Category: Erisa

Some great Christmas links:

“Good News of Great Joy.” (Thanks to Benefitslink.com for today’s Benefits Buzz pointer.)

“The Best Gift Of All.” (Thanks to the Sophorist for the pointer.)

Mike O’Sullivan at CorpLawBlog today announced that he had added a search feature to his website which allowed readers to search the SEC website. Mike has graciously shared his technical expertise with me and I have now added a search feature over on the right which allows readers to search the DOL website, the IRS website, or the PBGC website via the Google search engine as well.

This article is a must-read for in-house attorneys: “NAKED AND NERVOUS: Many In-House Lawyers Find That Directors and Officers Insurance Won’t Shield Them.” Quote of Note:

“You cannot assume that simply because you are a corporate general counsel or are practicing within a corporate law department that you are immune from personal liability,” says Gary Beck, a consultant in Austin, Texas, for insurance broker AON’s legal practice group. “Likewise, you should not assume that your company’s existing general liability or D&O insurance covers you as an attorney, because it probably doesn’t.”

Did you know that there is a little-known, easy-to-use online tool which allows you to have input into the federal government’s promulgation of regulations at this site: Regulations.gov? For instance, at this page you can comment on the recent “Electronic Registration Requirements for Investment Advisers To Be Investment Managers Under Title I of ERISA.” You can view the proposed regulations in html or pdf format and then submit a comment online.

Internal Revenue Code open regulations appear here.

SEC open regulations appear here (scroll down) including the controversial “Disclosure Regarding Market Timing and Selective Disclosure of Portfolio Holdings” (submit a comment by clicking here) or the “Amendments to Rules Governing Pricing of Mutual Fund Shares” (submit a comment here.)

Also, at this link you can view the regulations for which today is the last day to submit comments.

The site also allows you to search by agency and also by keyword.

In a press release issued December 16, 2003, Fiduciary Analytics announced that it had “completed research on mutual fund families that ranks them by the percentage of their individual funds that pass fiduciary due-diligence screens.” Fiduciary Analytics is a Pittsburgh-based organization that provides fiduciary training and research to pension plan sponsors and investment advisers. This fiduciary scoring process developed by Fiduciary Analytics ranks funds within their peer group as “passed, acceptable, watch, or replace.” The funds are scored according to an established eight-point due diligence process which consists of the following:

• Minimum track record
• Amount of assets under management
• Stability of the organization (manager turnover)
• Holdings consistent with style
• Correlation to style or peer group
• Expense ratios/fees
• Performance relative to assumed risk
• One-Year performance relative to peer group
• Three-Year performance relative to a peer group
• Five-Year performance relative to a peer group.

Why is all of this important? The press release says it best:

Fiduciaries–such as trustees, investment advisors, and retirement plan investment committees–are required to prudently manage investment decisions. As such, when a mutual fund family is implicated in wrongdoing, the fiduciary must show evidence that a process was followed in deciding whether or not the fund family should be retained. Knowing the fund family’s overall fiduciary ranking can significantly help in reaching a sound decision, and demonstrating that a prudent process was followed.

The Street.com reports on the research tool: “Does Your Fund Meet Its Fiduciary Responsibilities?” Quote of Note: “Don Trone, founder and president of Fiduciary Analytics, said the firm conducted the extensive study due to the groundswell of investors and retirement-plan fiduciaries asking what to do with funds from families implicated in the scandal. “Not surprisingly, the funds that have been implicated didn’t rank very well,” Trone said.”

Additional quote of note: “Of Vanguard’s 100 funds, 85% were in the “passed/acceptable” camps, while 71% of T. Rowe Price’s 83 funds made the cut. . . [Vanguard founder John] Bogle always talks about meeting the fiduciary responsibilities of Vanguard’s investors, and this ranking is a vindication,” Trone said. Also turning up among the top 50 were American Funds Group (No. 31, with 62% of its funds making the top two categories) and Fidelity (No. 48, with 50% of its funds making the cut).

It is important to understand that the rankings do not factor in recent allegations, scandals, market-timing confessions, etc. in any quantifiable way. ERISA fiduciaries must still obtain information regarding the various funds in their 401(k) line-up and analyze that information as discussed in this previous post: Plan Fiduciaries: Navigating the Rough Waters of the Mutual Fund Investigations.

By the way, I would be interested in hearing from plan sponsors on what sources they find the most helpful in obtaining information regarding the mutual funds being implicated. I have mentioned some sources to use here at Benefitsblog, but would be interested in hearing about how plan sponsors are coping with this issue. Please email me by clicking here if you would like to share your experience. Any information I receive will be kept confidential. I would be glad to publish results here on a collective and purely anonymous basis.

The Wall Street Journal has this today,”Is Money Missing from Your 401(k)?” The article reports how a certain company failed to credit employee contributions and matches under a 401(k) plan to employee accounts, going all the way back to 1999. Apparently, the problem which can occur inadvertently through administrative error as well as for other reasons is more common that one would like to think. The article reports that the Department of Labor, which polices employee-benefit plans, says reports of troubled corporate retirement plans are on the rise and that the number of civil and criminal retirement-plan cases closed by the Labor Department has risen to 1,459 in the year ended Sept. 30, from 962 in 1999. Quote of Note: “Experts stress the importance of tracking your contributions. “You have to keep comparing your pay stub and account statements to make sure they match up,” says Jack Van Derhai, a retirement-plan expert and business professor at Temple University. He says he has found errors in his own statements in the past when he worked for a different university.”

Today’s Wall Street Journal is reporting that a musical revival in Washington at a Capitol Hill party roasted tax shelters. According to the article, a woman sang “God Rest You Merry Tax Shelters” to the tune of “God Rest You Merry Gentlemen.” “O hidings of shelter and joy. . .” she sang.

In addition, the Wall Street Journal is reporting that Pam Olson, Treasury’s assistant secretary for tax policy, has quipped: “This just in: Citing the growing cost of running the federal government and the need to cut costs in order to reduce the budget deficit, President Bush announced today that he was laying off all 535 members of Congress and transferring lawmaking operations to a legislative support center in Bangalore, India.”

The Cornell Law School Legal Information Institute has a helpful link to U.S. Supreme Court “Recent Decisions on Pensions and ERISA”. Listed are many of the U.S. Supreme Court cases benefits attorneys refer to often such as Boggs v. Boggs, Harris Trust, Egelhoff v. Egelhoff, and Great-West. Cases link directly to Federal Code sections and other cited case law.

Charles Jaffe for the Philadelphia Inquirer is giving out the 2003 Lump of Coal Awards in this article: “In fund world, some merit lumps of coal for holidays.”

Also, Morningstar.com has published “A Progress Report on Scandal-Tainted Fund Shops” which plan fiduciaries may find helpful.

For a Collage of Legalese on ERISA fiduciary concerns pertaining to the mutual fund scandal, I have collected all of the articles which have come to my attention so far (including the one here at ERISAblog) and provided links to them here:

Articles by Law Firms and Attorneys:

Bullivant House Bailey, P.C.: “The Growing Mutual Fund Scandal: A Practical Guide for ERISA Fiduciaries.”
Gardner Carton & Douglas: “How Should Plan Fiduciaries Respond to Current Investigations of Mutual Fund Practices?“
B. Janell Grenier, Esquire: “Plan Fiduciaries: Navigating the Rough Waters of the Mutual Fund Investigations.”
McDermott, Will & Emery: “Fiduciary Responsibility in Light of U.S. Mutual Fund Industry Problems.”
The Groom Law Group: “Market Timing & Late Trading – Issues Affecting Employee Benefit Plans.”
Parker Poe: “Responses to Recent Mutual Fund Trading Scandal May Impact Retirement Plan Participants.”
Pepper Hamilton LLP: “What ERISA Fiduciaries Should Do About the Mutual Funds Investigation.“
Seyfarth Shaw: “Retirement Plans – Managing in the Mutual Fund Scandals.”
Sutherland Asbill & Brennan LLP: “Fiduciary Duties and Recent Mutual Fund Developments.”

Articles by Consultants:

AON: “Advice for Sponsors of Employer-sponsored Retirement Plans: A Prudent Fiduciary Response to the Mutual Fund Trading Scandals.”
Blue Prairie Group: “The Mutual Fund Scandal: What Should Plan Sponsors Do?“

I will be adding these articles in a Section over the on the right entitled “Mutual Fund Investigations & ERISA” in the next couple of days.

By the way, the 401khelpcenter.com has collected some good links on the mutual fund investigations in “COLLECTED WISDOM

Since I regularly link to different sections of the Internal Revenue Code and ERISA here at Benefitsblog, I have added a “Pertinent Laws” Section of links over on the right (scroll down) so I won’t have to waste time hunting for them any more. I hope that you find the Section of links useful as well. The links are as follows:

ERISA:

Part I, Reporting and Disclosure
Part II, Participation and Vesting
Part III, Funding
Part IV, Fiduciary Responsibility
Part V, Administration and Enforcement
Part VI, Continuation Coverage and Additional Standards for Group Health Plans
Part VII, Group Health Plan Requirements
Plan Termination Insurance Provisions

Internal Revenue Code:

PART I – PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A – General Rule
Sec 401 -Qualified pension, profit-sharing, and stock bonus plans
Sec. 402. – Taxability of beneficiary of employees’ trust
Sec. 403. – Taxation of employee annuities
Sec. 404. – Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan
Sec. 404A. – Deduction for certain foreign deferred compensation plans
Sec. 407. – Certain employees of domestic subsidiaries engaged in business outside the United States
Sec. 408. – Individual retirement accounts
Sec. 408A. – Roth IRAs
Sec. 409. – Qualifications for tax credit employee stock ownership plans
Subpart A – General Rule
Sec. 410. – Minimum participation standards
Sec. 411. – Minimum vesting standards
Sec. 412. – Minimum funding standards
Sec. 413. – Collectively bargained plans, etc.
Sec. 414. – Definitions and special rules
Sec. 415. – Limitations on benefits and contribution under qualified plans
Sec. 416. – Special rules for top-heavy plans
Sec. 417. – Definitions and special rules for purposes of minimum survivor annuity requirements
Subpart C – Special Rules for Multiemployer Plan
Subpart D – Treatment of Welfare Benefit Funds
Sec. 419. – Treatment of funded welfare benefit plans
Sec. 419A. – Qualified asset account; limitation on additions to account
Subpart E – Treatment of Transfers to Retiree Health Accounts
Sec. 420. Transfers of excess pension assets to retiree health accounts
PART II – CERTAIN STOCK OPTIONS

Regulations:

DOL Regulations
PBGC Regulations
Treasury Regulations