MoJo

The vertical side of a cliff (not the top or the bottom, but just the part that goes vertical...). We sold it, but the hardest part was getting a surveyor to give us a legal description.....

I never suggested that they do it for free. I merely suggested that they should be eager to do so (and I've ran into some who simply refuse at any cost). Perhaps the issue should be addressed in a service agreement up front....

I would think that a prior recordkeeper would want to do a final val - if for no other reason than to prove the records and assets are in balance, thereby making any future inbalance conditions not their responsibility....

RCK, you imply that the only consideration then is one of diversification (i.e. if it is a company stock fund and therefore undeiversified, a cap is ok, but, for example, if it were a sector fund, but nonetheless diversified, it wouldn't be ok). Why is that? Diversification in this context necessarily presumes that employees have no other assets. I think the fiduciary implications are greater - and as yet have been unexplored by professionals, plan sponsors, and dare I say, the plaintiff's bar.....

My experience has generally been a "soft cap" (i.e. you can contribute or reallocate funds to the company stock fund provided the company stock fund does not exceed x% of your account. If through growth it does, no liquidation occurs, but no further investments in that fund are allowed either). I'd like to add a query: Does anyone think the imposition of a cap on a particular fund creates an implication that perhaps the fund is not an appropriate investment option to begin with? That is, by making the determination that no more than x% should be invested in a company stock fund, is not the sponsor as fiduciary making investment decisions which 1) could have greater liability for the sponsor (i.e. why x%? why not 2x% or 1/2x%?); and 2) has obvious 404© implications.

Not to confuse the issues (which I find fascinating - especially in light of the now (hopefully) defunct Bentsen legislation which would have saddled participants with recordkeepers and trustees who were inferior because no one could take over a plan from such industry losers without an (extensive) "quiet period" to reconcile the irreconcileable records), but.... Any comment on the role of the 404© requirement to only provide for changes in investments with a frequency, which under the circumstances, is appropriate (but not less frequently than quarterly)? Seems to me that it could be argued that the circumstances (of improving the plan in many respects (if that is indeed the case)) may have made the suspension of trading activity justified, and still be within the parameters of 404©. This may, of course, not be applicable in the Enron case, which is fraught with non-fiduciary (read "SEC" issues) which may have made the timing of the quiet period inappropriate in its entirety.

I would question how the CA law "relates to" an Employee Benefit Plan such that it is preempted by ERISA. The use of a SS# is a convenience, not at all essential to the provision of benefits to participant. True, for tax reporting, the distribution must bear the SS#, but I don't see why statements must....

Thanks IWIS. I would look these up when I get back to my office. However, the only one that looks to be on point would be the Robbins case. Even so, the imposition of a "discretionary" requirement with respect to control of plan assets, IMHO, would be a clearly erroneous reading of the statute, and fly in the face of basic statutory construction (every word has a unique meaning, and the use of a word in one context but not in another means that Congress intended different meanings....). I'll still play it safe with my clients. If you toucb plan assets in anything but the most nominal way, you will be held to a standard of a fiduciary (albeit one with limited authority).

IWIS - I disagree. ERISA specifically makes a distinction between the types of fiduciaries. ERISA Section 3(21)(A)(i) specifically defines a fiduciary as anyone to the extent: "he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets." If what you say is true, why is the term "discretionary" attached to the first clause (exercises any discretionary authority or discretionary control respecting management of such plan) but NOT with respect to the second (OR exercises ANY authority or control respecting management or disposition of its assets). The absence of the word "discretionary" when it comes to management or disposition of assets, but its inclusion with respect to management of the plan is sisgnificant. One "controls" assets when one has possession of them whether or not they may exercise any discretion with respect to those assets. Under the clear definition of a fiduciary in ERISA, I would respectfully submit that one who touches assets in anything other than a short duration nominal way is going to be a fiduciary with respect to that plan. If there is another explanation for the statutory distinction, please, let me know. In the meantime, I'll continue to advise my clients that a custodian of plan assets is, under ERISA definition, a fiduciary.

I think the confusion is that some are interpreting the language of ERISA to require "discretion" as a condition to becoming a fiduciary. As I read ERISA 3(21), there are three conditions causing one to be a fiduciary - only one of them requiring discretion - that of administration of the plan. "Authority or control" over assets - EVEN WITHOUT discretion, I believe will cause you to be a fiduciary - hence, a "non-discretionary directed" trustee is in fact a fiduciary, as would be a custodian (which, is functionally the same as that non-discretionary directed trustee). The third, of course, being the investment advice for a fee provision. One cannot not be a fiduciary simply because they believe themselves not to be (or contract in such a way as to eliminate or reduce what is percieved to be a fiducairy obligation). I worked for KeyCorp which did everything possible to limit exposure (which I believe is appropriate), but the bottom line is that Key was a fiduciary in all cases where it was trustee (even if non-discretionary directed), and where it was a custodian for qualified plan assets, having derived its position as custodian via authority granted to the trustee in the trust agreement.... The DOL and the OCC (thinking itself to be the body charged with insuring the bank fulfilled all of its obligations, even those the DOL thought it had authority over!) concurred on numerous occassions. Consider as well that the DOL believes that even a ministerial functionary can be charged with responsibility under a "constructive trust" doctrine if that person holds assets any longer than is practically necessary to transfer them into the trust. Remember that the DOL's positon with respect to the handling and timing of participant deferrals relates only to the "segregation" of those assets from those of the employer (and only as a matter of inference to the requirement that the assets been invested in the trust) and that it has used the constructive trust concept (aka fiduciary custodian!) in order to nail offenders. I'm trying to do some research on this (remotely - greetings from the Mid-sized Pension Conference in rainy Orlando!) and hope to provides some cites later....

I can't say I know of any NY case law, but reason should suffice. It is the "holding" of the asset that in and of itself gives rise to the fiduciary status. It would be a breach of a fiduciary (i.e. trustee) to give over assets to a non-fiduciary to hold. Trusts were developed out of the doctrine of "uses" in old England. One, in order to avoid the laws of descent and distribution which mandated that all property became the sole property of the eldest son, would "give" or "sell" (for nominal consideration) the property to a "trusted" associate for the "use" of another (a surviving spouse, daughter, etc.) and hence the "holding" of the asset became part and parcel of the fiduciary requirements. For a modern day trustee to relinquish control over an asset to one who is not bound as a fiduciary to maintain that asset consistent with the terms granting the custodianship would be unfathomable.

p.s. I used to be trust counsel at a midwestern based super-regional bank. We made the distinction between a custodian who was a fiduciary, and an escrow account, where the escrow agent wasn't....

I'm going to stick by my original post. A custodian, albeit one who exercises absolutely NO discretion over the plan or its assets still "controls" the assets by having possession of them. I would suggest that trustee that give assets to a custodian who is not charged with holding them as a fiduciary has in fact breached its fiduciary duty to safeguard the assets. Those items listed in the ERISA definition of a fiduciary are not an exclusive list - ERISA just statutorily mandates that these are fiduciaries. Common law also indicates that one who custodies assets of a trust does so as a fiduciary.....

I would suggest that a custodian of plan assets is ALWAYS a fiduciary. They have the money, and must hold and protect it as a fiduciary (despite not having investment control).

I disagree, Dook. I work for a mid-sized bundled 401(k) service provider, and last year our average turnaround time was 4-6 days after receipt of good data, and total blackouts averaged 4-5 weeks (TOTAL). Not one fortune 1000 company in the bunch. I think we are on the short side of normal, but not by much. In the wake of Enron, these numbers are becoming more important.

Factor out government programs.... The number of "privately" insured is considerably less. I stand corrected, however.....

Like I said. We have a warped sense of charity in this country. It seems as though all of you are arguing that we should feed, cloth, educate, and cover those who were fortunate enough to have a WTC address, but ignore those in the hills of Appalachia.... I have checked the stats. The uncovered is in excess of 50%. Some by choice. Some because the choice is between food and insurance. Does that mean the government should step in and cover them? Reread my post - I never said that. I actually said I thought citizens of the USA were different because we cared for one another. I may have to rethink that position.... What's with bringing in Hillary here? Debate the facts, folks. Keep the personal issues with the first highly educated articulate first lady we've ever had to yourself. (By the way, I prefer a highly educated articulate first lady to one who sets the president's agenda on the basis of her astrologer's readings - just like I like all other presidential advisors - NONE OF WHOM WE VOTE FOR - to stand their ground...).

You know, we've got a warped sense of charity in this country. Kip, I agree that employers don't have to offer medical coverage to their employees, but it isn't charity that they do so - its out of competitive necessity, and for staffing/HR issues (a healthy workforce is more productive, replacing workers who die as a result of inadequate healthcare is expensive). There are studies on this, go look for them. Secondly - why is it this people seem to beleive they are entitled to a "windfall" as a result of this tragedy? Make them whole? Well, maybe, but people should plan for the unexpected. I pay life insurance premiums every month to cover my family in the event of my untimely demise (whether it from a terrorist attack or a heart attack is immaterial). We didn't take care of the Oklahoma City victims. We haven't taken care of the Birmingham Church bombing victims (of about 35 years ago - and that was terrorism too!). We're not taking care of the LTV unemployed (economic terrorism as a result of the japanese illegal dumping of cheap steel). Lets keep in mind that half or more of the population of this country in uncovered by health insurance and (despite the fact that emergency shootings may get patched up in an emergency room, Kip), most of those uninsured are under cared for, and lead lives shortened and of less quality as a result of it. For MMC to even offer continuation of healthcare coverage (over the COBRA period) is magnanimous. To use donated money from staff to do so may or may not be appropriate. If the fund was set up to care for the families of the victims, then using it pay for coverage, in my humble opinion, is caring for them. It'd be a better deal than individual policies. Should we help these people out? Yep. But it should be based on need. Should we use the excess money for other charitable purposes? Yep, again. The best thing that has come out of this most tragic of situations is that the USA is not but a few hundred million acres of land between Canada and Mexico, but a group of people who are united in their hearts, and care for the others (both within, and without our borders). It is that spirit that is of the utmost importance, and the one that no terrorist act, whether from foreign influenced actors or domestic ones, that cannot be destroyed and will prove to be the "evil-doers" undoing.

Well, for now, there really is no "legal" maximum - its a matter of what is necessary, and whether the selection of a vendor that can't do a timely conversion was prudent. The typical blackout starts a few days to a few weeks BEFORE the stated asset transfer date (as the current recordkeeper/trustee needs to let the accounts settle), and then runs to 4-15 business days after the receipt of GOOD records from the prior recordkeeper (which can be up to a month after the asset transfer date). Current industry practice is for the blackout period to average around 4-5 weeks. Ask what the holdup is. If there are problems in records (dirty data) it can take a while to convert the plan, BUT those things should have been discovered and correct PRIOR to the plan going into blackout.

Dubya: Believed (past tense)???? I think we need Santa more now than ever.... Go read "Yes Vriginia, there is a Santa Claus" again.... www.noradsanta.com has a copy of it (yes, NORAD tracks Santa on his journey!).

Kirk - given the extremes you use, I think it would be safe to say a "prudent expert" would engage assistence in the latter case, but not the former. However, I hesitate to utilize such examples - as the decision on whether or not to use a professional advisor is clearly a question for the prudent expert to answer. That is, if we were talking about $100,000, what would your answer be? I would suggest that in some cases, a professional should be engaged, in others, maybe not. It is the ability to make that determination, through the use of a prudent expert's sound reasoning, that in fact is what a prudent expert is.

I don't think the "prudent expert" standard is one of state law fiducuiary responsibility - indeed I think that is a distinction between the "prudent person" (must be politically correct now!) standard and the "prudent expert standard." ERISA Section 404(a)(1)(B) provides that a fiduciary must act solely in the interests of the participants and beneficiairies "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." It is the "acting in like capacity and familiar with such matters" language which is in addition to the state law concept of a "prudent man" which makes the standard a "prudent expert" one. A fiduciary must not simply act with respect to an ERISA covered plan as any old prudent man would - you must approach it as a prudent "expert" would. That is, when dealing with investments, you will be judged not as a prudent man would be, but rather as a prudent professional investment manager would. A prudent man may perform one level of due diliugence before making an investment, a prudent expert would presumably do much more. The prudent man standard is but a starting point for ERISA fiduciaries. The standard applicable to them is considerably more stringent.

I don't believe so. In this case, there really is no termination affecting rights under the plan (i.e. there is no "new plan" into which the old assets will be merged into). In this case, its merely a split-off of one plan into two, with each portion covering the respective employees.

As does Strong.... And most other bundled service providers....

My concerns don't all deal with thinnly traded stock - most deal with management of the cash portion of the unitized fund. The "whipsaw" is a thinnly traded problem. Most employers want tosee as small a cash portion as possible, while most recordkeepers/trustees want to see it as large as possible. The problem is, what happen when you run out of cash? Trades are delayed, and pricing is fubar. Communication to the employees is a must, but if you need to impose a trading stop (delay?) then why unitize? Why not simply use share accounting?