The401kinsider.blogspot.com/

EFFICIENT ADVISORS

noreply@blogger.com (Investor Coach Dave) — Fri, 30 Mar 2012 22:59:00 +0000

EFFICIENT PORTFOLIOS

noreply@blogger.com (Investor Coach Dave) — Fri, 30 Mar 2012 21:47:00 +0000

FAQ's

noreply@blogger.com (Investor Coach Dave) — Fri, 30 Mar 2012 21:09:00 +0000

Low Cost 401k Providers, How to Get Index Funds in 401(k) Plans and Other FAQs
	What do you mean when you say you offer “the lowest total costs?” What are your service standards? Do you offer 401(k)s to start-ups? Do you work with investment advisors and other TPAs?What investments do you offer?Can I get Vanguard? Can I get ETFs? How secure is our money?I know you offer 401(k) plans, do you offer other qualified retirement plans as well?
What Do You Mean When You Say You Offer “the Lowest Total Costs?”
	Our fees, $1,500 for up to 30 eligible employees and $30 per eligible thereafter, less any revenue sharing we receive, is the lowest cost for full service daily recordkeeping and administration in the industry. In addition, since we offer any fund from any fund company, plan sponsors and their advisors can dramatically reduce investment costs. Don’t believe us? We offer free apples-to-apples comparisons—showing all 401(k) fees—with your current provider. Send our comparison to your accountant, advisor or counsel. You won’t find another provider offering lower total cost401(k) retirement plans anywhere in America. Top
What Are Your Service Standards?
	We are full-service 401(k) administrators and 401(k) recordkeepers. Our service standards have been rated among the best in the industry. They include: 100% of electronic contributions (such as ACH) invested within 48 business hours of receipt of orderly data and funds 100% of participant transactions processed within 24 business hours of receipt of orderly data and funds Assumption of co-fiduciary responsibility to assist plans in meeting or exceeding fiduciary standards in regard to the performance of administration and record-keeping functions All necessary testing—actual deferral percentage (ADP) testing, actual contribution percentage (ACP) testing, non-discrimination testing, top heavy testing, and new comparability testing—completed accurately within 30 days of receipt of data Form 5500s, Summary Annual Reports and other necessary forms prepared within 30 days of receipt of data Continuous data backup in two separate, secure remote locations New plans set up within 5 business days on receipt of accurate and reconciled data Conversions completed within 10 business days on receipt of accurate and reconciled data Customized enrollment kits printed and shipped within 15 business days of receipt of signed approval Distribution and loan requests processed within 5 business days Participant statements prepared and mailed or e-mailed within 15 business days of the end of the quarter Broker/advisor payments processed within 24 hours of Plan Sponsor approval Free customized proposals and plan comparisons delivered within 48 business hours Online TPA census and contribution reports Calculation of participant eligibility Calculation of participant vesting balances Single point of contact Same-day reply to all phone calls and email Top
Do You Offer 401(k)s to Start-ups?
	We guarantee the lowest cost 401(k) plans for any sized company from start-up to $20 million in combined assets. By lowest cost, we mean lowest total costs, meaning all costs paid for by the company and its employees. Small business 401(k) plans typically claim to be cheap, but shift nearly 100% of the costs to participants, who are charged much higher than average investment fees. Mutual fund companies and/or insurance providers deduct investment fees and wraps directly from participant returns to subsidize actual plan costs. These undisclosed charges cost plans—especially small plans—thousands and expose employers and their advisors, who have a fiduciary responsibility to run plans solely in the best interest of employees, to the possibility of lawsuit. Top
Do You Work With Investment Advisors and Other TPAs?
	We welcome any outside advisors (including RIAs and brokers) and TPAs committed to improving customer-service or reducing the costs of their clients’ employee retirement plans. EmployeeFiduciary gives TPAs and advisors the ability to improve their clients’ plans by providing 100% open architecture, without additional or hidden fees, and by offering the lowest cost daily recordkeeping in the industry. Top
What Investments Do You Offer?
	We offer any fund from any fund family available to 401(k) plans. This includes 401(k) index fundsand 401(k) exchange traded funds [401(k) ETFs] . Click here for a list of funds. Top
Can I Get Vanguard?
	There are three ways to add Vanguard to your company’s plan. #1. Call Vanguard directly. Vanguard offers 401(k) plans directly to plans with $10 million or more in plan assets. If you have less than $10 million in aggregate assets in your 401(k), Vanguard will not service you directly. (Note: Vanguard may require that 100% or a certain proportion of plan assets are invested in Vanguard Family Funds). #2. Call a third-party administrator (TPA) offering Vanguard shares and pay a “wrap.” Since Vanguard does not pay revenue-sharing, 401(k) providers offering Vanguard funds often charge a “wrap” or asset-based fee, which may offset much of the benefit of low-cost investing, especially as account balances grow. #3 Call Employee Fiduciary. We offer all of Vanguard’s funds and do not charge any wraps or asset-based fees. Top
Can I Get ETFs?
	Yes, we offer all the major exchange-traded funds on the market. We provide 401(k) exchange traded funds without any asset-based wrap charges. Top
How Secure Is Our Money?
	We do not hold your plan’s money. Salary deferrals are invested in the mutual funds or other investments that you, as the employer, agree to offer. By law, these deferrals are held in trust by a third-party custodian. The custodian also holds the proceeds of any mutual fund sales prior to disbursement to participants. We use MG Trust® Company, LLC, A wholly owned subsidiary of Matrix Financial Solutions, MG Trust provides custodial, trust and/or cash agent services for approximately 75,000 plan and individual accounts and more than $29 billion in assets. MG Trust is regulated and chartered through the State of Colorado Division of Banking and is also a trust member of the National Securities Clearing Corporation. Top
I Know You Offer 401(k) Plans. Do You Offer Other Qualified Retirement Plans As Well?
	Employee Fiduciary is committed to offering the lowest-cost, full-service employee benefit plans in the industry. This includes defined contribution plans, such as low cost 401(k) plans, solo-(k)s, safe harbor, and SIMPLE plans, which give employees and employers the flexibility to contribute varying amounts to the plan tax-free, low cost 403(b) plans, which are typically used by non-profit groups, profit sharing plans, which give employers have the option of contributing varying amounts to the plan based on company performance, and money purchase plans, where employers commit to contribute a predetermined amount to their plan. If you don’t know what plan is right for you, contact Employee Fiduciary to learn more. Top

Fiduciary

noreply@blogger.com (Investor Coach Dave) — Fri, 30 Mar 2012 20:49:00 +0000

I'm Not A Fiduciary ... Am I?

Plan Sponsors are Fiduciaries Whether they Like it or Not!

No matter how many advisors, investment committees, or board members participate in the decisions of running a 401(k) plan, the ultimate responsibility for a 401(k) plan’s performance rests squarely upon its sponsor -- who is usually the employer — owners and partners in a privately-held company, or shareholders (and often directors and officers) in a publicly-traded company. Plan sponsors cannot delegate away fiduciary responsibility, and failure to meet fiduciary standards can trigger severe penalties for the company and the possibility of individual personal liability. Plan sponsors can, however, elect to contractually hold others to the same high standards that are required of them.

Unlike other 401(k) providers, Wealth Management Partners of MI, will contractually assume fiduciary responsibility with sponsors, to help shoulder the responsibility of upholding the interests of employees.

You Are Not Alone
	Our EF Fiduciary Guidebook also guides each employer through the steps required by the Department of Labor to maintain and demonstrate “prudent expert” fiduciary standards. And by electing EF Smart Plan defaults, an employer can rest assured that employees’ interests are secure.

The Employee Retirement Income Security Act (ERISA) imposes four particular standards on 401(k) plan fiduciaries. These four standards are:

1) the duty of loyalty
2) the duty of prudence
3) the duty to diversify investments
4) the duty to follow plan documents. What many directors, officers, business owners and employees fail to understand are the many responsibilities and liabilities of functioning as a fiduciary under ERISA.

Who Is a Fiduciary?

A person can become a fiduciary in one of two ways. First, when they are expressly appointed a fiduciary, generally as the plan administrator, plan trustee, or member of an administrative or investment committee. Second, when they perform a duty or function that is deemed to be a fiduciary function. As a general rule this includes anyone who exercises discretionary authority over plan assets, renders investment advice for a fee, has some discretionary authority in the administration of the plan, or appoints or removes individuals and other parties who exercise any of the first three functions.

What Are The Duties of a Fiduciary?

Historically, the three key principles that guide the actions of a fiduciary are:

Act solely in the best interest of plan participants and their beneficiaries.
Act for the exclusive purpose of providing benefits to the participant.
Use the care, skill, and prudence of a "Prudent Expert" in the management of 401(k) plan assets.

Fiduciaries are also prohibited from dealing with plan assets in the fiduciary's own interest or for the fiduciary's own account; acting in any transaction involving the plan on behalf of a party whose interests are adverse to the interest of the plan or its participants and beneficiaries; or receiving any consideration for the fiduciary's own personal account from any person dealing with the plan in connection with any transaction involving plan assets.

The concerns of fiduciaries have historically been focused on investment related decisions, but their duties and responsibilities go beyond the investment arena. In a recent article by the law firm of Reish Luftman & Reicher1 discussing a lawsuit filed by the U. S. Department of Labor (DOL) against the Enron Corporation, they observe that this lawsuit "is a primer on the DOL's attitude about how plan fiduciaries -- whether or not they are named as fiduciaries -- need to go about their jobs." The article notes some of the more important points made by the DOL including:

Plan fiduciaries have an obligation to pay attention to "warning signs," to consider their import, and to take action accordingly.
Plan fiduciaries must meet regularly, and consider the prevailing circumstances that impact the plan.
Company officers must provide fiduciaries with information that is relevant to the performance of the fiduciaries' duties.
Plan fiduciaries must periodically review the suitability of the plan's investment options.
Company officers who appoint plan fiduciaries have an ongoing duty to monitor their performance.
Fiduciaries must speak and communicate truthfully and completely.
Also remember that a fiduciary's obligations to the plan participants outweigh those to their boss, the board of directors or to the shareholders.

Fiduciaries Are Personally Liable.

ERISA §409 provides that any "person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable2 to make good to such plan any losses to the plan resulting from each such breach...." The fiduciary may also be personally responsible for paying any civil penalties or excise taxes imposed on an employer by a Court of Law.

Fiduciaries can also be held liable for failing to take reasonable steps to correct another fiduciary's breach of duty.

In today's litigious society, people who perceive they have been wronged react with lawsuits that can cost millions of dollars to defend and settle. This makes fiduciaries potential lightning rods of liability, particularly in light of the amount of money held in retirement plans today. Bottom-line is that the financial risks of being a fiduciary are great, and they should take their duties very seriously.

Misconceptions About Fiduciary Liability Exposure

Many plan sponsor fiduciaries harbor several misconceptions about their exposure to liability for fiduciary breaches. The most common are:

We hired an outside investment manager to handle all our investment issues, so we have no liability anymore. FALSE.

ANSWER: While doing so can reduce the liability, you still carry great exposure for having hired the investment manager.

We allow our employees to make all their own investment decisions, so we have eliminated our liability. FALSE.

ANSWER: Plan fiduciaries are still responsible for determining which investment options are made available in the plan and have a duty to monitor those options closely. Further, if you are not fully 404(c) compliant, you are responsible for the very investment choices your employees are making.

My ERISA Fidelity bond protects the fiduciaries from this exposure. FALSE.

ANSWER: An ERISA Fidelity Bond only protects the plan from a loss due to dishonest acts of trustees. You need a separate fiduciary Liability Policy to protect the personal assets of a plan fiduciary for Wrongful Acts.

My Directors & Officers Liability policy protects the fiduciaries from this exposure. FALSE.

ANSWER: Errors and Omission insurance does not protect against fiduciary responsibilities nor does your General Liability insurance.

Procedural Prudence

So how do you protect fiduciaries and ensure that you are acting solely in the best interest of plan participants and their beneficiaries? It is called "Procedural Prudence." Let me explain briefly.

Fiduciaries are not required to make perfect investment decisions, but they must establish and follow good processes and document their actions at every turn to show due consideration. This is often called "Procedural Prudence," and the principle should be applied to all decisions and actions taken by a fiduciary. They should position themselves to be able to defend their conduct and decisions by building a record that will demonstrate "Procedural Prudence" that can withstand close scrutiny. To do so, they must assume that their decisions will be examined in detail in the future. Documentation is critical and spans a wide array of both internal and external reporting requirements. This documentation should be built into an audit file that can be quickly produced and reviewed to demonstrate "Procedural Prudence."

1 Fred Reish, Bruce Ashton and Joe Faucher, "Department of Labor Sues Enron," ASPA ASAP No. 03-17(July 21, 2003).

2 Generally, corporate liabilities do not attach to the personal assets of individuals. However, the corporation cannot shield the individual from liability in certain circumstances. One of these circumstances is when that individual is acting as a fiduciary, whether he realizes it himself or not.

This blog post is for informational purposes only and is not intended to provide investment, financial, legal, accounting or tax advice and should not be relied upon in that regard.

Brokers are Butchers ... and Pink Slime is 100% Lean Meat

noreply@blogger.com (Investor Coach Dave) — Fri, 03 Feb 2012 20:41:00 +0000

Brokers are Butchers ...and
Registered Investment Advisors ... Dietitians

401(k) Benchmarking: Keeping Everyone Honest (and Legal) ...

noreply@blogger.com (Investor Coach Dave) — Fri, 03 Feb 2012 19:37:00 +0000

Benchmarking: the Key to a 401(k)
Plan Sponsor's Fiduciary Compliance
What is Benchmarking?

Benchmarking is the key component of any 401(k) plan sponsors fiduciary compliance review. The Department of Labor isn't looking for perfection from plan sponsors, nor is it demanding that the plan be lowest cost. Rather, what the DOL is looking for is to be assured that sponsors are at least on the right track and can prove it if asked. Knowing how one's 401(k) plan stacks up against one's peers certainly places the plan sponsor on the road to fiduciary diligence. Unfortunately, far too few 401(k) plan sponsors conduct these fiduciary self-assessments, and in doing so deny themselves fiduciary cover.

So how does one go about undertaking a fiduciary compliance review? It starts with a who, what, where and why review of the plan's history; who's eligible, what's included, where's it been; any changes along the way, why it's working or not working?

ERISA 408(b)(2): The Perfect Storm

noreply@blogger.com (Investor Coach Dave) — Fri, 27 Jan 2012 21:00:00 +0000

New U.S. Department of Labor Disclosures to Expose

Plan Fiduciaries, Fees, and Failures

Plan NOW to minimize employee confusion

By David Palmer

For years, participants in employer-sponsored 401(k) plans have received periodic statements that included fund balances and changes in account value since the prior period - with no mention of the investment fees paid from their accounts. All that is about to change as the U.S. Department of Labor (DOL) begins enforcing new regulations surrounding fee disclosure for 401(k) ERISA covered retirement plans. The new regulation 408(b)(2) requires service providers expecting to receive $1,000 or more in direct and / or indirect compensation and provide certain fiduciary or registered investment advisory services, to fully disclose the explicit fees and expenses paid by plan participants on their quarterly statements and to provide annual disclosure of all investment fees and expenses. Regulation 408(b) requires service providers to supply employers with a "plan-level' "Service Agreement" disclosing whether they are acting as a fiduciary to your plan and, if so, in what capacity; along with a full "Investment-level" disclosure of all associated fees and expenses paid by the plan. Overall, the changes are positive in that both plan participants and employers will gain full transparency regarding fees and fiduciary liability. Plan sponsors need to prepare now to communicate these changes with plan participants or they risk ending up with some surprised and upset employees on their hands.

Beginning June 30, 2012 - 408(b)(2): Plan service providers need to present plan sponsors with a written copy of their service agreement outlining their fiduciary duties to the plan and an itemization of their fees. Plan sponsors will then have the responsibility to have a process of due diligence in place in order to evaluate these fees for reasonableness. Without a documented due diligence process in place to evaluate these fees, plan sponsors can be held personally liable and subject to IRS penalties.

Beginning August 30, 2012 - 404(a)(5): The second change involves plan participants directly. Plan sponsors must furnish their first set of fee disclosures to plan participants no later than 60 days after the effective date of the service provider disclosure regulation. In addition, fees and expenses paid by participants must appear on the September 30, 2012 quarterly statement - which must be distributed by November 14, 2012 - the 45th day after the end of the July - September third quarter.

For many plan sponsors and most plan participants this will be the very first time they have ever received such detailed information about all the fees they are being charged. These fees are likely to come as quite a shock, as sponsors and participants alike, discover how much they've been paying in service charges and investment management fees over the years - for something they generally thought was free.

I have to work how much longer before retiring?

Steps to take NOW: The Seven Things Every Plan Sponsor Needs to Know

Employers need to plan ahead and think about how their employees are going to react to these disclosures and how to responsibly inform them so as to minimize the surprise factor. One such way is to start by conducting a 401(k) Benchmark diagnostic. A 401(k) benchmark diagnostic will provide you with a comprehensive apples-to-apples comparison of your plan's fees, design, and diversification relative to a national database of plans of similar asset size and participation utilization; providing clear evidence that a thorough and objective fiduciary process was followed and that all fees are "reasonable" for the services provided.

“Plan sponsors, as fiduciaries to their ERISA plans (such as 401(k) plans), have a duty to know and evaluate the direct and indirect compensation of their plan service providers. The new DOL regulation requires that the service providers give plan sponsors written descriptions of their services and their total compensation.”
- Fred Reish, ERISA attorney

Step #1: Obtain a copy of the 401(k) service agreements from all service providers (ie: plan administrator, TPA, Investment Advisor, Accountant). Ask them what systems and procedures they have in place to help educate and inform employees about the required fee disclosures.

Step#2: Evaluate All Fees. Once the service agreements are in hand, plan sponsors have a duty to evaluate the fees and do their best to determine if the fees are in the best interest of the employees. Sponsors are obligated to know exactly what services are being provided, at what cost, and why they're valuable. In most cases the largest fees are asset based fees charged against the mutual fund investments within the plan - investments most employees think are free. Plan sponsors will need to evaluate these investment fees very closely, as most are intentionally obscured in order to mitigate their obvious impact on participant savings. If uncertain whether the fees are reasonable, sponsors should benchmark the fees against other like-minded plans.

Step #3: Explain the Process. When ready, explain to participants and employees alike the rigorous process that the organization went through in order to ensure that the fees are indeed reasonable. For plan sponsors, when it comes to their personal fiduciary liability, transparency and participant education are the best defense(s) against a litigious-minded employee.

Many plan sponsors will see a benefit of using the 401(K) Benchmark reports primarily for fiduciary documentation as part of an annual plan review process. Others will rely on the reports as a means to objectively compare their plan to other plans in their industry and peer group in order to remain competitive in employee compensation. Still others will use the benchmark reports to guide their participant education and communication efforts. Regardless, service providers not in compliance as of July 1, 2012 will be in violation of ERISA's prohibited transaction rules and subject to penalties under the Internal Revenue Code.