Frequently Asked Questions

How are IRA protections different from the protections for pensions and 401(k)-type plans?

For traditional pensions (also called defined benefits plans), a fiduciary is required to manage the plan’s funds to help assure that there will be sufficient assets to pay the monthly pension benefits promised under the plan. In a 401(k)-type plan, a fiduciary, who is often the employer, must prudently select and monitor the investment options offered to the employees covered under the plan.


When do I need to sign a contract with my adviser and what should that contract include?

The contract provisions of the exemptions will not go into effect until Jan. 1, 2018. As of that date, IRA customers entering into a new advisery relationship should expect to sign the contract anytime before, or at the same time as, the execution of a new recommended transaction. The contract may be a stand-alone document, or it may be incorporated into another agreement between the customer and the firm.


How can I know if my adviser is acting in my best interest? How does the rule help better protect my retirement savings?

Under current rules, investors rarely know whether their adviser is supposed to act in their best interest. Many brokers, consultants and advisers hold themselves out as expert advisers, but are not, in fact, required to adhere to a fiduciary standard. Under the rule’s updated definition of fiduciary investment advice, advisers to plan participants and sponsors are required under ERISA to provide investment advice in their client’s best interest.


Does this new rule apply to all employer-sponsored retirement plans and IRAs?

No, In the case of employer-sponsored plans, the new rule applies only to plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). These are generally referred to as “ERISA” plans.” Plans that are not subject to ERISA (“Non-ERISA plans”) are generally excluded.


Under what circumstances will an adviser be a fiduciary?

An adviser who recommends a service provider to provide plan record keeping services would be acting in relation to “the administration of [the] plan.” But the adviser would likely not be viewed as a fiduciary because the adviser does not have “discretion” (i.e. final authority) to select the service provider. An adviser who recommends investments, however, would be a fiduciary if he/she is deemed to provide “investment advice for a fee or other compensation.”


What are the Fiduciary obligations of Retirement Plan Sponsors?

Your fiduciary responsibilities under ERISA, as stated by the Department of Labor (DOL) :

  • Act in plan participant’s best interests

    An ERISA fiduciary must act solely in the interest of the plan participants (and beneficiaries) with the exclusive purpose of providing benefits to them. Fiduciaries are required to disclose conflicts of interest and are prohibited from engaging in self-dealing, that is, actions that primarily serve the fiduciary’s interests.

  • Act prudently

    A fiduciary must carry out their duties prudently. Fiduciaries are required to act with the same care, skill and diligence as a prudent man, under similar circumstances. If a fiduciary does not have the expertise to handle matters under their control, they must hire professionals who have that expertise.

  • Follow the terms of the plan document

    The plan documents serve as the foundation for plan operations. Interpretation of documents and operational direction is a fiduciary function. Fiduciaries must perform their duties in accordance with the governing plan document and instruments, insofar as they are consistent with ERISA.

  • Diversify investments

    Plan assets must be diversified to reduce the risk of large investment losses, unless under the circumstances it is clearly prudent not to do so.

  • Pay reasonable plan expenses

    The plan fiduciary must hire and monitor service providers and ensure that only reasonable fees are paid for plan services and investments. DOL recommends that your plan be benchmarked for reasonableness every 3 to 5 years. We will assist you in understanding the entire fee landscape.


What is the Employee Benefits Security Administration (EBSA) responsible for with regards to the enforcement of ERISA?

Through its enforcement of ERISA, the Employee Benefits Security Administration (EBSA) is responsible for ensuring the integrity of the private employee benefit plan system. For the fiscal year 2016, the monetary results for enforcement, voluntary fiduciary corrections, and informal complaint resolutions totaled over $775 Million.

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