of Good Communications Jul 13, 2017
- Jul 12, 2017 Tracking Down the Valid Claims-More Victories for 401k and 403b Fiduciaries Jul 12, 2017
- Jun 6, 2017 What's Under the Hood? Another Court Dismisses Conclusory 401k Fee Suit Jun 6, 2017
- May 25, 2017 Win the Battle, Lose the War? The Fiduciary Rule Moves Forward May 25, 2017
- May 16, 2017 The Supported Participant-How 401k Plan Design Can Increase Retirement Savings May 16, 2017
- May 15, 2017 Free Guide: "The Intelligent Fiduciary" May 15, 2017
- May 9, 2017 The Difference a Delay Makes-Will the Fiduciary Rule Survive? May 9, 2017
- May 3, 2017 Are Your Target Date Funds Making You A Target? May 3, 2017
- Apr 17, 2017 The Confident Participant: Effective 401(k) Plan Education Apr 17, 2017
- Mar 15, 2017 Put it in Writing! Why Your Pension or 401(k) Plan Should have Written Policies Mar 15, 2017
- Feb 21, 2017 Upheld, Delayed and Under Review-Heads are Spinning over the Fiduciary Rule Feb 21, 2017
- Feb 13, 2017 Is This the End of the Fiduciary Rule? Feb 13, 2017
- Jan 18, 2017 How To Make Your 401(k) or 403(b) Plan a Litigation Target Jan 18, 2017
- Jan 4, 2017 Archive: Benefits Blog Cohen & Buckmann Jan 4, 2017
- Jan 3, 2017 Size Matters: Do Your Fiduciaries Negotiate for Lower 401(k) Plan Fees? Jan 3, 2017
- Dec 19, 2016 Two More Victories for the Fiduciary Rule - But Will They Be Hollow Ones? Dec 19, 2016
- Nov 14, 2016 Fiduciary Rule Survives First Court Challenge - Will Other Courts Follow? Nov 14, 2016
- Oct 31, 2016 Is Your Pension Plan Auditor Making the Grade? Five Ways to Get a Better Audit Oct 31, 2016
- Sep 26, 2016 Denial is Not an Option: Why Savvy Investment Advisors will Accept Fiduciary Status Sep 26, 2016
- Sep 14, 2016 Is Your 401(k) Plan Income "Floating" Away? New Lawsuit Challenges Fidelity's Practices Sep 14, 2016
- Sep 1, 2016 Score One for 401(k) Fiduciaries - Excessive Fee Suit Against Chevron Dismissed Sep 1, 2016
- Aug 16, 2016 403(b) PLANS (AND MORE 401(k) PLANS) IN THE CROSSHAIRS----FEE LITIGATION FINDS NEW TARGETS Aug 16, 2016
- Aug 14, 2016 Are They Playing Pokemon Go at Your Office? Aug 14, 2016
- Aug 7, 2016 Vanished Into Thin Air? Lost Participants Create Pension Plan Audit Risk Aug 7, 2016
- Jul 26, 2016 401(K) Plans Still in the Crosshairs: New Cases Challenge Plan Fees Jul 26, 2016
- Jul 15, 2016 Let's Take a Trip! Creating a Good Unlimited Vacation Policy Jul 15, 2016
- Jul 13, 2016 The Danger of Wishful Thinking: Don't Avoid Pension Plan Self-Audits Jul 13, 2016
- Jul 5, 2016 THE DISAPPEARING DETERMINATION LETTER: HOW PLAN SPONSORS CAN COPE Jul 5, 2016
- Apr 30, 2016 After Sun Capital ERISA Decision: What's Next for Private Equity? Apr 30, 2016
- Apr 30, 2016 WHAT YOUR PROTOTYPE PLAN PROVIDER DOESN'T TELL YOU Apr 30, 2016
WHAT YOUR PROTOTYPE PLAN PROVIDER DOESN'T TELL YOU
By Carol I. Buckmann
One-stop shopping sounds attractive. Many employers, not necessarily just the smaller ones, want help managing their qualified plans. They are busy running their businesses, and the idea of adopting a plan that has been pre-approved by the IRS and is maintained by a professional third party is very appealing. The number of employers adopting pre-approved plans will surely increase now that the IRS has announced sharp cutbacks in the ability of employers to get approval letters for individually-designed plans. But what do you need to know when you make that decision?
The business model of these providers is that they are not fiduciaries to their plans, and so far, the courts have upheld them. The Department of Labor has issued new fiduciary regulations that also allow providers to continue in business as non-fiduciaries. There is nothing wrong with that, but most employers who adopt pre-approved plans remain unaware that the provider has not assumed a fiduciary role and that they-not the provider-are responsible for compliance and plan errors.
Unless they have hired an investment fiduciary, these employers also remain solely responsible for plan investments, including making sure that the menu of investments made available to participants is prudent and diversified and has reasonable fees. And unless they have the provider’s documents reviewed by an attorney with expertise in this area, they may be needlessly exposing themselves to liability. That also is not well understood, even though the documents almost always have a vague warning on the first page that they should be reviewed by an attorney. That may seem like an unnecessary cost; it isn’t.
Here are a few of the areas where employers would be well-advised to get independent assistance:
That service agreement that is sent to you with an arrow indicating where to sign is really negotiable, and you will want an attorney to review carefully its provisions on indemnification and responsibilities, and also where suit may be brought if you have a contract dispute. Do you really want to have to sue the provider in Idaho?
Plans need ERISA bonds and it is highly recommended that the actual fiduciaries protect themselves with fiduciary liability insurance. A qualified attorney can help get the right coverage.
More and more lawsuits seem to be based on plan communications. That seemingly innocuous plan booklet called the SPD can be a lawsuit waiting to happen if it isn’t well-drafted. Yet many providers produce “cookie cutter” SPDs that omit important details or aren’t drafted to take advantage of the protections available to plan fiduciaries. For example, courts have held that plans may provide their own reasonable time limits on when suit may be brought after benefit claims are denied, but ONLY if the plan communications alert participants about those limits.
The people helping to set up these plans are not attorneys, and they may miss legal issues. For example, qualified plans must have a U.S. domestic trust, but we sometimes see plans set up by providers that have only executives located outside the U.S. as trustees because the set up team is not aware of this rule. Sometimes they don’t realize there are related employers that affect required plan testing, which can be a very big deal and can involve costly corrections.
The bottom line is that it is less expensive in the long run to get qualified outside advice than to deal after the fact with problems that could have been avoided.