COLLECTED WISDOM™ on Fiduciary Related News and Intelligence
These are general fiduciary news items. Other topical areas you may find of interest that are not fully covered here include ERISA 404(c) Compliance and Fiduciary Duty, 401k Investment Committees, Fiduciary Responsibility and Liability Issues, and DOL's Final Fiduciary Rule and Best Interests Contract Requirement.
Abstract: Fidelity recently debuted two "no fee" mutual funds, a domestic and an international index fund. This concept raises significant fiduciary questions. Beyond the fact they have no investment performance history, the very concept of the business model has no history. No mutual fund has ever been offered that has been fully subsidized by the management company.
Source: Fiduciarynews.com, October 2018
Abstract: Unfazed that the Department of Labor fiduciary rule has been rendered moribund, the Garden State is forging ahead with its own. The New Jersey Bureau of Securities is initiating work on the standards, which would impose a fiduciary duty on all New Jersey investment professionals and require them to place their clients' interests above their own when recommending investments.
Source: Asppa.org, September 2018
Abstract: Determining whether a breach of fiduciary duty has occurred is a science. It is an organized way of gathering and analyzing evidence about the behaviors and methodologies of those who make choices.
Source: 401khelpcenter.com, September 2018
Abstract: This 12-minute podcast discusses participant directed defined contribution plans and the lawsuits against the fiduciaries and service providers which are responsible for administering them. Also examines the best practices that can achieve favorable results for plan participants and the practices that can avert litigation or enable plan fiduciaries to effectively defend themselves if there is litigation.
Source: Erisapracticecenter.com, September 2018
Abstract: Since 2016, participants have filed 19 lawsuits against universities over the fees charged to the universities' 403b plans. In the first of these cases to reach trial, New York University secured a complete victory when the court found that NYU did not breach its ERISA fiduciary duty of prudence. The court's decision provides some important takeaways for plan sponsors and the retirement committees that act as plan fiduciaries.
Source: Drinkerbiddle.com, September 2018
Abstract: District Judge Katherine B. Forrest's opinion in Sacerdote highlights the various fiduciary governance practices the NYU fiduciaries followed in making the decisions at issue in the case. This article summarizes the fiduciary practices and explains how they helped the NYU fiduciaries prevail at the trial level.
Source: Barclaydamon.com, September 2018
Abstract: In holding that the former employee failed to state a claim, the court in Meiners v. Wells Fargo & Co. reasoned that the plaintiff failed to plead facts showing the Wells Fargo investment funds were an imprudent choice. Specifically, the court found that the plaintiff's allegations that an allegedly comparable fund performed better was not sufficient, especially given the other fund's differing investment strategy.
Source: Employeebenefitsblog.com, September 2018
Abstract: Given the prevalence of ERISA fee litigation, 401k plan sponsors are very concerned about identifying and implementing best fee practices to insulate themselves from liability against such claims. Over 50 so-called "fee cases" have been filed to date, with the majority pursued as class actions. Like most fiduciary benefit claims, however, the liability risk can be substantially mitigated through preventive practices.
Source: Bna.com, September 2018
Abstract: Due to ERISA's increased standard of care, the now defunct DOL rule and other potential regulatory replacements, plan sponsors are faced with the heightened importance to understand the fiduciary roles and responsibilities for their retirement plan. This article outlines the ways of becoming a fiduciary, the differences between ERISA 3(21) and 3(38), and which is best depending on your plan and plan committee.
Source: Planpilot.com, September 2018
Abstract: Due to the large amount of work in starting and maintaining their retirement plan, sponsors often overlook certain aspects that may expose them to potential liability. Additionally, some plan sponsors are unaware of the ongoing fiduciary duties which can result in misconceptions about the plan and its participants. These misconceptions can be costly, and sponsors may find themselves in trouble with the IRS or the Department of Labor.
Source: Planpilot.com, August 2018
Abstract: The article's author believes that most plan sponsors fail to comply with section 404(c)'s "sufficient information" and "control" requirements. Plan sponsors must have that information in order to (1) comply with their fiduciary duty to conduct an independent investigation and evaluation of a plan's investment options, and (2) to ensure that the plan options provide plan participant with the opportunity to effectively diversify their retirement account and minimize the risk of large losses.
Source: Iainsight.wordpress.com, August 2018
Abstract: The United States District Court for the District of Minnesota has, for a second time, dismissed claims by participants in the Wells Fargo 401k plan. This second decision focused on the issue of the fiduciary duty of loyalty, the court's discussion of which is thorough and interesting both in its specific application to stock drop cases and to fiduciary litigation more generally. In this article we discuss the court's opinion in detail.
Source: Octoberthree.com, August 2018
Abstract: The Fifth Circuit Court of Appeals issued its mandate to vacate the Department of Labor fiduciary rule in June, but guidance issued by the DOL the month prior allows at least part of the rule to continue to apply. This anomaly has some profound ramifications for retirement advisers dispensing rollover advice.
Source: Investmentnews.com (registration may be required), August 2018
Abstract: One of the trickiest areas of compliance for advisers and their supervising firms is related to principal transactions. David Kaleda, a principal in the Groom's Fiduciary & Plan Governance practice, provides an overview of compliance obligations for advisers in connection with principal transactions.
Source: Groom.com, August 2018
Abstract: Comments on the SEC's proposed best interest standards express concern that the standards fail to impose a uniform fiduciary standard or define key terms, most notably, what is a "best interest" standard.
Source: Planadviser.com, August 2018
Abstract: There are legal rules, then there are common sense rules. This article is about the common sense rules. Common sense refers to those standards and practices that helps one excel in the front lines of the real world. Here are seven very practical rules every professional fiduciary must follow.
Source: Fiduciarynews.com, August 2018
Abstract: In the last two years, over 100 lawsuits were filed against fiduciaries of 401k plans, primarily involving selection of investment options and other plan service providers. Similar lawsuits are targeting plans sponsored by private sector universities and tax-exempt organizations. Defined contribution plan fiduciaries should review the types of claims described here and schedule a review of your processes for selection of investment options and other service providers, to limit liability exposure.
Source: Hansonbridgett.com, July 2018
Abstract: hey can take away the DOL's Fiduciary Rule, but they can't remove the after effects. Remember, the official name wasn't "The Fiduciary Rule." When the DOL unveiled the final version, it was rechristened "The Conflict-of-Interest Rule." The focus wasn't on some legal definition of fiduciary. Instead, the emphasis was on the dangers inherent in advice containing conflicts-of-interest. Here are some examples of self-dealing transactions that, if executed, will likely result in a fiduciary breach.
Source: Fiduciarynews.com, July 2018
Abstract: Using non-fiduciary plan providers for services or investing may cause a plan committee to assume more retirement plan risk than the plan sponsor wants to accept. Retirement plan sponsors have a large responsibility to plan participants and the sponsoring organization. We frequently hear of the responsibility that extends to plan participants and their beneficiaries, but we rarely hear of some of the additional responsibilities. Most plan sponsors have a full understanding of the role of the plan vendors. What is frequently misunderstood is in what capacity are our service providers performing their functions?
Source: 401ktv.com, July 2018
Abstract: Many retirement plan participants and plan sponsors are no longer content with investments that simply bring them good returns. They also want their investments to do some good in the world. The key question for plan fiduciaries is whether they can pursue these types of investments while also meeting the requirement to act in the best interest of plan participants.
Source: Bna.com, July 2018
Abstract: The death of the Fiduciary Rule does not mean that plan sponsors and committee members cannot insist on getting nonconflicted fiduciary advice. It just makes their job harder. It is worth the extra effort, because getting investment advice from an ERISA fiduciary makes a big difference.
Source: Penchecks.com, July 2018
Abstract: For many plan sponsors, their real job has nothing to do with running the company retirement plan. Yet, being named a plan sponsor may carry greater personal risk than their real job. This article identifies fiduciary questions every 401k plan sponsor must ask, what the best answers to those questions are, and why they are important.
Source: Fiduciarynews.com, July 2018
Abstract: Here's a new risk for plan sponsors to be aware of, you could be sued based on the qualified default investment alternative (QDIA) you choose for your retirement plan. For example, participants could claim you failed to fulfill your fiduciary duty if the plan's qualified default investment option -- typically a target-date fund -- doesn't deliver the expected outcomes.
Source: 401ktv.com, June 2018
Abstract: When thinking about fiduciary support services and outsourcing, really the important considerations should be about process and time management, more than fiduciary risk transfer.
Source: Planadviser.com, June 2018
Abstract: While the SEC has proposed to impose a limited, or transaction-based, best-interest standard on broker-dealers, that only applies to investment recommendations made to "retail customers." Based on the SEC's definitions, it does not appear that, for the court, retirement plans are retail customers. As a result, broker-dealer investment recommendations to retirement plans would not be covered by the best-interest standard.
Source: Investmentnews.com (registration may be required), June 2018
Abstract: The last deadline for resuscitating the fiduciary rule passed when the government declined to ask the U.S. Supreme court to reconsider the appeals court’s decision. The prospect of holding advisers accountable to retirement savers hasn't disappeared entirely, though. The SEC is considering its own version of the fiduciary rule, known as the best-interest rule.
Source: Bloomberg.com, June 2018
Abstract: Taco trucks. Thinking outside the box is often a valued attribute. In the retirement plan universe, it can find expression in arrangements and plan features that offer flexibility, liquidity and portability. But a recently released paper suggests that it is important to be mindful of fiduciary duties while embracing innovation.
Source: Asppa.org, June 2018
Abstract: Sophistication gaps always cause vulnerabilities because one can potentially take advantage of another and cause harm. There is an ethical element to this that seems to be absent in many dialogues with regards to this subject that is inevitably inescapable but is rather hard to grasp because its obligation was not created by a contract.
Source: 401khelpcenter.com, June 2018
Abstract: Since the clear majority of plan sponsors need to involve external plan managers in some capacity, it's important to understand how financial professionals of different classes differ in what they bring to the table. Two major categories of professional assistants are available to sponsors. Broadly speaking, they can be grouped as investment brokers and retirement plan consultants.
Source: Planpilot.com, June 2018
Abstract: Under ERISA, those who administer, manage, or control plan assets have a fiduciary duty to plan participants. This fiduciary duty requires them to act solely in the interest of plan participants and beneficiaries. It is important for plan fiduciaries to understand their roles and responsibilities in deciding whether to outsource some of the administrative tasks to a 3(16) administrative service provider.
Source: Bsllp.com, May 2018
Abstract: The FAB states that during the period from June 9, 2017 until after regulations or prohibited transaction exemptions or other administrative guidance have been issued, neither the DOL nor IRS will pursue prohibited transactions against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have been exempted in the Best Interest Contract and Principal Transactions Exemptions, or treat such fiduciaries as violating the applicable prohibited transaction rules.
Source: Wagnerlawgroup.com, May 2018
Abstract: Under the FAB, DOL states that it "will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have been exempted in the BIC Exemption and Principal Transactions Exemption, or treat such fiduciaries as violating the applicable prohibited transaction rules."
Source: Groom.com, May 2018
Abstract: The Proposed Interpretation sets forth the SEC's views of investment advisers' fiduciary duties under the Advisers Act, including the duties of care and loyalty, and the SEC's views on an investment adviser's ability to vary or modify the fiduciary duty. Such an interpretive proposal of an existing obligation, unlike a rule or form proposal, could have some legal effect from the date of its publication and could be cited in SEC enforcement proceedings.
Source: Akingump.com, May 2018
Abstract: Fred Reish, partner at Drinker, Biddle and Reath, told attendees of the Plan Sponsor Council of America 71st Annual National Conference, from his perspective, plan sponsors have a "best practices hat," meaning "plan sponsors have an option of going beyond looking at what benefits the participants or employer. Meeting minimal objectives of the law is not the goal."
Source: Plansponsor.com, May 2018
Abstract: Many plan sponsors falsely believe that loan defaults do not merit fiduciary attention. Yet the Employee Retirement Income Security Act characterizes plan loans as investments, requiring care and prudence to meet the fiduciary standard. With all the litigation targeting defined contribution plans, now is a good occasion for plan sponsors to re-evaluate their loan practices.
Source: Loaneraser.com, May 2018
Abstract: Since fiduciaries can be personally liable for losses caused by a fiduciary breach, and there are other ERISA penalties, committee members have a lot of exposure. The good news I was able to give him was that special fiduciary liability coverage is available in the market. It just requires purchasing the right policy. But the policies are not fungible.
Source: 401ktv.com, May 2018
Abstract: When it comes to being a workplace retirement plan fiduciary, the best defense is a good offense. That said, if your fiduciary plays are more about keeping yourself out of hot legal water than they are about doing what's in your participants' best interests, even your best defense may not be good enough.
Source: 401ktv.com, May 2018
Abstract: The Trump administration unveiled guidance aimed at the burgeoning socially responsible investment industry that left some investors scratching their heads. The Department of Labor, which oversees retirement-plan funds, published guidelines that said investments based on environmental, social and governance issues aren't always a "prudent choice" and that such factors shouldn't "too readily" be considered as economically relevant by fiduciaries.
Source: Investmentnews.com (registration may be required), April 2018
Abstract: Proxy voting and company engagement practices are moving from a mere compliance issue to an integral component of investment and risk management. The old "set it and forget it" approach which relies on off-the-shelf proxy voting processes has become a risky practice. Fiduciaries are well advised to re-evaluate how their legal obligations relate to use of proxy voting in this changing environment.
Source: Reinhartlaw.com, April 2018
Abstract: Given the high stakes, it is important that plan fiduciaries understand their duties and how best to fulfill them. For employers who have not yet undertaken the task, training of plan fiduciaries should be a top priority for 2018. This article reviews 10 key topics that should be included in an ERISA fiduciary training program.
Source: Thompsoncoburn.com, April 2018
Abstract: ERISA broadly prohibits plan fiduciaries from causing the plan to enter either a direct or an indirect transaction involving the plan or its assets that would have a potential for conflicts of interest. This one-page article provides an overview of these prohibited transactions.
Source: Boutwellfay.com, March 2018
Abstract: The Department of Labor's fiduciary rule may be on hold indefinitely, but that doesn't mean that fiduciary duties similarly are in limbo. This article offers some tips for meeting them.
Source: Asppa.org, March 2018
Abstract: Share class confusion is an increasing concern and focus of regulators. While it might seem like an evergreen and ongoing issue for the investment industry, a new wrinkle in the form of the fiduciary rule is adding a frenzied air.
Source: 401kspecialistmag.com, March 2018
Abstract: The running debate about the standards of care in the financial services industry is beginning in earnest. Pete Swisher provides a discussion of current fiduciary law and the country's options with respect to standards of care.
Source: Pentegra.com, March 2018
Abstract: While compliance pressures continue to rise for executives charged with overseeing their organizations' employee benefit plans that are qualified under ERISA, sophisticated technology solutions are beginning to offer a reassuring light at the end of a seemingly endless regulatory tunnel.
Source: Rolandcriss.com, March 2018
Abstract: Three key areas of vulnerability arise from last year's ERISA litigation. This article discusses these vulnerabilities in detail and suggest ways plan fiduciaries can defend against them and reduce their exposure to liability.
Source: Fiduciaryplangovernance.com, March 2018
Abstract: In Singh v. RadioShack Corp., the Plaintiffs held RadioShack stock in their 401k accounts after November 30, 2011. They appeal the dismissal by the district court of their claims that Defendants breached their fiduciary duties under ERISA by allowing plan participants to invest in RadioShack stock despite the company's descent into bankruptcy. The Fifth Circuit Court of Appeals affirmed the district court's dismissal.
Source: Erisalawyerblog.com, March 2018
Abstract: According to a recent survey of DC plan executives, many don't acknowledge their role as a fiduciary. You'd think fiduciary awareness would improve over time, but the surprising fact is that fiduciary awareness seems to be declining at a time when all roads are leading to greater fiduciary scrutiny in the marketplace.
Source: Hrexecutive.com, March 2018
Abstract: Fulfilling ERISA fiduciary responsibilities is a constant challenge. Carol Buckmann has been blogging and speaking about fiduciary best practices for many years. Her guidance for fiduciaries has been compiled in a new 2018 edition of the Intelligent Fiduciary Guide.
Source: Cohenbuckmann.com, March 2018
Abstract: Unfortunately for employers, the DOL has been aggressively challenging the adequacy of employer efforts to locate and contact missing participants. Numerous plan sponsors have received letters from the DOL during missing participant audits that threaten sanctions against plan fiduciaries for alleged violations of ERISA, despite a lack of definitive guidance on exactly how employers should follow up on a variety of challenges.
Source: Winston.com, February 2018
Abstract: An SEC fiduciary rule should provide investors clarity about the role of their adviser, enhanced protection and offer regulatory coordination, Chairman Jay Clayton said Friday. The SEC and DOL have promised to work together on investment-advice standards.
Source: Pionline.com, February 2018
Abstract: Legislation before the Maryland legislature would create a fiduciary duty for agents and investment advisers, as well as broker-dealers, to act "primarily for the benefit" of their clients.
Source: Ntsa-net.org, February 2018
Abstract: The focus on compliance obscures the compelling business case that fiduciary conduct (1) is what clients want, (2) is operationally efficient and reliable, (3) strengthens client-adviser relationships and makes them more enduring, (4) provides the adviser with greater pricing power, and (5) enhances the advisory firm's brand and market valuation.
Source: Investmentnews.com (registration may be required), February 2018
Abstract: An Interview with ERISA attorney David Levine. His advice to plan sponsors and service providers is "that while there are compliance and litigation challenges for plan sponsors and service providers, the sky is not falling. Yes, there are bumps in the road but as the adage says, an ounce of prevention is worth a pound of cure."
Source: Fiduciarynews.com, February 2018
Abstract: The best interest requirement may lead some to think that advisors have to meet an essentially impossible standard. As with a lowest-cost recommendation, a mandate to recommend the best investment is a myth...it just isn't true. Even the DOL has said so.
Source: Brokerdealerlawblog.com, February 2018
Abstract: A decision by Massachusetts' regulators to file state charges against Scottrade by claiming it violated the Department of Labor fiduciary rule has surprised many industry analysts. In short, the state claims Scottrade ignored the policies and procedures it put in place starting June 9 to comply with the DOL rule.
Source: Advisornews.com, February 2018
Abstract: For those fiduciaries self-aware enough to know there are things they need to learn, here are some suggestions for ways they can raise the bar in fulfilling their fiduciary responsibilities.
Source: Cohenbuckmann.com, February 2018
Abstract: It doesn't need to be difficult for employers meet their 401k fiduciary responsibilities and avoid liability. They just need to understand these responsibilities and take action in six key areas.
Source: Employeefiduciary.com, February 2018
Abstract: Not following sound decision-making processes and procedures can result in plan disqualification, fiduciary breaches, lawsuits, and personal liability. This article outlines fiduciary best practices related to 401k plan decision-making and documentation.
Source: Lawtonrpc.com, February 2018
Abstract: You are at risk because no plan is safe when there are so many class action lawyers out there aggressively looking for lawsuits to file. Some plans are more attractive lawsuit targets than others, and there are things fiduciaries can do to lower their risk of being hit with a 401k lawsuit.
Source: 401ktv.com, February 2018
Abstract: Worrying about plan documents probably is not keeping you up at night, but maybe is should. Although most plan fiduciaries are aware of their duties of prudence and loyalty, they may not be tuned into their equally important duty to follow the terms of their written plan documents. This "sleeper" duty could catch you by surprise.
Source: Boutwellfay.com, February 2018
Abstract: A good fiduciary will always look for opportunities to teach and test for understanding of clients and savers. The author asked financial experts from around the country what they felt it was important to convey to retirement savers. Here are the top five.
Source: Fiduciarynews.com, January 2018
Abstract: With the new Department of Labor fiduciary rules further pushed back to go into effect on January 1, 2019, plan fiduciaries have more time to review employee benefit plan best practices.
Source: Bsllp.com, January 2018
Abstract: The myth is that broker-dealers and RIAs -- and their advisors -- must only recommend the lowest cost investments. For example, mutual funds with the lowest expense ratios. That is not correct.
Source: Fredreish.com, January 2018
Abstract: Duane Thompson argues that "the SEC's examination and enforcement arms appear to be moving closer to ERISA's fiduciary standard mandating reasonable compensation for investment advice" by focusing on compensation received for rollover advice and on fees that result from the use of mutual fund share classes in retail and retirement accounts.
Source: Asppa.org, January 2018
Abstract: Implementation of the DOL's fiduciary rule has been delayed, and the rule may not have the teeth it originally did. But it would be a mistake to assume that means a complete demise for a new fiduciary standard for advisors. That depends in part on what the Securities and Exchange Commission does with its own fiduciary rule, work that reportedly is accelerating.
Source: Asppa.org, January 2018
Abstract: This Q&A addresses issues raised in the DOL's recent release which provides for an 18-month Extension of Transition Period and Delay of Applicability Dates for the Best Interest Contract Exemption; the Class Exemption for Principal Transactions; and PTE 84-24. In particular, it focuses on the issues the DOL raised regarding the status of "enforcement" procedures during the transition period.
Source: Jdsupra.com, January 2018
Abstract: Legislation is before the New Jersey legislature that would require certain disclosures by non-fiduciary investment advisors regarding their fiduciary status with clients.
Source: Asppa.org, January 2018
Abstract: In both teaching and spirit, Trust Law instructs ERISA. Trusts are characterized by the relationship between the trustee and the beneficiary of the assets dominated by the former's fiduciary duties to the latter. The relationship between the trustee and beneficiary is measured and recognized not by the result of the interaction but the sincerity of the behaviors that yield the result.
Source: 401khelpcenter.com, January 2018
Abstract: There had been a common belief among advisors that fiduciary status could be avoided by presenting a list of investments to plan sponsors. It was thought that since the list did not "recommend" any particular investments, it could not be a fiduciary recommendation.
Source: Ntsa-net.org, January 2018
Abstract: Failure to deal with cybersecurity issues could be a fiduciary breach under these rules and fiduciaries could have personal liability for the resulting losses, for example, if hackers are able to steal plan assets or fraudulently obtain distributions online by pretending to be participants. Participants whose personal accounts are hacked might also have claims against fiduciaries who failed to protect their data.
Source: 401ktv.com, January 2018
Abstract: Plan sponsors are not legally compelled to set up committees. Most standardized plan documents give plan sponsors the flexibility to set one up or not. But just because you are not required to do something doesn't mean it's not a good idea.
Source: Fiduciaryplangovernance.com, January 2018
Abstract: Any organization that sponsors a regulated retirement plan needs a blueprint for compliance and a system for governing the plan that integrates with its overall business risk strategy. This article presents five tips that are fundamental to an integrated compliance solution.
Source: Rolandcriss.com, January 2018
Abstract: With the core of the DOL fiduciary rule in place and the rest of it delayed for 18 months, can advisers expect all to be quiet on the fiduciary front in 2018? In a word, no. The regulatory baton has been passed from the DOL to the SEC and it's likely we will see an SEC fiduciary rule proposal by midyear.
Source: Investmentnews.com (registration may be required), January 2018
Abstract: There's a chance for savers to increase the odds they'll retire in comfort thanks to the 2017 tax law. Here's how, but the window of opportunity will close fast.
Source: Fiduciarynews.com, January 2018