News From Sobel & Co., LLC

Are you dissatisfied with the current service providers for your Plan? Do you want to make a change but haven't decided to pull the trigger because it is more comfortable to remain with the status-quo? If you are tired of the status quo and are ready for the next steps, enclosed are some tips on comparing and analyzing different service providers.

The first task involved in shopping for new service providers is to understand the role everyone has in the process. Included below is some terminology which will be referenced throughout this article. Click here to view entire article.

From a Human Resource Perspective......

Conducting Internal Investigations

Written by Molly Lockwood

Conducting an internal investigation is often difficult because of the heightened emotion, the personalities, the intimacy of the surroundings and the sensitivity and discretion that is absolutely necessary when investigating one's own staff. Nonetheless, when business leaders are in the position of conducting an internal probe, there are some guidelines that they can follow to help overcome some of the more obvious pitfalls.

Click here to view entire article.

2011 - Year in Review

Stephen Craffen

Boy was 2011 a year of contrasts - high volatility ruled. Some days stocks were up 3-4% or down 4- 5% yet when the year was over the market was essentially unchanged. Not a good combination unless you can profit from that (our clients do through VIX related holdings). Here are the final results for domestic stock:

2011	Value	Blend	Growth
Large	.4%	2.1%	2.6%
Mid Cap	-1.4%	-1.5%	-1.7%
Small	-5.5%	-4.2%	-2.9%

While US stocks pretty much ended up where they started, European stocks had a poor year marked also by high volatility stemming from the uncertainty from the excessive debt in Italy and Greece (among other countries). Click here to view entire article.

Upholding Fiduciary Duties - Part II of a Series

Under the Employee Retirement Income Security Act (ERISA), Plan Administrators have an important fiduciary responsibility to act in the best interests of the Plan participants when exercising authority or control over the management of the Retirement Plan or its assets and when exerting control over the management of the Retirement Plan or its assets and when exerting control over the management or disposition of the Plan's assets.

As such, they are required to follow the Plan document, as well as other documents relating to it, provide an investment policy statement, offer Plan governance and/or minutes of Plan meetings, understand the costs of the Plan and revenues collected on its behalf, review service agreements regularly, and at the same time, gain an understanding of, and uphold, the most current rules.

To fulfill their fiduciary duties, Plan Administrators must follow the Pan document and also keep up with changes in the law as they occur.

This includes understanding the latest rules which, when they became effective January 1, 2012, created a general fiduciary obligation to disclose required information about Plan investments and fees to participants and beneficiaries in participant-directed individual account plans have the necessary information from the Plan Administrator to make informed decisions about their participation and about the selection of investment choices for their accounts. The new regulations require Plan Administrators to proactively provide specified information to all individuals who are eligible to participate in the Plan (whether or not they have an account balance). The information that Plan Administrators are required to disclose are both plan-related and investment-related and to make the process less of a burden, they are encouraged to work with their record keeper to see that the necessary data is gathered and the required disclosures are made.

Implications

A failure to provide the required information as described here may be judged as a breach of fiduciary duty, and there are, of course, repercussions from such a breach. Those fiduciaries that don't follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through their improper use of the plan's assets. Even though a fiduciary may both be held liable for the specific investment allocations made by participants or automatic investments, he or she still has the responsibility for selecting and monitoring the investment alternatives that are made available under the Plan.

Being Vigilant Regarding Fees

Plan Administrators have the right to know what fees they are being charged, and one of the most critical roles for the Plan Administrator is to be sure that those fees are reasonable and prudent. In addition, the Plan Administrator should implement a fiduciary process regarding fees that is documented in writing. Armed with accurate information, they can be more aggressive in requesting fair and reasonable fees, as dictated by law.

Providing Value Added Services for Audit Clients
A Potential Solution to Every 401(k) Plan Fiduciary's Problem
By: Alan Spierer, Sr. VP - Investments, Corporate Services Financial Advisor, UBS Financial Services, Inc.

The Federal law governing private-sector retirement plans, the Employee Retirement Income Security Act(ERISA), requires that those responsible for managing retirement plans - referred to as fiduciaries - carry out their responsibilities prudently and solely in the interest of the Plan's participants and beneficiaries. Among other duties, fiduciaries have a responsibility to ensure that the services provided to their plan are necessary and that the cost of those services is reasonable.

DOL - Understanding Retirement Plan Fees and Expenses

The new Department of Labor regulations related to Participant Fee Disclosures under Section 405a-5 are scheduled to be implemented for the first time starting in 2012. Clients and their Auditing Firms can prepare by being aware of the following:

The penalties under ERISA are substantial if the employer breaches any of its fiduciary duties. ERISA Section 502(a) also gives participants the power to file legal claims against a plan fiduciary for breaching its duties under ERISA. A growing number of lawsuits have been filed against some of the nation's largest employers and investment providers alleging, in part, that they breached their fiduciary duties under ERISA by failing to monitor the direct and indirect compensation paid to the plan's service providers.

To avoid violating federal law and the related penalties under ERISA, the employer must confirm that any and all fees paid with plan assets are reasonable, and the employer must make this determination with the same standard of care that would be required of a prudent expert.

Given the fact that employers typically have limited knowledge of the 401(k) plan industry (other than the experience they have with their individual plans), employers may be exposing themselves to significant fiduciary liability when they sign off on plan fees without any outside assistance or formal review process.

ERISA does not require plan fiduciaries to select the least expensive service provider. In fact, selecting one or more service providers whose fees are above average may be appropriate depending on the relative value of the services provided to the plan.

The use of a reliable benchmarking service may assist in assessing the reasonableness of plan fees and thus help satisfy ERISA requirements.

A Dialogue with your Clients:

To keep clients, the results will, at a minimum, help clients fulfill their fiduciary responsibility and may help reduce plan costs for both the plan sponsor and participants, here are 2 questions you can pose:

Do you currently have a process to evaluate the total cost of the retirement plan to the company and your participants?
Are you aware of the different expenses and compensatory arrangements involved in the plan?