25.02.2020 02.26 GMT+0000

Fiduciary litigation targets another large plan--but in some new ways.

Suit Against Shell Plan Drills for New Legal Claims

Suit Against Shell Plan Drills for New Legal Claims

Perhaps the most significant claim raised against Shell pertains to the claim that the Shell fiduciaries allowed Fidelity to use participant data to promote non-plan products and services.

A new lawsuit filed against the Shell Oil Company’s 401(k) plan raises several new challenges to fiduciary’s behavior. Most significantly, the suit assets that participant data is a plan asset and the use of such data by the plan recordkeeper to promote non-plan products generates several new fiduciary challenges.

25.01.2020 05.01 GMT+0000

In selecting new providers and reducing plan costs, fiduciaries need to be alert to the conduct of deselected providers.

Winning While Losing

Winning While Losing

Terminated Providers May Represent a Special Fiduciary Challenge.

Scrutiny of plan fees may create situations where an incumbent plan provider can make more by losing a highly competitive bid for an employer-sponsored plan -- and then actively “harvesting” accounts and assets from that plan--than by retaining that plan. And, once deselected, the provider-- and individual representatives employed by that provider--may have a strong economic incentive to encourage participants to move assets out of the employer-sponsored retirement plan and into the retail products of the (deselected) provider.

02.01.2020 01.44 GMT+0000

The SECURE Act, signed by President Trump, contains a potpourri of provisions encouraging plan formation, use of annuities and adoption of safe harbor designs.

SECURE Act Passed–Ensuring Much Activity and Some Change

SECURE Act Passed–Ensuring Much Activity and Some Change

New Legislation Creates Planning Opportunities and Pitfalls.

The SECURE Act offers employers some new options and alternatives--and a handful of new mandates. Overall, the Act seeks to encourage employers to adopt retirement plans and to encourage employees to use those plans. Although the Act will not rock the retirement plan world, over the course of time it may shake things up just a bit.

13.12.2019 06.59 GMT+0000

Fee compression affecting retirement plan providers has been well documented. However, it is harder to track efforts by these providers to shift revenue out away from the watchful gaze of plan fiduciaries.

Actions and Reactions

Actions and Reactions

Retirement plan providers are under pressure to reduce fees--and are likely to respond by shifting more focus to non-plan products.

Under Newton’s Third Law, for every action, there is an equal and opposite reaction. Fee compression for retirement plan providers, such as plan recordkeepers and investment providers, is well documented. However, it is harder to document provider efforts to replace compressed revenue from sources just beyond the scrutiny of (most) plan fiduciaries--through the sale of non-plan products to individuals participating in employer-sponsored plans.

29.10.2019 01.55 GMT+0000

Employers need to develop strategies for dealing with state/federal tug-of-war over regulatory authority.

The (Individual) States of America vs The United States of America

The (Individual) States of America vs The United States of America

The states and the federal government are engaged in a tug-of-war over the ability to issue rules affecting key HR and benefits matters. This is a game with no winners.

There is an ongoing conflict between the federal government and individual states over benefits and HR policies--with states seeking to fill gaps left by the federal government and the federal government claiming that the state initiatives are preempted.

12.09.2019 01.12 GMT+0000

More fiduciaries are reading and hearing about the risks posed by conflicted provider service models.

Focus on Conflicts Gains Visibility

Focus on Conflicts Gains Visibility

Awareness--and concern--about the impact of DC provider conflicted service models continues to gain visibility.

Concern about plan providers and the risks of conflicted service models continues to gain visibility as RetireAware leadership takes this message to two national audiences.

02.09.2019 02.36 GMT+0000

States are acting to fill gaps in federal rule. Can they?

State Action on Fiduciary Standards – Is An Opposite and Equal Industry Reaction Looming?

State Action on Fiduciary Standards – Is An Opposite and Equal Industry Reaction Looming?

What Happens When States Seek to Set Their Own Fiduciary Standards?

Federal law “preempts” conflicting state law. As states increase activities to protect investors—and impose fiduciary standards—we can expect to see the financial industry push back. A key battleground is likely to be the application of preemption to these state initiatives.

19.07.2019 02.55 GMT+0000

The SEC’s new Regulation BI relies heavily on increased disclosure of conflicts of interest to protect investors. However, there is research indicating that, where an economic conflict exists increased disclosure makes things worse--not better. This research is worth considering as we assess the implications of these new rules.

Understanding the Impact of Disclosure

Understanding the Impact of Disclosure

Research indicates that disclosing conflicts of interest may not have the desired effects.

SEC rules to protect investors from brokers (with conflicting economic incentives) relies heavily on disclosure of these conflicts. However, some academic research raises questions about the impact of increasing disclosure where parties’ interest may conflict. Significantly, conflicted advisors may provide more biased advice (to offset the impact of the disclosure) and customers may not adequately assess or consider the nature of the conflict.

25.06.2019 05.38 GMT+0000

SEC Finalizes New Standards for Broker Dealers

SEC Finalizes New Standards for Broker Dealers

The SEC has adopted new rules for broker-dealers that expand disclosure requirements and require broker-dealer to act in the “best interest” of customers.

The SEC has finalized rules governing the behavior of broker-dealers. Under this rule broker dealers need to (i) provide investors with additional disclosure regarding fees, services and conflicts of interest and (ii) use care and diligence to develop a reasonable belief that a recommendation is in the “best interest” of the customer and not place the interest of the broker dealer “ahead of” the interest of the customer.

10.05.2019 04.29 GMT+0000

Awareness of Emerging Fiduciary Risk Grows

Awareness of Emerging Fiduciary Risk Grows

An article published in Benefits Quarterly by RetireAware’s Dan Alexander and Steinberg describes how retirement plan providers may exploit access to plan participants to promote nonplan products and services--and how these behaviors create fiduciary risk.