Monday, November 11, 2013

Demand is Rising for 401(k) Advisors

Every once and a while someone asks me my thoughts about the retirement plan industry.  Occasionally, they choose to print some of those thoughts.  Below is an article from Benefits Pro featuring myself and a few others discussing the demand for specialization from the investment advisory community.  Happy reading.

Wednesday, November 6, 2013

Excessive Fee Case: Mass Mutual is on the Defense.

This is a great case, thanks to FRA Plan Tools for the link below describing the circumstances of the suit.

The complaint from the plaintiffs allege a variety of improper or missing fiduciary process' costing the plan and its participants millions of dollars over the years.

I echo the conclusions drawn by FRA re posted below. 

So what does this mean for plans that use MassMutual as a provider or advisors who recommend MassMutual services and products? It means that you should use this as an opportunity to review your plan’s relationship with MassMutual. This is only a complaint and no one can predict with any certainty how it will turn out. But that being said, if any of the specific allegations found in the complaint could apply to your plan, you have now been put on notice to investigate. This can include asking for more information, re-reviewing your 408(b)(2) disclosures and agreements, or benchmarking your plan’s fees. These tasks should obviously focus on analyzing any investments in your plan and ensuring that any fees paid are reasonable and necessary.

Friday, November 1, 2013

The Fiduciary Definition Fight continues

The U.S. House of Representatives approved legislation Tuesday evening, October 29th that would delay – or possibly kill – the Department of Labor’s regulatory initiative to expand the definition of a fiduciary to encompass retirement plan advisors. The bill passed by a 254-166 margin, including 30 Democrats.

The measure, introduced last summer by Rep. Ann Wagner, R-Mo., would prohibit the DOL from proposing its regulation until 60 days after the Securities and Exchange Commission has finalized a similar rule in the works to raise standards for advisors who provide retail investment advice.
On Monday, the Obama administration threatened to veto the legislation, saying that it undermines the DOL’s efforts to protect workers and retirees from conflicted investment advice.

Supporters of Wagner’s bill say the SEC must go first to ensure coordination between the agencies and avoid duplicative costly fiduciary requirements that would ultimately limit investment advice for smaller investors. Opponents say that the bill would effectively kill the DOL rule if the SEC declines to propose its own regulation.

For those who are not paying close attention to this issue, the DOL has been empowered to rule make on changes to the fiduciary definition but isn't necessarily coordinating with the Securities and Exchange Commission (SEC).  This is one of the issues causing the vote to delay, the desire to have the SEC opine before the DOL makes the rule.  The other issue is the applicability of this new rule making to Qualified Plans but also to IRAs. 

The underlying reasoning is that the current definition of fiduciary under ERISA is written too vaguely.  It is widely assumed that the new rules will pointedly define who is a fiduciary and who is not and potentially pull in a lot of non-fiduciary financial consultants into fiduciary status.  Versions of this potential new rule would also potentially create a 'non-uniform' uniform fiduciary standard. Scenarios could present themselves where financial consultants would be permitted to say that they are fiduciaries while also having the ability to have conflicts of interest with the client.  This would be the opposite of what the uniform fiduciary standard is intended for. 

Ultimately the fight will continue, it is possible that Wagner's bill will not get through the Senate or will be vetoed by the President.  More to come on this issue.

COLA 2014 - IRS Announces Pension Limits w. some changes

The Internal Revenue Service announced the 2014 Cost of Living Adjustments affecting dollar limitations for pension plans.  

The main changes are as follows:

  • 415 Limit is increased from $51,000 to $52,000
  • Annual Considered Compensation is increased from $255,000 to $260,000
  • The Taxable Wage Base for Social Security is increased from $113,700 to $117,000 (yes, that's right, high earners are paying more into Social Security) 

There are other changes as well, but these are the main ones impacting 401(k) plans for 2014.  For a complete list including changes to IRA limits, DB limits and others, you can find them here -->