Retirement Plan: Q2 Industry Update


July 20, 2017

Written by David Westra, Partner

DOL Fiduciary Rule Update

Congressional efforts to stop the rule include:

  • Letters to DOL Secretary Acosta urging further delay and review
  • Financial CHOICE Act would nullify the rule and prevent DOL from prescribing a new one until SEC issues a final fiduciary rule
  • House and Senate bills would repeal the rule and allow conflicts to be solved by disclosure
What is required effective July 9, 2017?
  • A person or organization will need to act as a fiduciary when making any of the following recommendations, if for a fee:
    • Investment of plan or IRA assets
    • Distributions from, or rollovers to, a plan or IRA
    • Management of securities or other property, including,
      • A person to provide investment advice or investment management services
      • Selection of account arrangement (e.g., brokerage v. advisory)
      • Investment policies or strategies
    • Best Interest Contract (BIC) exemption is available, but firms only need to comply with the “impartial conduct standards” during the transition period
      • Give advice in the best interest of the retirement investor
      • Charge no more than reasonable compensation
      • Make no misleading statements
    • Effective January 1, 2018, all requirements of the BIC are scheduled to take effect, including:
      • Written agreements with IRA holders
      • Substantial disclosures to retirement investors

(J.P. Morgan, 2017)

Are Your Retirement Plan Records Being Kept?

In the Estate of Barton v. ADT Sec. Servs. Pension Plan, the courts have ruled that it is the plan sponsor’s responsibility to keep retirement plan records until all liabilities have been distributed. It is required and essential for sponsors to work with record keepers to ensure that a plan’s retirement data is organized, accurate, and current.

Mary Henderson, CEBS, ERPA, QPA, recently wrote, “The IRS and federal tax regulations require that records be retained as long as their contents may become material in the administration of any internal revenue law. As a result, records for retirement plans should be kept until all benefits have been paid, the trust has been dissolved, and sufficient time has passed that the plan will not be the subject of an audit.”

The following is a summary of the Barton case:

  • Bruce Barton, former employee of ADT, sought retirement benefits from ADT 24 years after he left the
  • Barton provided paystubs, W-2s, employee identification, and
  • The California U.S. District Court’s initially ruling declared that the claimant (Barton) was likely entitled to pension benefits but lacked access to key
  • Barton appealed to the 9th Circuit Court, where the decision ultimately came down to which party was responsible for keeping plan eligibility, participation, and vesting records.
  • Appellate court found that the employer (ADT) was in a better position to maintain and provide necessary records to prove benefit

(Kurdek, 2017)

IRS Pressures Employers to Adopt Only Pre-Approved Plans

The IRS is modifying the pre-approved letter program by combining the master and prototype (M&P) and volume submitter (VS) programs into a new opinion letter. The IRS promotes that the goal of the initiative is to encourage employers that currently maintain individually designed plans to convert to the pre-approved format.

The new program is:

  • Simplified by eliminating the distinction between M&P and VS plans
  • Liberalized by increasing the types of plans eligible for pre-approved status
  • Revised to offer greater flexibility in the design of pre-approved plans (Iekel, 2017)

401(k) Lawsuits Seek to Establish if Fees are Necessary and Reasonable

A best practice to mitigate the risk of a retirement plan lawsuit is to reduce, and eliminate where possible, revenue sharing arrangements. The structure of fiduciary liability under ERISA is that fees must be reasonable and necessary and that the plan must be constructed for the sole benefit of the participants.

For plan sponsors to reduce liability stemming from revenue sharing, they need to:

  1. Understand all fees assessed by service providers
  2. Determine the fees are reasonable for the services rendered

As a plan sponsor, it is a best practice to proactively benchmark and monitor all fees associated your retirement plan.

(Lynch, 2017) (Barstein, 2017)

Works Cited

Quarterly DC Review: 3Q2017 [Pptx]. (2017, July). J.P. Morgan Asset Management. JPMorgan Chase & Co.


Iekel, J. (2017, July 5). IRS Moves to Nudge Employers to Pre-Approved Plans. Retrieved July 17, 2017 from employers-to-pre-approved-plans/


Kurdek, R. (2017, July 5). Who’s Responsible for Keeping Retirement Plan Records. Retrieved July 17, 2017 from


Lynch, E. (2017, June 29). Making Sure 401(k) & 403(b) Fees are “Necessary” & “Reasonable”–Part One. Retrieved July 18, 2017 from 403b-fees-are-necessary-reasonable-part-one


Barstein, F. (2017, July 5). Revenue Sharing Spurring 401(k) Lawsuits with More to Come. Retrieved July 18, 2017 from

Written By

Mark Feldman

David Westra

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