401(k) Fee Litigation After Tibble v. Edison Int'l: Navigating the Continuing Duty to Monitor Plan Investments

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A 401(k) Fee Litigation After Tibble v. Edison Int'l: Navigating the Continuing Duty to Monitor Plan Investments Establishing ERISA Plan Investment Policies to Avoid Fee Challenges and Costly Liability THURSDAY, AUGUST 6, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: David C. Olstein, Counsel, Skadden Arps Slate Meagher & Flom, New York Stephen D. Rosenberg, Of Counsel, The Wagner Law Group, Boston Rebecca L. Sczepanski, Counsel, HunterMaclean, Savannah, Ga. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

2 Tips for Optimal Quality FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial and enter your PIN when prompted. Otherwise, please send us a chat or sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

3 Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you that you will receive immediately following the program. For additional information about CLE credit processing call us at ext. 35.

4 Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: Click on the ^ symbol next to Conference Materials in the middle of the lefthand column on your screen. Click on the tab labeled Handouts that appears, and there you will see a PDF of the slides for today's program. Double click on the PDF and a separate page will open. Print the slides by clicking on the printer icon.

5 401(k) FEE LITIGATION AFTER TIBBLE V. EDISON INT L: NAVIGATING THE CONTINUING DUTY TO MONITOR PLAN INVESTMENTS Stephen D. Rosenberg, Esq. August 6, 2015

6 Topics What Is Excessive Fee Litigation? The Controlling Statutory Framework. The Road to Tibble v. Edison Int'l, 135 S. Ct. 1823, 191 L. Ed. 2d 795 (2015). 6

7 The Nature of an Excessive Fee Claim Higher Fees Reduce Asset Growth Over Time Department of Labor Example Higher Fees Do Not Correlate with Higher Returns 401(k) Plan Participants Have Little Control Over Fees Funds are Selected by Plan Fiduciaries 7

8 What is an Excessive Fee Claim? Plan Fiduciaries Stand in the Shoes of Plan Participants Charged with Acting in Plan Participants Interests with Regard to Selecting Investment Options for the Plan and Negotiating their Fees and Costs Excessive Fee Claim by Plan Participants: the Fiduciaries Should Have, But Did Not, Avoid Higher than Necessary Fees in the Mutual Fund Menu in a Plan 8

9 Revenue Sharing Claims Related to Excessive Fee Claims Revenue Sharing = a Portion of the Fees From the Mutual Funds Are Used to Fund Plan Administration Plan Administration is Not Paid for Directly by the Employer, Plan Sponsor or Employee Participant The Claim: Higher Fee Funds Were Selected to Generate Revenue to Pay for the Plan s Administration 9

10 Revenue Sharing A Real Life Example Fidelity became the recordkeeper for the Plan in 1995 after a competitive bidding process. Initially, ABB paid Fidelity a flat fee for each Plan participant. Beginning in 2000, Fidelity primarily was paid through revenue sharing a common method of compensation whereby the mutual funds on a defined contribution plan pay a portion of investor fees to a third party. Fidelity received a percentage of the income the Plan investment options received from the participants. Tussey v. ABB, Inc., 746 F.3d 327, 331 (8th Cir.) cert. denied, 135 S. Ct. 477, 190 L. Ed. 2d 358 (2014) 10

11 The Statutory Framework Fiduciary Duties are Imposed by ERISA 404 Fiduciary Liability is Imposed by ERISA 409 A Cause of Action Against Fiduciaries for Fiduciary Breach is Established by ERISA 502 The Applicable Statute of Limitations is Imposed by ERISA

12 Who Are the Fiduciaries Subject to Suit? Named Fiduciaries Accidental or Deemed Fiduciaries The Cynical View Anyone who touches the plan s operations and investment choices will be named as a defendant The Practical Lawyer Insulate senior officers from those activities 12

13 The Duties of a Fiduciary ERISA 404 Sets Out the Duties of a Fiduciary Two Key Duties for Excessive Fee or Revenue Sharing Claims Are: The duty of loyalty To act solely in the interests of the plan participants The duty of prudence To act as would a prudent person knowledgeable about the subject 13

14 Liability for Breach of Fiduciary Duties Is Imposed by ERISA 409 Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach 14

15 ERISA s Statutory Remedies Remedies for Violating ERISA Are Contained in ERISA 502 Allows for claims seeking denied benefits, equitable relief, and recovery of losses stemming from fiduciary breaches 15

16 Breach of Fiduciary Duty Alone is Not Enough Focus for much of the first several years of excessive fee litigation was on whether the duties of loyalty and/or prudence were violated But a breach of fiduciary duty claim requires damages from that breach as well for fiduciaries to be liable, even if they breached those duties To have a successful breach of fiduciary duty claim, Plaintiffs must be able to prove both breach of fiduciary duty and a prima facie loss to the plan. Tussey v. ABB Inc., No. 2:06-CV NKL, 2015 WL , at *11 (W.D. Mo. July 9, 2015) 16

17 Statute of Limitations ERISA Provides a Specific Statute of Limitations for Breach of Fiduciary Duty Claims ERISA 413 Three years after actual knowledge of the breach Six years after the last act in a breach or, in the case of an omission to act that is a breach, after the last date on which the breach could be cured 17

18 The Supreme Court, Tibble and the Statute of Limitations When Does the Six Year Period Begin to Run, and Thus End? Supreme Court Rejects Idea that it Runs Only from Selection of the Expensive Investment Option A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely. Tibble v. Edison Int'l, 135 S. Ct. 1823, , 191 L. Ed. 2d 795 (2015) 18

19 Class Action Claims Excessive Fee Claims Are Well-Suited for Class-Wide Prosecution Harm to One Participant Matches Harm to Many Class Certification: Draw Class that Matches Up With the Investments of the Class Representatives ERISA Breach of Fiduciary Suits Are Often Described as Well-Suited to the Class Action Mechanism 19

20 Development of the Case Law From Hecker to Tibble in Six Years From Outlier Theory to Mainstream Cause of Action High Points Along the Way 20

21 401(k) FEE LITIGATION AFTER TIBBLE V. EDISON INT L: NAVIGATING THE CONTINUING DUTY TO MONITOR PLAN INVESTMENTS Stephen D. Rosenberg, Esq. 99 Summer Street, 13th Floor Boston, MA (617) A ppt

22 401(k) Fee Litigation After Tibble v. Edison Int l: Navigating the Continuing Duty to Monitor Plan Investments 8/6/2015 Presented by David C. Olstein Beijing / Boston / Brussels / Chicago / Frankfurt / Hong Kong / Houston / London Los Angeles / Moscow / Munich / New York / Palo Alto / Paris / São Paulo / Seoul Shanghai / Singapore / Sydney / Tokyo / Toronto / Washington, D.C. / Wilmington 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 22 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

23 Topic Overview Tibble Factual Background Litigation Timeline Alleged ERISA Violations District Court Rulings Court of Appeals Decision Supreme Court Decision Duty to Monitor Investments Open Issues 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 23 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

24 Factual Background Edison 401(k) Savings Plan o Sponsored by Southern California Edison Company ( SCE ) o $3.8 billion in assets o Administered by SCE Benefits Committee o Investment options selected by Edison International Trust Investment Committee (the Investment Committee ) o Pre-1999 investment line-up limited to six investment options o Approximately 40 retail mutual funds added to investment line-up following collective bargaining negotiations 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 24 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

25 Factual Background Investment Selection and Monitoring Process o Responsibilities of Investment Committee o Evaluation of investment options by SCE investments staff o Consultation with outside experts o Use of watch list o Removal of investment options o Frequency of investment changes 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 25 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

26 Factual Background Revenue Sharing o Hewitt Associates retained as Plan recordkeeper o Plan document originally required SCE to pay cost of administering plan o Prior to expansion of investment line-up, SCE paid entire cost of Hewitt s services o Revenue sharing payments from mutual funds partially offset cost of Hewitt s services o Plan document amended in 2006 to require SCE to pay administrative costs net of any adjustments by service providers 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 26 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

27 Litigation Timeline August 16, 2007: Complaint filed July 16 & 31, 2009: District Court rules on summary judgment motions October 20-22, 2009: Bench trial July 8, 2010: District Court rules on remaining ERISA claims March 21, 2013: Court of Appeals affirms May 18, 2015: Supreme Court vacates appellate decision and remands case for further proceedings 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 27 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

28 Alleged ERISA Violations SCE s receipt of revenue sharing offsets constituted a prohibited transaction SCE violated Plan terms by failing to pay full cost of Hewitt s recordkeeping services Defendants breached duty of loyalty by selecting mutual funds based on revenue sharing Defendants breached duty of prudence by including retail mutual funds as investment options Defendants breached duty of prudence by selecting or retaining retail share classes when lower cost institutional share classes were available 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 28 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

29 District Court Rulings Summary Judgment Stage Statute of Limitations o Neither party satisfied its burden to alter the six-year limitations period o Rejected continuing violation theory o Plaintiffs could only challenge investment decisions made during limitations period 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 29 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

30 District Court Rulings Summary Judgment Stage Receipt of revenue sharing offsets not a prohibited transaction o SCE did not exercise control over transactions that generated revenue sharing o Benefits Committee and Investment Committee caused Plan to transact with mutual funds o Committees acted independently of SCE o SCE s appointment of committee members not sufficient to establish that it exercised control over transactions 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 30 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

31 District Court Rulings Summary Judgment Stage Defendants correctly interpreted Plan document as permitting revenue sharing offsets o For portion of limitations period, Plan document did not give Benefits Committee full discretion to interpret the terms of the Plan o Without discretionary language, Benefits Committee s interpretation should be reviewed under a de novo standard o Plan document did not expressly prohibit payment of Hewitt s fees by third party o During collective bargaining, there were extensive discussions regarding use of revenue sharing to offset cost of Hewitt s services o Defendants repeatedly informed participants through SPDs or other benefits brochures that revenue sharing was being used to reduce recordkeeping expenses paid by SCE 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 31 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

32 District Court Rulings Summary Judgment Stage Triable issue existed as to whether defendants breached their duty of loyalty o Internal documents suggested defendants may have improperly considered revenue sharing when selecting mutual funds o Duty of loyalty claims time barred to the extent they relate to investment decisions made before August 16, (k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 32 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

33 District Court Rulings Summary Judgment Stage Defendants did not breach duty of prudence by including retail mutual funds on investment line-up o No evidence showing that retail mutual funds selected by defendants underperformed compared to other available retail mutual funds o Plan fiduciaries regularly reviewed retail mutual funds and removed funds whose performance was in question o Overall performance of retail mutual funds compared favorably to other benchmarks o ERISA does not require fiduciaries to scour the market to find and offer the cheapest possible fund o No evidence showing that retail mutual funds selected by defendants charged higher fees than other available retail mutual funds o Retail funds included as options had broad range of expense ratios 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 33 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

34 District Court Rulings Post Trial Defendants did not breach duty of loyalty by selecting retail share classes instead of institutional share classes o Overall pattern of investment line-up changes not consistent with a motive to increase revenue sharing o No evidence recommendations of SCE investments staff were motivated by revenue sharing o No evidence TIC members considered revenue sharing when selecting or retaining the six mutual funds at issue in the case 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 34 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

35 District Court Rulings Post Trial Defendants breached duty of prudence by selecting retail share classes within limitations period without adequately investigating institutional share classes o Institutional share classes were available when retail share classes were selected o No difference between classes other than fees o No evidence defendants considered investing in institutional share classes or weighed relative merits of investing in different classes o Defendants offered no credible reason for choosing retail share classes over institutional share classes o Defendants could have obtained waiver of minimum investment requirements for institutional share classes o Plan participants incurred damages equal to the difference in fees and lost investment opportunity 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 35 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

36 District Court Rulings Post Trial Defendants did not breach duty of prudence by failing to convert retail shares selected outside limitation period into institutional shares o Plaintiffs failed to establish that triggering events would require fiduciaries to undertake a review of available share classes and associated fees o Change in fund name or investment strategy would require only limited scope due diligence review o Triggering events did not involve addition of new share classes or mapping of assets to the mutual funds 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 36 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

37 Court of Appeals Decision District Court correctly applied six-year statute of limitations o Act of designating investment starts limitations period for claims asserting imprudence in design of investment menu o Failure to remedy a fiduciary breach does not constitute a second breach o Plaintiffs failed to demonstrate changed circumstances that would prompt a full due diligence review o Plaintiffs would not have actual knowledge of breach required to trigger three-year limitations period absent knowledge of how retail mutual funds were selected 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 37 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

38 Court of Appeals Decision District Court correctly determined that no triable issue existed over whether pre-amendment version of Plan document allowed revenue sharing offsets o Firestone framework not limited to benefits context o Plan vests Benefits Committee with discretion to interpret its terms o Benefits Committee interpretation subject to review under abuse of discretion standard o No explicit conflict between interpretation and plain language of Plan o Interpretation consistent with substantive requirements of ERISA o Revenue sharing offsets do not constitute receipt of consideration for purposes of ERISA Section 406(b) 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 38 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

39 Court of Appeals Decision Including retail mutual funds on Plan s investment line-up was not categorically imprudent o Retail mutual funds have regulatory and transparency features that make them more attractive than other types of investment vehicles o Too many relevant considerations for fiduciaries to support bright line approach to prudence o ERISA does not require fiduciaries to offer only the cheapest funds o Expense ratio range of offered retail mutual funds not sufficiently out of the ordinary to make inclusion imprudent 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 39 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

40 Supreme Court Decision Court of Appeals erred by applying statute of limitations based solely on the initial selection of funds without considering the contours of the alleged breach of fiduciary duty In determining contours of duty, Court of Appeals must look to the common law of trusts, from which an ERISA fiduciary s duty is derived 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 40 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

41 Supreme Court Decision Court of Appeals erred by applying statute of limitations to bar breach of fiduciary duty claims without considering nature of the fiduciary duty Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones Duty to monitor exists separate and apart from duty to exercise prudence in the initial selection of investments Claim that an ERISA fiduciary breached its duty of prudence by failing to properly monitor investments will be timely if alleged breach occurred within six years of suit 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 41 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

42 Supreme Court Decision On remand, Court of Appeals to consider common law trust principles and determine, in light of those principles: o whether duty to monitor required a review of the contested mutual funds o what kind of review was required absent a significant change in circumstances o whether defendants conducted the required review Supreme Court expressed no view as to scope of duty to monitor or whether plaintiffs forfeited right to raise claim 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 42 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

43 Duty to Monitor Investments Open Issues Frequency of Review Scope of Review Depth of Review Special Circumstances Consideration of Alternative Investments 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 43 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

44 Thank You David C. Olstein Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York david.olstein@skadden.com Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 401(k) Fee Litigation After Tibble v. Edison Int l: Negotiating the Continuing Duty to Monitor Plan Investments 44 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

45 401(k) Fee Litigation After Tibble v. Edison Int'l: Navigating the Continuing Duty to Monitor Plan Investments August 6, 2015 Rebecca L. Sczepanski, C.P.A., J.D. SAVANNAH tel BRUNSWICK tel H U N T E R M A C L E A N. C O M 45

46 Topic Overview Plan Governance Issues Framework for Selection & Continual Monitoring of Plan Investments Scope of Continuing Duty to Monitor Investments ERISA Fiduciary & Liability Insurance Risk Management Helpful Tips 46

47 Plan Governance Issues Identification of Plan Administrator Plan Administrative and/or Investment Committees Plan Sponsor s Entity Type Need for Formal Delegation of Responsibilities Risks Associated With Informal Delegations Resolutions Committee Charters 47

48 Selection & Monitoring of Plan Investments Legal and Fiduciary Framework Investment Committee Charters Selection of Appropriate Committee Members Investment Policy Statements Investment Performance versus Plan Expenses ERISA Expense Recapture Accounts and Policies Nature of Investment Expenses Selection and Monitoring of Investment Advisors/Managers 48

49 Selection & Monitoring of Plan Investments Documentation of Investment Choices Committee Minutes Investment Advisor Review Materials Morningstar Reports Due Diligence Monitoring Issues with Mapping Investments Fiduciary Safe Harbor What Constitutes a Similar Investment 49

50 Selection & Monitoring of Plan Investments Watch Lists and Frozen Investment Issues Retention of Inappropriate Investments Withdrawal and Transfer Restrictions Balancing Diversification and Participant Paralysis from Too Many Investment Choices Delegating Responsibility/Liability Hiring an ERISA 3(38) Investment Manager Understanding ERISA Plan Assets and Look- Through Investments 50

51 Scope of Duty to Monitor Investments Scope of Continuing Duty to Monitor Investments Failure to Prudently Select Investments Failure to Continuously Monitor Investments Effect of Plan Document Provisions Impact of Investment Policy Statement and Committee Charter Provisions Statute of Limitations Issues Traditional Trust Principles Under ERISA 51

52 ERISA Liability Insurance Coverage is recommended for any ERISA plan fiduciary Named fiduciary in plan documents Functional authority conferring fiduciary status Coverage is often specifically excluded or strictly limited from general E&O policies Fiduciary and administrative liability are often separate endorsements Strict policy limitations if premium paid by plan 52

53 Proposed Fiduciary Definition Update Old Rules Fiduciary if you: Render advice individualized to plan regarding buying, selling, or investing in securities On a regular basis Pursuant to a mutual agreement As a primary basis for investment decisions. New Rules Fiduciary if you: Make a recommendation regarding buying, selling, managing, hiring managers/advisors for, rolling over, or valuing plan assets to a plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner Pursuant to a mutual agreement For consideration in making investment or management decisions Advice is individualized or specifically directed to the advice recipient 53

54 54

55 RISK MANAGEMENT Fiduciary Protections: Policy, Process, Documentation Identify all plan fiduciaries, and if necessary, formally delegate authority and discretion Adopt an investment policy statement, review it annually, make any necessary changes, and document your process. Determine the level of fiduciary/investment responsibility you wish to delegate, then use a prudent process to select the provider. Read and understand all service contracts before they are signed; ensure they properly reflect the relationship and that the providers assume appropriate levels of responsibility 55

56 RISK MANAGEMENT Fiduciary Protections: Policy, Process, Documentation Monitor the performance of the plan s investment providers on at least an annual basis; document your process, conclusions, and the basis for these conclusions Monitor fees and expenses, negotiating reductions in costs when assets grow and the market changes. Do a competitive benchmarking process every 3 years, at a minimum, so you understand the market for services Review your insurance coverage to determine if your policy covers ERISA fiduciary liability and plan administrative failures 56

57 RISK MANAGEMENT Fiduciary Protections: Policy, Process, Documentation Know and understand the plan and trust provisions, and ensure they agree with how the plan is being administered If mutual funds are being used, understand the share classes chosen. Investigate whether cheaper classes are available and/or appropriate, and whether any of the fees can be recaptured for the participants benefit Document what services the plan is receiving in exchange for the fees that are directly or indirectly being paid from plan assets Review documents and notices prepared by service providers before distributing to employees and participants one size does not fit all 57

58 58

59 HELPFUL TIPS Understand the corporate structure of the plan sponsor Question free services E.g., fiduciary warranty provided to sponsors, paid for from plan assets Be aware of non-traditional investments in 401(k) plans Increased ERISA bond or audit requirements Non-discrimination issues if not offered to all participants on an equal basis Liquidity and valuation issues 59

60 HELPFUL TIPS DON T: Acknowledge the plan sponsor is paying too much for the plan in front of other employees Make any decision regarding a retirement plan based on the benefit to the company or other plans Assume that what the sponsor has always done is good enough, just because no one s ever sued before Accept investment advisor statements without question Hire investment advisors based on personal charisma or cost, without considering qualifications 60

61 IMPACT OF BENEFITS 61

62 QUESTIONS? Rebecca L. Sczepanski, C.P.A., J.D SAVANNAH tel BRUNSWICK tel H U N T E R M A C L E A N. C O M 62