The mainstream media is ranting on about the new 401k Fee disclosure rules. “Finally, we are saved!” 

Without a doubt, the majority of plan sponsors have no idea what they are paying in fees, so the government is going to force the providers to tell them. The first thing plan sponsors will learn if an employee sues them for “breach of fiduciary duty” is what they have been paying in fees. Those that don’t know will not have a leg to stand on. The rules don’t state what the fees should be but that fiduciaries have an obligation to know what they are and that they are reasonable.

Anyone that lives on or routinely travels to the gulf will appreciate the difference between a fiduciary and someone that is selling stock in a company. Transocean is held to a different standard as a fiduciary. As a fiduciary one is held to the highest standard of care . If you owned a million dollars of trans. stock you would have no recource. If you made 10/hour and had a thousand dollars in your 401k it’s a different story. Does the distinction make sense? Why does the stockholder not have the same recourse as the 401k plan participant?

“A time of turbulence is also one of great opportunity for those who can understand, accept, and exploit the new realities” Peter Drucker

The supreme court changed the reality of the 401 (k) landscape when it ruled that one person could sue the plan sponsor. One distraught employee can file a law suit against a CFO and CEO, and he can most likely find a lawyer to take it on contingency. It’s free, and the liability can be personal.

Strong leaders “face up to reality and resist the temptation of what “everybody knows,” which are about to become the deleterious superstitions of tomorrow.” Peter Drucker

http://www.lanepowell.com/9600/irs-announces-401k-compliance-check-questionnaire-project/

http://www.irs.gov/retirement/article/0,,id=223440,00.html

4o1k Compliance questionnaire-It is 46 pages and is only 60 questions if you don’t count the a’s,b’s, and c’s. It is not voluntary. No doubt 99.99% of plan sponsors will not have the resources to complete this with internal resources. How much will this increase the cost of maintaining a 401k plan? Someone has to sit down and gather all of the data and begin the miserable process of answering all of the questions. Either the plan sponsor will have to pay for it or it will be deducted out of the participants accounts, someone has to pay for it.

I would urge you to print the document out and show it to prospective clients. I don’t think anyone would believe the government would put such a burden on employers if they didn’t actually see it. I didn’t.

“Meet a worker’s long-term retirement savings needs, rather than just preserving capital.” This is the heart of QDIA.

At the risk of repeating myself, the majority of employers we meet with default employee funds into a money market account. They mean well. It’s not illogical to assume that if an employee fails to take the time to invest their money that the employer is acting prudently by defaulting the employee’s funds into a guaranteed account, but it’s not so. The government has decided in its infinite wisdom that if an employee fails to take the time to insure his or her funds are invested the responsibility defaults to the employer. I urge you to review this link in that it will prove invaluable in opening new cases. If you are selling 4o1k Safe we have this feature built into our plan. As the Sponsor, Administrator, and Fiduciary of our 401k plan we take this action not only because it’s in the best interest of the participants but because of the liability in sponsoring the plan.

http://www.mhco.com/Library/Articles/2009/AQDIAnotice_112009.html

One of the advisors we work with recently called on a 5M plan that just had a fiduciary audit by competing firm that said”everything was fine.” The advisor then asked prospect about the timing of their deposits.

“We are getting it in by the 15th of the following month” the prospect said.

The advisor went on to explain that current practice didn’t qualify for safe harbor protection. See enclosed article. We routinely see plans that are not sending the deposits in on time. Great way to open new cases.

http://www.martindale.com/labor-employment-law/article_Miller-Johnson_956324.htm

Be sure and see end of article

“The third area of lawsuits, and perhaps the scariest area for the majority of employers, is based upon opportunity cost and plan fees.”

http://www.401khelpcenter.com/401k/robertson_opportunity_cost.html

I was with an advisor today that closed an 8m 401k Safe deal today. We had met with the controller a couple of weeks ago; today we had the first meeting with CFO. Most people still have their default option set to go into a money market account because they assume it’s safe. This is what everyone did prior to pension protection act of 2006.

It wasn’t a complicated conversation. How many people know what QDIA means? The advisor made it simple. The people in Washington didn’t think it was a good idea for someone that was 25 years old to let their retirement plan money sit in a money market account for 40 years so they simply said if you want the 404c protection you need to invest it.

The prospect got it.

He also liked the idea that with 401k Safe he no longer had to do a 5500, have a plan audit, administer hardships, loans, withdrawals, or serve as the named sponsor of the plan. It was a short meeting.

http://www.fixingthe401k.com/the-blog/2008/12/22/qdia-notice-requirements-is-your-plan-in-compliance.html

The majority of advisors don’t market and sell 401(k) plans. Many advisors can’t make the math work. Too much paper work relative to the revenue. It’s also a complicated field one must be versed in to successfully guide clients through the maze of regulations.

We are working to disrupt the market with 401k Safe. First, our advisor partners simply need to be able to communicate the fiduciary risk associated with sponsoring a 401k plan, and that’s not complicated. If you don’t follow the guide lines laid out by Erisa you have unlimited personal liability. Second they need to have a solution to the problem and that is where 401k Safe comes in.

Once a client adopts our plan we become the sponsor, administrator, fiduciary of the plan, and it’s easy! Our advisor partners do the annual enrollments, 401k Safe takes over as the fiduciary, and the client gets the most logical 401k plan solution on the planet.

http://eba.benefitnews.com/news/more-401k-plan-sponsors-are-dissatisfied-2683005-1.html

Feb 17, 2010 — The Law Offices of Howard G. Smith has announced its investigation of potential violations of the Employee Retirement Income Security Act violations by Toyota Motor Corporation, related to design defects in its vehicles’ acceleration systems. —

A press release said a shareholder lawsuit pending in the United States District Court for the Central District of California claims that between August 4, 2009, and February 2, 2010, Toyota and certain of its officers and directors misrepresented and/or failed to disclose that there was a major design defect in Toyota’s acceleration system, which could cause unintended acceleration, thereby causing Toyota securities to trade at artificially inflated prices.