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Ret plan investments - misc

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[Discussion] Can One Retirement Plan Loan Money to Another Retirement Plan?
"Employer has two retirement plans. Can one plan lend money to the other as an investment? (DB Plan wants to lend to PS Plan so that the PS plan then has funds to use to make an investment in a parcel of land. We'd rather not have the DB plan make the investment directly, due to annual valuation issues for the parcel.)" (BenefitsLink Message Boards)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 44
"For the rest of this year -- the 'transition period'-- most firms will use the Best Interest Contract Exemption.... Transition BICE requires that the entity and the adviser only comply with the Impartial Conduct Standards (ICS) [which] has 3 components: the best interest standard of care, only reasonable compensation, and no materially misleading statements. In effect the best interest standard of care brings the ERISA prudent man rule and duty of loyalty to IRAs. As a result, advisers and their supervisory entities need to educate themselves on the requirements of a prudent process with a duty of loyalty to the IRA owner." (
Advisory Firm Dodges ERISA Suit Against BB&T
"In the underlying complaint, the advisory firm was lumped together with the plan sponsor/recordkeeper and accused of permitting fiduciary breaches under ERISA.... The court concluded 'there are no facts alleged that as to the particular breaches of fiduciary duty alleged, Cardinal did any specific thing.... [T]he plaintiffs have essentially alleged nothing more than that Cardinal gave BB&T general investment advice.' " (planadviser)
[Guidance Overview] DOL Charts a New Course for ERISA's Fiduciary Rule
"[C]ompliance with the Fiduciary Rule and the related PTEs is generally not required until June 9, 2017.... Compliance with the remaining conditions of the [BIC Exemption] and with the amendments to [PTE 84-24] ... will not be required until January 1, 2018.... [A chart] provides a high-level summary and timeline of the applicability of the various aspects of the fiduciary rulemaking, and identifies a few discrete issues that industry participants might consider in anticipation of the June 9 applicability date[.]" (Dechert)
Addressing the Unique Investment Challenges of Multiemployer Defined Benefit Plans
"Across asset classes, active management and the relentless pursuit of alpha are crucial to generating needed returns. Private investments could be the single biggest driver of asset return for many plans ... [I]ndividual investment strategies and the entire portfolio should be tailored to each plan's specific participant demographics, economic conditions, and risk tolerances. Use of these sophisticated strategies can introduce heightened illiquidity, volatility, and drawdown risks. Long-term success requires effective approaches to designing, executing, and monitoring these strategies, and diligently managing their risks." (Cambridge Associates)
Financial Adviser Alert: Pension Insurer Wants Your Expertise (PDF)
"[PBGC] says it's likely to need outside help to tackle large and complex cases, and it's looking for financial advisers to step up. To find qualified advisory firms -- those with specialized knowledge but without conflicts of interest -- the federal pension insurer says it's renewing a program in which it constructs a list of pre-vetted, go-to financial firms for bids on future contracts." (Bloomberg BNA Pension & Benefits Daily)
Comparing the Best Portfolio Rebalancing Software Tools
"[In] today's environment, the need for rebalancing software is even more urgent to stay competitive, with the rise of 'robo-advisors' that can already automate rebalancing, along with tax loss harvesting. The good news, though, is that as the original 'robo' solution for portfolio automation, all the major rebalancing software platforms can handle this... and more! But only for advisors who are willing to move away from portfolio rebalancing Excel spreadsheets!" (Craig Iskowitz, in Nerd's Eye View)
Judge Dismisses Fiduciary Breach Lawsuit Against CVS and Stable Value Fund Manager
"The lawsuit, originally filed in February 2016 by three plan participants, charged that CVS breached its fiduciary duties because the plan's stable value fund ... imprudently invested 'too much of the plan's stable value fund assets in ultra-short-term cash management funds that provided extremely low investment returns' ... Judge Mary M. Lisi dismissed the suit, citing that the 'fund was invested in conformance with its stated objective and whether that strategy was prudent cannot be measured in hindsight.' " [Barchock v. CVS Health Corp., No. 16-061 (D.R.I. Apr. 18, 2017)] (Pensions & Investments)
As DOL Fiduciary Rule Stalls, Acting SEC Chairman Seeks to Have Agency Step In
"An outspoken critic of the [DOL's] fiduciary duty rule, [acting SEC Chairman Michael Piwowar] expressed support for the implementation delay that recently went into effect while the DOL re-evaluates the regulation ... Mr. Piwowar said that determining advice requirements is the SEC's job, the same point made by financial industry opponents of the DOL rule." (Pensions & Investments)
2017 Target Date Fund Landscape: Answers to Frequently Asked Questions (PDF)
91 pages. "Assets in target-date mutual funds reached an all-time high of $880 billion by the end of 2016 ... At the end of 2016, 12 firms offered more than one target-date series ... whereas no firm offered more than one 10 years ago.... Fees for target-date funds continue to decline ... The average equity glide path hasn't changed dramatically in recent years, particularly for the youngest and oldest investors. However, midcareer investors have seen a modest in crease in equity exposure." (Morningstar)
How Should You Invest Your Roth IRA?
"Use it as an emergency fund.... Save for a short term goal.... Choose investments that complement your other retirement accounts.... Choose a more conservative mix for early retirement.... Choose more aggressive investments for long term tax-free growth.... Keep it simple." (Financial Finesse)
[Opinion] SPARK Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "[T]he Regulation will prevent smaller plans and individual investors from receiving beneficial products and services that are currently made available to them by retirement industry service providers.... [The] overly broad definition of fiduciary investment advice, restrictive carve-outs, and unnecessarily burdensome requirements for satisfying the BICE will cause an increase in litigation, and an increase in the price that investors and retirees must pay to gain access to retirement services." (The SPARK Institute)
[Opinion] Are State Pension Systems Failing to Deliver?
"[T]here should be a detailed breakdown of fees paid to brokers, advisors, lawyers, and pretty much all service providers at any public pension plan.... All public pensions should report all their returns net of all fees and costs because that represents the true cost of managing these assets.... [M]ost US state pensions ... [are] clinging on to their pension rate-of-return fantasy which will never materialize. They do this to keep contributions low to make their members and state governments happy but sooner or later, the chicken will come home to roost[.]" (Pension Pulse)
[Opinion] Setting a Fiduciary Standard That Puts Investors First: Problems with the DOL Rule
"[1] The current implementation plan calls for a piecemeal rollout of provisions.... [A] full review of the rule should be completed before any one element is made final.... [2] The rule currently defines 'investment advice' in broad terms. This sweeping definition brings with it regulatory requirements that are in some instances sensible but in many cases unnecessary.... [3] [T]he rule makes unnecessary distinctions between how advice is delivered ... the topic of advice ... and the type of client ... This fragmented approach is confusing, and will ultimately increase the complexity and cost of advice." (Vanguard)
Vanguard Growing Faster Than Everybody Else Combined
"In the last three calendar years, investors sank $823 billion into Vanguard funds, the company says. The scale of that inflow becomes clear when it is compared with the rest of the mutual fund industry -- more than 4,000 firms in total. All of them combined took in just a net $97 billion during that period, Morningstar data shows. Vanguard, in other words, scooped up about 8.5 times as much money as all of its competitors." (The New York Times; subscription may be required)
Interesting Angles on the DOL's Fiduciary Rule, Part 43
"[W]hile the explicit compensation requirement of the [Impartial Conduct Standards] is that advisers and Financial Institutions cannot receive more than reasonable compensation, the DOL is saying that a Financial Institution's compensation structures cannot promote investment recommendations that are not in the best interest of the investor.... One possible interpretation is that, even though the compensation of the adviser can vary, both for similar products (e.g., mutual funds) and among product categories (e.g., mutual funds vs. variable annuities), the variation cannot be so great as to unreasonably promote advice that is inconsistent with the best interest standard of care." (
[Opinion] IRI Calls on DOL to Delay Entire Fiduciary Rule, Establish Workable Alternative
Requiring all financial professionals to operate as ERISA fiduciaries is inconsistent with the statutory text of ERISA and will cause significant dislocations or disruptions within the retirement services industry.... In adopting the Rule, the Department failed to adequately consider ... the Rule's impact on retirement savers' access to financial assistance, products and services; job losses likely to result from the Rule; the Rule's adverse impact on annuities; viable alternatives to the Rule; and comments provided by other regulators." (Insured Retirement Institute [IRI])
[Opinion] To Protect Retirement Savers, House Committee Members Urge DOL to Further Delay Flawed Fiduciary Rule
"Republican members of the House Committee on Education and the Workforce ... are urging the [DOL] to further delay implementation of the fiduciary rule, which would force low- and middle-income families to pay more for retirement advice and make it harder for small businesses to offer their workers retirement options.... The members expressed concerns over the accuracy of the Obama administration's analysis of its rule[.]" (Committee on Education and the Workforce, U.S. House of Representatives)
[Opinion] Market Synergy Group Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
35 pages. "The rule should be withdrawn in its entirety. It is anathema to the Administration's articulated policies ... [A]ny potential gains to retirement investors that the rule supposedly would achieve have been overstated. The Department's earlier estimates of potential investor gains were based on outdated, methodologically flawed data, extrapolations, and assumptions." (Market Synergy Group, Inc.)
[Opinion] DCIIA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
"[DCIIA] members have reported sightings of billboard signs soliciting plaintiffs only by reason of their participating in a 401(k) plan and have witnessed broad-scale social media campaigns to solicit 401(k) plan plaintiffs.... DCIIA requests that the [DOL] conduct research to examine the impact of increased litigation on promoting innovation and the successful implementation of defined contribution plans ... [including] an assessment of potential harm to plan participants resulting from lack of access to products and services that can improve their ability to save effectively for retirement but that plan fiduciaries may be reluctant to offer due to the potential threat of litigation." (Defined Contribution Institutional Investment Association [DCIIA])
[Opinion] TIAA Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "Recommendations concerning subsequent investment or use of Required Minimum Distributions (RMD) payments should not be fiduciary advice.... The education exclusion should be expanded to include a service provider's recommendations about enrolling in or contributing to a plan ... The definition of 'Best Interest' should mirror ERISA's 'prudent man standard of care' under ERISA Section 404(a) for all retirement investors.... The BIC Exemption should be expanded to accommodate advice to participants of the advice provider's own employer sponsored plans." (TIAA)
Direct Real Estate Can Improve Returns and Reduce Risk for Target Date Funds (PDF)
"[D]irect real estate has offered returns competitive to equities and REITs, with significantly lower volatility (as measured by standard deviation) for the 20-year period, 1997-2016.... Direct real estate's less frequent transactions don't necessarily pose a challenge to maintaining target allocations. Net cash flows from regular plan contributions can be used for monthly rebalancing. Investments in high-quality 'core' property markets potentially can be sold if necessary." (TIAA)
[Opinion] ICI Comment Letter to DOL on Proposed Re-Examination of Fiduciary Rule (PDF)
50 pages. "The final rule was developed based on a faulty and incomplete regulatory impact analysis, is excessively convoluted, and -- without significant revision -- will harm the very individuals it was designed to protect. More urgently, the Department must extend the compliance date for the rule to avoid very serious disruption and harm to retirement savers." (Investment Company Institute [ICI])
Fear of Litigation Looms Over DC Plans
"A quarter of DC consultants surveyed ... rated avoiding fiduciary lawsuits as the most important consideration of their clients, compared with 29 percent who chose retirement outcomes. Of these consultants, who collectively advise on more than $4 trillion in DC assets, 84 percent recommended that clients compare plan costs with those of peers as one way to manage fiduciary risk. Another 55 percent said plan sponsors should avoid funds that charge performance fees." (Institutional Investor)
[Opinion] SIFMA Comment Letter to DOL on Proposed Delay and Reconsideration of Fiduciary Rule
128 pages. "[T]he path chosen by the former Administration has proven to be impractical, unworkable, unrealistic and therefore, unlikely to lead to better financial results for retirement savers.... [1] It limits products and services and makes both more costly to retirement investors. [2] It has disrupted the industry in such a way that millions of retirement savers will be unable to purchase lifetime income options ... [3] The exemptions' reliance on private plaintiffs to enforce the Rule significantly increases the probability of meritless litigation and will likely lead to even further increases to the costs of products and services[.]" (Securities Industry and Financial Markets Association [SIFMA])
[Opinion] American Retirement Association Comment Letter to DOL on Fiduciary Rule (PDF)
"The ARA recommends that [1] the definition of Level Fee in the Best Interest Contract Exemption [BICE] be clarified to permit a Level Fee Fiduciary to receive transaction-based compensation under an offset arrangement that falls within the parameters of Advisory Opinion 97-15A.... [2] the Department revise [BICE] to eliminate the costly, inefficient and inconsistent enforcement mechanism of class action litigation.... [3] the applicability date for the Regulation be delayed until January 1, 2018... and that ultimately, a transition period of at least 24 months from the date a revised exemption (or rule) is promulgated should be provided." (American Retirement Association [ARA])
[Opinion] Morningstar Comment Letter to DOL on Fiduciary Rule
16 pages. "[Morningstar has] estimated ... possible expenses from class action lawsuits stemming from [BICE[ ranging from approximately $70 million to $150 million annually.... One potential alternative would be for financial institutions to agree to operate under certain uniform prudence standards, including submitting certain data elements to demonstrate compliance with the prudence standard.... [An] auditable big-data system provided by a neutral third party for reviewing individual portfolios across a firm, as well as the reasons advisors recommended rollovers to IRAs and in support of advice within IRAs, could substitute for [BICE] while still protecting investors.... [S]uch a uniform prudence standard and data assembly system will likely be developed in any case to help firms defend against lawsuits." (Morningstar)
Fiduciary Rule Comments Due Today
"All public comments on the controversial [DOL] fiduciary rule must be filed by 11:59 p.m. Monday [April 17].... [This] deadline is [for comments] on the substance of the rule and the directive set forth by President Donald J. Trump.... Evidence indicates the DOL takes the feedback seriously. The agency has indicated it will remain open to helpful comments even after the deadline." (
DOL Faces Tough Road in Revising or Repealing Fiduciary Rule
"If the agency makes changes -- as the Feb. 3 directive from President Donald J. Trump seems to foreshadow -- it could generate lawsuits from proponents. But the DOL will not get the same benefit of the doubt from the courts in that round of lawsuits that it has in current litigation brought by opponents of the rule." (InvestmentNews)
[Opinion] June 9, 2017 Dawning: Strict Fiduciary Obligations to Arise?
"At least for IRA accounts, salespeople will become fiduciaries.... Broker-dealer firms will diverge in their approaches to the rule.... Advisers will increasingly shift from one firm to another. Many of the older advisers, who want to try to remain as salespeople and who don't want to become true fiduciaries, will migrate to firms that will utilize BICE and the other PTEs.... Then, new advisers in firms that request the advisers to use BICE and the other PTEs, rather than level compensation, will eventually wise up and depart for a purer fiduciary pasture." (Ron A. Rhoades, JD, CFP)
Fintech Firms Still See a Future for Fiduciary Compliance Tools
"[A] portfolio construction platform, is just one of dozens of fintech firms that began promoting their tools to advisers last summer, aiming to capitalize on compliance requirements the rule would demand.... [F]intech heads defend their strategy, arguing that just because the rule may end up derailed, the need for advisers to upgrade their technology and be open with clients doesn't go away.... [W]hile firms may have to tweak their messaging, the DOL rule has created client awareness and demand." (Financial Planning)
2016 NAPA Black Book
"A TPA can be a plan advisor's best friend. But it's important to understand the various types of TPAs and how to best leverage them depending on the plan profile and size." [Chart lists 36 TPAs, with number of plans and participants, total assets, and other metrics.] (National Association of Plan Advisors [NAPA])
Substance Over Form May No Longer Prevail in the Sixth Circuit (PDF)
"[T]he Sixth Circuit outright rejected the substance-over-form doctrine, and held that because Roth IRAs are able to hold DISC stock, and that by Congressional design, DISCs are all form and no substance, neither it nor the IRS has the authority to undo this transaction just because the end goal was intended to be, and resulted in, a reduction in taxes.... Outside of the Sixth Circuit, companies should tread very lightly in this area. Everyone should anticipate Congressional action or possibly IRS appeal to the Supreme Court[.]" [Summa Holdings, Inc. v. Comm'r, No. 16-1712 (6th Cir. Feb. 16, 2017)] (Groom Law Group)
Boomers Abandoning Target Date Funds at or Near Retirement
"[O]ne possible explanation for Boomers taking their money out of TDFs is they are putting their assets into a payment strategy... [G]uidance issued by the DOL and [IRS] in 2014 formally permits DC plan investment options such as target-date funds to include income annuities as part of their fixed-income holdings ... Yet, there has still been relatively little product development in this area." (planadviser)
Charles Schwab Seeks to Arbitrate 401(k) Investment Case
"Charles Schwab Corp. urged a federal court to order a former employee challenging the investment options in the company's 401(k) plan to submit his claims to individual, non-class arbitration ... The plan documents required participants to submit any claims arising out of or related to the plan to binding arbitration in a non-class basis, Charles Schwab alleged ... Schwab ... may be one of the first financial companies facing an ERISA lawsuit over its use of in-house funds in which the claims move to arbitration." (Bloomberg BNA)
[Guidance Overview] DOL Fiduciary Rule: Slowed Down, But Not Out
"Firms that intend to rely on PTE 86-128 for discretionary transactions will need to make sure that IRAs receive the disclosures that were previously required only for [ERISA] plans as of June 9. Further, if a firm was relying on PTE 86-128 to cover compensation that will no longer be covered on June 9, the firm will need to consider whether another exemption is available (e.g., the BIC Exemption for nondiscretionary advice) or whether its compensation arrangements otherwise need to be restructured." (Morgan Lewis)
[Opinion] Fiduciary Rule: Vanguard's View on DOL Delay
"Vanguard agrees a delay will provide a helpful opportunity for the DOL to review the rule's scope and other issues that may limit investor access to investment advice ... Regardless of whether the DOL ultimately decides to modify the rule in any respect, [Vanguard is] concerned that this piecemeal implementation may increase the cost of compliance and reduce investor access to investment advice, information, and education." (Vanguard)
[Opinion] Many IRA Contracts Include Impartial Conduct Standards as an 'Implied Term'
"[T]he absence of a express term in the contract that the Impartial Conduct Standards are to be adhered to does not means that the parties to the contract cannot enforce the Impartial Conduct Standards. Rather, the Impartial Conduct Standards become implied terms of every new IRA account agreement (or IRA annuity contract) entered into on or after June 9, 2017, and become applicable to existing IRA account agreements when transactions are undertaken that remove the arrangement from grandfathered status." (Ron A. Rhoades, JD, CFP)
Cliffs Natural Resources Beats ERISA Challenge to Stock Drop
"The lawsuit against Cliffs involved two scenarios ... The first is when stock price plummets and investors claim that public information about the company's struggles demonstrated that the stock was a bad investment. The second is when investors learn that the company's stock was artificially inflated and corporate executives had inside knowledge of corporate fraud that caused the inflation.... The Cliffs employees raised claims based on both public and inside information. The Sixth Circuit rejected both under Dudenhoeffer." [Saumer v. Cliffs Natural Resources, No. 16-3449 (6th Cir. Apr. 7, 2017)] (Bloomberg BNA)
How to Invest in Private Equity with a Self-Directed IRA
"[1] Get familiar with the self-directed IRA guidelines.... [2] Understand the risks associated with private equity investments.... [3] Compare the costs to any potential upside of investing in private equity." (U.S. News & World Report)
[Guidance Overview] DOL Delays Fiduciary Rule and Eases Compliance
"Compliance with certain contentious provisions of the PTEs will be delayed until January 1, 2018.... During this grace period, investment advice fiduciaries will be required only to adhere to what the DOL guidance defines as the 'impartial conduct standard.' This standard requires investment advice fiduciaries to interact with retirement savers by making only recommendations that are in the retirement investor's best interest, avoiding misleading statements, and charging no more than reasonable amounts for investment advisory services." (Ascensus)
Fifth Circuit Denies Emergency Injunction to Stop DOL Fiduciary Rule
"The Fifth Circuit Court of Appeals in New Orleans denied a request for a preliminary injunction against the regulation that was filed by several industry interest groups. The three-judge panel also denied the plaintiffs' motion for an expedited appeal of the case.... The plaintiffs include the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable and the U.S. Chamber of Commerce." (InvestmentNews)
Text of District Court Opinion Rejecting Use of Vanguard's Fees to Determine Reasonableness of Proprietary Investment Fund's Fees (PDF)
"Plaintiffs rely on [an expert's comparison of] Putnam mutual funds' average fees to Vanguard passively-managed index funds' average fees.... Vanguard is a low-cost mutual fund provider operating index funds 'at-cost.' ... Putnam mutual funds operate for profit and include both index and actively managed investment. [The] analysis thus compares apples and oranges. Moreover ... the Plaintiffs cite no relevant case law holding that such ranges or averages are unreasonable as matter of law." [Brotherston v. Putnam Investments, Inc., No. 15-13825 (D. Mass. Mar. 30, 2017)] (U.S. District Court for the District of Massachusetts)
Investment's Failure to Satisfy QDIA Safe Harbor Does Not Preclude Its Use as a Default
"The QDIA rules allow plan fiduciaries to shed some potential responsibility for the investment of participant accounts when participants or beneficiaries fail to give investment instructions. While [a recent DOL Information Letter] does not expand that protection to investments with noncompliant transfer restrictions, it serves as a reminder that the QDIA rules are only a safe harbor. Fiduciaries willing to forgo the protection of the QDIA rules may still be able to satisfy their fiduciary duties by carefully selecting default investments." (Thomson Reuters / EBIA)
Judge in Putnam 401(k) Suit Deals Potential Setback to Use of Vanguard as Fee Benchmark
"Similar self-dealing lawsuits against fund managers have proliferated of late, often using Vanguard and other recognized indexers as a barometer of acceptable low-cost funds for a 401(k) plan. This Putnam ruling ... points to a potentially difficult road ahead for plaintiffs[.]" [Brotherston v. Putnam Investments, Inc., No. 15-13825 (D. Mass. Mar. 30, 2017)] (InvestmentNews)
DC Investors Continue Shift to Target Date Funds, Away from Equity
"Mutual fund assets held by defined contribution plans were approximately $3.9 trillion as of the end of 2016. About 46% of those assets were invested in U.S.-equity focused funds and just more than a quarter were invested in hybrid funds, primarily target date and lifestyle. The 10-year trend has seen allocations to hybrid funds increase to 25.6% of DC assets from about 16%, while equity assets have fallen to 9.5% as a proportion of the whole." (Pensions & Investments)
[Guidance Overview] Fiduciary Rule Delayed -- But It's Not Entirely What Was Expected
"[T]he delay means the 'old' rules will apply to the sale of investments (including insurance and annuities) and investment-related services to IRAs and ERISA-governed plans for another 60 days. This also means that -- until June 9, 2017 -- many firms and advisers will not be classified as fiduciaries and will not need to comply with a prohibited transaction exemption to do business. The relief provided under PTE 84-24, although temporary, is also significant.... In effect, the DOL is confirming that the new definition of fiduciary advice and the 'Best Interest' standard of conduct (and other Impartial Conduct Standards) will apply on and after June 9, even as it completes its review of the Rule and decides how to proceed." (Drinker Biddle)
Fiduciary vs. Investment Manager: What's the Difference?
"In an environment of increased fiduciary litigation, advisors and other service providers have ramped up their marketing efforts to provide risk management services to plan sponsors. Such efforts have resulted in plan sponsor confusion as to the type of services that are being offered, as well as the type of services that are preferable (e.g., is it better to engage a 3(21) fiduciary, or a 3(38) investment manager?). This [article] will attempt to get past all of the marketing hype so that plan sponsors can make productive decisions in this area." (Cammack Retirement Group)
[Guidance Overview] DOL Announces 60-Day Delay to Fiduciary Rule and Exemptions and Makes Significant Changes to Transition Period Compliance
"[T]he DOL's approach incorporates a 60-day delay of the applicability date of the Fiduciary Rule and related exemptions and a significant reduction in compliance burdens during the new transition period ... This approach essentially eliminates the need for transition agreements, disclosures, and certain structural changes (such as the appointment of a BICE officer) that were formerly required to be in place on the applicability date." (The Wagner Law Group)
[Guidance Overview] DOL Fiduciary Rule Delayed, But Parts Might Be Here to Stay
"In addition to the general 60-day delay, the Department has delayed most of the requirements for the best interest contract and other new exemptions through January 1, 2018. In setting separate applicability dates, the Department distinguished between [1] the rule on fiduciary status (who is a fiduciary) and the 'Impartial Conduct' standard (acting in the client's best interest), and [2] the more onerous requirements of the various exemptions. The Department hinted that it might let the rule on fiduciary status and the Impartial Conduct standard go into effect as early as June 9." (Proskauer's ERISA Practice Center)
'Poof, It's Gone!' DOL Quietly Strips Two Heavy Lifts from the Fiduciary Rule as It Makes Delay Official
"In a move that took even seasoned ERISA attorneys by surprise, the [DOL] extracted the teeth from the fiduciary rule until Jan. 1, 2018. In making official its 60-day delay until June 9, the DOL eliminated its two most stringent requirements -- namely the need to declare fiduciary status to clients and the associated need to disclose specific conflicts of interest." (RIABiz)
Use of Managed Accounts Rising in 401(k)s
"Though the space is dominated by target-date funds, a number of employers seemingly feel that managed accounts that pair algorithm-driven advice with human helpers are superior for workers who are nearer to retirement. Participants in managed accounts have been found to save .5% a year more than those in target-date funds, while earning, on average, .24% more, after fees, each year." (Barron's)
[Guidance Overview] DOL Releases Final Extension of Fiduciary Rule Applicability Date (PDF)
"Because the Fiduciary Rule will be applicable prior to the completion of the analysis required by the President's Memorandum, DOL may be able to take the position that the retirement services industry is able to comply with the Fiduciary Rule. Additionally, because there is no delay to the end of the Transition Period from January 1, 2018, DOL may be able to argue that making changes to the Fiduciary Rule or related exemptions would drive up compliance costs at no industry savings. That is, by January 1, 2018, the financial services industry will be expected to have finished spending the $5 billion in anticipated start-up costs." (Groom Law Group)
Advisers Get Stay of Execution with Fiduciary Rule Delay
"The 60-day delay is likely to be followed by another one to allow the agency adequate time to fully vet the rule. Many stakeholders asked for a longer delay, arguing that 60 days isn't enough time to finish a review of the beleaguered rule.... The DOL also will have comments to sift through on the presidential memorandum, which are due by April 17." (Bloomberg BNA)
[Opinion] Updated Website Aims to Simplify Teachers' Retirement Choices
"[CalSTRS] has finally upgraded the website where public-school employees can get educated about their 403(b) retirement plan options, making it easier to compare fees and performance and sign up for a plan. While the upgrade of could save teachers some serious bucks, it's still not perfect because there is no easy way to compare the thousands of options available in the public schools. What it does do is highlight the shamefully daunting task teachers face trying to save for retirement." (Kathleen Pender, in San Francisco Chronicle)
Fiduciary Rule Delayed by 60 Days
"During the 15-day comment period on whether to delay implementation, the [DOL] received approximately 193,000 comments ... In that deluge, wealth management firms and some advisers pushed for the rule to be postponed lest they have to make changes to client relationships multiple times. [Some] firms, fearing costly disruption to their business strategy, went further, requesting an even longer delay of up to a year or more." (Financial Planning)
U.S. Pensions Aim to Be More Like Canadian Funds
"[T]he largest Canadian pensions tended to exhibit three distinct characteristics: an emphasis on cost savings, a well-diversified investment portfolio, and a large appetite for illiquid alternative investments, such as infrastructure and real estate." (Institutional Investor)
[Official Guidance] Text of 60-Day Extension of Applicability Date for Final DOL Fiduciary Rule and Related Class Exemptions
63 pages. "This document extends for 60 days the applicability date of the final regulation, published on April 8, 2016, defining who is a 'fiduciary' under [ERISA] and the Internal Revenue Code of 1986. It also extends for 60 days the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs. It requires that fiduciaries relying on these exemptions for covered transactions adhere only to the Impartial Conduct Standards (including the 'best interest' standard), as conditions of the exemptions during the transition period from June 9, 2017, through January 1, 2018. Thus, the fiduciary definition in the rule (Fiduciary Rule or Rule) published on April 8, 2016, and Impartial Conduct Standards in these exemptions, are applicable on June 9, 2017, while compliance with the remaining conditions in these exemptions, such as requirements to make specific written disclosures and representations of fiduciary compliance in communications with investors, is not required until January 1, 2018. This document also delays the applicability of amendments to Prohibited Transaction Exemption 84-24 until January 1, 2018, other than the Impartial Conduct Standards, which will become applicable on June 9, 2017. Finally, this document extends for 60 days the applicability dates of amendments to other previously granted exemptions. The President, by Memorandum to the Secretary of Labor dated February 3, 2017, directed the [DOL] to examine whether the Fiduciary Rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, and to prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Rule as part of that examination. The extensions announced in this document are necessary to enable the Department to perform this examination and to consider possible changes with respect to the Fiduciary Rule and PTEs based on new evidence or analysis developed pursuant to the examination." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Large Plan Sponsors Use Every Tool in the Toolbox to Manage Pension Cost and Risk
"[S]ponsors continue to adjust, reduce, or eliminate DB benefits by adopting hybrid plan designs (often cash balance plans), closing plans to new entrants or freezing benefit accruals to manage and reduce pension costs.... 2016 contributions of $18 billion were some $5 billion more than 2015's, but only marginally more than the cost of new benefit accruals.... Since 2010, at least six of the 19 sponsors have shifted 10% or more of their portfolio to fixed income from return-seeking assets. The biggest policy change in 2016 was IBM's fixed income allocation target increasing from 56% to 70%." (Russell Investments)
[Guidance Overview] DOL's Final Rule on Fiduciary Investment Advice: Overview and Considerations for Plan Sponsors
"While the fate of the regulatory package is uncertain and its most immediate effects would be on investment advisers, there are various things plan sponsors should be thinking about.... Assess the policies, procedures, and practices already in place for ensuring your fiduciary obligations are being met and to reduce the possibility of co-fiduciary liability.... Examine your investment adviser relationships, keeping in mind that plan sponsors have the fiduciary obligations of prudently selecting and monitoring all service providers, including investment advisers.... Pay close attention to services in the following areas that would be especially impacted by the new rule: [1] Rollover and distribution advice ... [2] Investment education materials and activities." (Hodgson Russ LLP)

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