Nevin's Data "Points"

  Did you hear the one about how nearly all U.S. retirement plans have “at least one regulatory or fiduciary ‘red flag’ violation”? Well, here’s hoping you haven’t. Because this so-called “analysis” of Form 5500 filings claims to have discovered that 84% of all (that’s right ALL) retirement plans in the United States have “at least one likely Employee Retirement Income Security Act (ERISA) red flag from a regulatory and/or fiduciary violation.” Now, having grabbed your attention, you probably won’t be surprised to find in the fine print of the press release an opportunity to “schedule a cost-free benchmarking audit.” But before you do so, you might want to take a look at the criteria this firm designates as a “red flag.” From their  press release , “Abernathy-Daley defines red flag violations as either ‘infractions, fineable offenses, fiduciary failure, or plan malpractice’ and are separated into two main categories: Regulatory Infraction Red Flags (RIRF) and Egregious Plan Mi...

After a dozen years here at PLANSPONSOR, effective November 1 , I have joined the Employee Benefit Research Institute (EBRI) in Washington, D.C., as Director, Education and External Relations, and Co-Director of the EBRI Center for Research on Retirement Income. I have long had a strong personal and professional admiration for the work that EBRI does in helping provide our industry with valuable and objective information and am thrilled to be able to be part of those efforts at this critical juncture. It has been my great privilege over this past decade and change to share with you some of my thoughts and observations in this space. You have been generous both with your comments and commentary on those musings, as well as our publications overall. While it’s not quite Thanksgiving, I thought I would dedicate this final “IMHO” to sharing some of the things for which I’m thankful: I’m thankful that the vast majority of plan sponsors continued to support their workplace retirement prog...

Last week brought to light an aspect of 401(k) litigation that doesn’t generally get a lot of coverage—and the participant-plaintiff was presented with a $50,000 bill. Now, at some level, this case was “just” another stock drop suit where some kinds of accounting issues contributed to a sudden (and ostensibly unexpected) drop in the price of company shares, including those held in the company’s 401(k) plan.1 These types of cases have cropped up one after another in the wake of the market downturn, and while the fact patterns behind the drop in share price vary slightly, the suits themselves allege pretty much the same thing: The plan fiduciaries kept the stock as a plan investment after it was no longer prudent to do so; to wit—after it suffered a precipitous drop in value. Most of these cases don’t seem to get very far, the courts either deferring to a “presumption of prudence” (see “IMHO: Prudent Mien?” or, as in this case, finding that ERISA 404(c)’s safe harbor provided shelter ...

If 2010 was not quite the return to “normal” we might have hoped, there was more than enough—both new and old—to draw the attention of plan sponsors. Here is a look at the trends that were on our mind this past year—and those just over the horizon. Doctor Bill? "Curing" Health Care? What we said : It is still hard to believe that the Senate and House positions on any number of key issues can be reconciled—but then, there was a point in the summer of 2006 when many felt the same way about the Pension Protection Act. But if it does pass—or if it does not—it seems safe to say that the issue is not going away any time soon. What remains to be seen is if the “cure” is worse than what it aims to remedy. Where we are : Given the legislative hurdles that the Patient Protection and Affordable Healthcare Act (PPACA) faced a year ago, it still seems amazing that the legislation passed. Of course, the dominant majorities in Congress that were necessary to carry that off are no more...

PLANSPONSOR’s National Conference last week featured a series of panels titled “Five Things You Need to Know About…” focused on a series of topics. One of those was qualified default investment arrangements (1) , or QDIAs—and while the “five things” that follow are somewhat different from the list presented by that panel, what follows was certainly inspired by the discussion. Here’s my list: (1) You don’t need to have a QDIA to get 404(c) protection. IMHO, one of the most marvellous things about the Pension Protection Act’s defined contribution provisions was that they weren’t imposed on plan sponsors. They provided clarity, structure, guidance, and, yes, protection on things like automatic enrollment, contribution acceleration, and default fund choices—but didn’t require that you embrace these concepts, unless, of course, you hoped to benefit from the protections associated with adhering to those structures. Sure, IMHO, it’s a lot easier to obtain 404(c) protection under the umbre...

Being a plan fiduciary is a tough job—and one that, it’s probably fair to say—is underappreciated, if not undercompensated. In my experience, most who find themselves in that role (see “ IMHO: Duty Call ”) do an admirable job of living up to the spirit, if not the letter, of their responsibilities. Nonetheless, there are plenty of areas in which we could do a better job. In this week’s column, we’ll touch on the rest of my “10 things you’re probably doing wrong” list: 6. Thinking your plan qualifies for 404(c) protection—and misunderstanding what that means. Any number of studies suggest that many, perhaps most, plan sponsors think their plan meets the standards of ERISA 404(c ), a provision that ostensibly shields them from being sued for participant investment decisions, so long as certain conditions are met. On the other hand, industry experts are nearly uniform in their assessment that very few, perhaps no, plans meet those standards (though the courts have been somewhat more lib...

When it comes to qualified retirement plans, there are three kinds of people: people who are fiduciaries and know it, people who aren’t fiduciaries and know it, and people who are fiduciaries and don’t know it. Now, for the most part, those in the first category are in pretty good shape. Oh, there are a plethora of ways in which a fiduciary can fail to uphold his or her responsibilities under the Employee Retirement Income Security Act (ERISA)—but, in my experience, if you’re at least trying to do the right thing(s), and taking the time to document that effort, you’re in good shape. Still, even those who are trying to do the right things—and who embrace that role—don’t always fully appreciate the implications. The second category mostly tends to include those folks or firms that provide services to the retirement plan fiduciaries. Most enjoy that status because they don’t technically have any authority to do anything on their own; they just help those who do know what to do. Of co...

ERISA’s 404(c) has long been held out by some as something of a magic talisman: Comply with its strictures, they claim, and you have an iron-clad defense against participant lawsuits —and, IMHO, the implication is a defense against ALL participant lawsuits. Of course, any number of ERISA experts will tell you that it is nearly impossible to satisfy those strictures, certainly not for every transaction (and mind you, 404(c) is transactional protection)—not that that seems to dissuade plan fiduciaries from trying, nor plan advisers from purporting to help them achieve that end. Nor are plan fiduciaries, or the participants and beneficiaries they support, ill-served by those efforts. That said, I have long been surprised at how broadly the judiciary has been willing to extend those protections. Good news if you’re the plan sponsor getting sued, of course—but not-so-good if you’re a plan fiduciary looking for some consistency in the law. The most recent example was Hecker v. Deere (see ...