18
FEE DISCLOSURE RULES PART II: MODELS AND Q&A
FEE DISCLOSURE RULES PART II: MODELS AND Q&A
The Presenter
Bradley K. Arends, CEO – Alliance Benefit Group
• Industry
Past President Retirement Advisors & Designers of America Board of Managers Alliance Benefit Group National 2010 PLANSPONSOR “Top Providers” June 2010 Fidelity Investments Advisory Council Schwab Retirement Business Services Trust & Custody Advisory Board SunGard / Corbel Advisory Council
• Law Washington University School of Law – Class of 1984 American Bar Association Minnesota Bar Association Employee Benefit Section of the Minnesota Bar
I. Recap of 404(a)(5) Regulation & Unanswered Questions
II. Guidance from DOL
III. Portfolio Models DIA?
IV. Advisor Action Items
V. ABG Support
Agenda
Take our Poll
Submit a Question
Forward the Presentation
Access links to docs & info
404(a)(5) Recap - The Deadlines
• August 30 – Initial Annual Disclosure Must detail fees that may be directly assessed to the
participant
• November 15 – Enhanced Quarterly Statements Must detail fees that were paid by the participant for the
applicable statement period
• Coverage Participant-Directed Plans
Individual Account Plans
(Not SEP or IRA or Frozen 403(b), Sole Proprietor Plans )
• Responsibility (is still on Plan Sponsor) Plan Sponsor can Outsource – Recordkeeper (ABG)
• Breach of Fiduciary Duty Inability to use 404(c) as a defense
Investment Losses
Excessive Fees
404(a)(5) Recap – The Rules
404(a)(5) Recap – The Questions
• The DOL’S final regulation leaves open-ended questions…
What qualifies as a “Designated Investment Alternative”?
Will Model Portfolios be viewed as a “DIA?”
404(a)(5) Recap - What is a DIA?
• 404a-5 (h)(4) “Designated Investment Alternative”
“Any investment alternative designated by the covered plan into which participants and beneficiaries may direct the investment of assets held in, or contributed to, their individual accounts.”
ABG Requests Clarifications
• ABG Submits Comment Letter to DOL
Retains ERISA attorney, Fred Reish
Clarification of Term “Designated Investment Alternative” (“DIA”)
Clarification of “DIA” requirements
DOL Releases Q&A
• Q28 – Are Model Portfolios considered DIAs?
Answer: If a model is made up of core funds, it is not considered DIA.
Answer: If a model includes non-core funds, the model is considered a DIA.
• Q29 – Do the regulations also cover SDBAs?
Answer: Yes. SDBAs must follow these same disclosure requirements.
The Problem - DIA
• DIA Requirements:
Rate of Return on DIAs Advisor must submit SEC Compliant Performance/ROR to
their ABG Account Manager, at a minimum, annually
Dedicated Website for DIAs Description of the Investment Objective
SEC Compliant Performance/ROR
Expense Ratio
Unitized
Non-Core Funds DIA
The Solution – Avoid DIA
96-1 Education
3(21) “Strategies”
3(38) Managed Accounts (For participants with core funds)
Non-DIA
Your Options
Education Strategies
96-1
Non-Fiduciary Service
Participant Rebalancing
Check the Box
Core Funds
Strategies
3(21)
Auto Rebalancing
Check the Box
Core Funds
Managed Accounts
3(38)
Fiduciary Service
Core + Non-Core Funds
Your Options – 96-1 Education
• Rename Models to “Strategies”
• Non-Fiduciary Service
• Participant-Directed Rebalancing
• Use of Core Funds
• “Check the Box” Election
Education Strategies
96-1
Non-Fiduciary Service
Participant Rebalancing
Check the Box
Core Funds
Your Options – 3(21) Strategies
• Rename Models to “Strategies”
• Fiduciary Service
• Auto Rebalancing
• Use of Core Funds
• “Check the Box” Election
Strategies
3(21)
Auto Rebalancing
Check the Box
Core Funds
Your Options – 3(38) Managed Accounts
• Rename Models to “Managed Accounts”
• Fiduciary Service
• Auto Rebalancing
• Use of Core & Non-Core Funds
• Service Specific to Participant
Managed Accounts
3(38)
Fiduciary Service
Core + Non-Core Funds
Action Items for Advisors
• Considering the facts…
What type of advisor are you? 3(21)? 3(38)?
Do you have model portfolios in your plan(s)?
How will you view your models?
• Complete the Advisor Questionnaire (access via the Links button) and submit to your ABG Account Manager by Friday, July 13th, 2012.
ABG Fee Disclosure Resources
• The Alliance Benefit Group “Tool Box” that advisors can access to help their sponsors & ultimately, plan participants. Click the links icon to access these items.
• What’s included? Sample RIA 408(b)(2) Agreement
Fee Disclosure Help-Packet Sponsor Bulletin
408(b)(2) Sponsor Checklist
Disclosure Timeline
Fee Disclosure Repository Resources Accessible on Plan Sponsor Website – CSP Agreements,
Sponsor Checklist, Benchmark Report, etc…
Benchmarking – Plan Tools
Questions?
CONTACT: Tim Struck – [email protected] Patty Richeson – [email protected] Brad Arends – [email protected]
Thank you for attending.
