Soltis Investment Advisors Fiduciary Education

Transcription

1 Soltis Investment Advisors Fiduciary Education November 2017 Kim D. Anderson, AIF Managing Partner, Retirement Plan Services Soltis Investment Advisors is proud to be among the first investment advisors globally to successfully complete the independent certification process of CEFEX, Centre for Fiduciary Excellence. CEFEX certification independently analyzes the trustworthiness and best practice processes of investment fiduciaries.

2 Soltis Investment Advisors Kim D. Anderson, AIF Managing Partner, Retirement Plan Services Kim Anderson has been with Soltis for over 19 years. Kim began his career in the financial industry as a consultant with Prudential Insurance Company, licensed in company and individual pensions, mutual funds and insurance products. Prior to joining Soltis in 1998, Kim spent nine years with General Motors Acceptance Corporation (GMAC) managing employees in various financial and credit departments including human resources and benefits. Kim D. Anderson, AIF Managing Partner Retirement Plan Services Since joining Soltis, Kim has been responsible for the development and services of the Retirement Plan Services Division. Kim is very active in the consultation, services and the administration of retirement plans throughout the country. Kim has industry experience consulting a large Third Party Administrator in management, services, and technology. Kim has been a featured industry expert speaker and panelist at various conferences to include Fidelity, Charles Schwab, and The Newport Group. He has been quoted in national publications to include the Wall Street Journal. He is a member of the National Association of Plan Advisor s (NAPA) Government Affairs Committee with regular interface with government agencies and congress regarding issues related to retirement planning. He currently serves on the Fidelity Advisory Council, and the Advisory Board of Alliance Benefit Group Rocky Mountain. Kim received his B.S. degree in Economics from Brigham Young University. Kim has earned the Accredited Investment Fiduciary professional designation from Fiduciary 360, Graduate School of Business, University of Pittsburgh. 2

3 Fiduciary Compliance Procedures 3

4 ERISA Compliance Procedures ERISA 401(b)(1) & 404(a)(1)(D) Plan must be in written form, and establish a written investment policy that is followed. ERISA 404(a)(1)(B) - Plan option selection must be made according to ERISA Prudent Man Requirements. ERISA 404(a)(1)(C) Plan options must be diversified, unless circumstances direct that it is not prudent to do so. ERISA 405(a) - Performance of plan investments must be regularly monitored and reviewed. ERISA 404(a) - Plan expenses must be reasonable. ERISA Plan investments must not result in a direct or indirect prohibited transaction. ERISA 404(c) - The Plan must permit the participants to exercise control over the assets and responsibility for any losses. ERISA 404(c)(5) Plan default options must be in compliance with the Department of Labor s Regulation for Qualified Default Investment Alternatives. ERISA 408b-2 A responsible plan fiduciary must obtain and review sufficient information in order to determine whether the proposed arrangement with a covered plan provider is reasonable. Copyright Soltis Investment Advisors 2013

5 Impacts to Retirement Plans New Tax Proposal 5

6 Tax Reform Impact on Retirement Plans Rumor for Tax Revenue to pay for Tax Reform Rothification Limiting the amount of 401k Contributions made on a pre-tax basis, the rest being made as Roth contributions. Limit the pre-tax limit to $2,400 from $18,500 with the remainder going to Roth(k) (based on the median contribution made by all contributing workers in 2013) Over Half of current 401(k) contributors would be affected (EBRI Model) President Trump Tweet: There will be no change to our 401(k). This has always been a great and popular middle class tax break that works, and it stays!

7 7

8 Fiduciary Required Notices 8

9 Participant Notices WHO RESPONSIBLE PARTY DUE DATE Summary Annual Report All plan participants and beneficiaries reported on the Form 5500 Record Keeper prepares Plan Sponsor Due within 9 months after the plan year end (2 months after 5500 filing deadline, plus any extensions) Safe Harbor* All eligible employees Record Keeper prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. QDIA* Each participant or beneficiary who may have retirement plan funds defaulted to the QDIA Record Keeper prepares Plan Sponsor Annually at least 30 days prior to the start of the plan year. ACA* Each participant to whom the arrangement applies NA Annually 30 days prior to the start of the plan year. Participant Fee Disclosure 404(a)5 All participants and beneficiaries eligible to direct investments to the plan Record Keeper Prepares Plan Sponsor Annual notice New Employees: On or before the date participants can first direct their investments The dollar amount of the fees charged to participant accounts must be disclosed quarterly Black Out Notice All plan participants and beneficiaries Record Keeper Prepares Plan Sponsor Required at least 30-days, but not more than 60-days prior to a blackout period QACA Each participant who is eligible to participate in the retirement plan Record Keeper Prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. EACA Each covered participant Record Keeper Prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. Summary of Material Modifications All plan participants and beneficiaries Plan sponsor 210 days after the end of the plan year when modification was adopted. Summary Plan Description (SPD) All plan participants and beneficiaries Record Keeper Prepares the draft Plan Sponsor New Employees and Beneficiaries: Within 90 days after individual receives benefits Every 5 year if any of the information which is required to be included has changed, or Every 10 years if no changes have occurred since the SPD was last updated

10 ERISA Section 404(a)5 10

11 ERISA Section 404(a)5 Disclosure Primary Responsibility A Fiduciary (or person or persons designated by the fiduciary to act on its behalf). Consistent with other disclosure obligations under ERISA, the Department has clarified that the plan administrator, as defined in ERISA section 3(16), is responsible for complying with the rule s disclosure requirements Note: The Plan Administrator will not be liable for the completeness and accuracy of information used to satisfy these disclosure requirements when the plan administrator reasonably and in good faith relies on information received from or provided by a plan service provider or the issuer of a designated investment alternative.

12 ERISA Section 404(a)5 Disclosure Covered Employees All employees that are eligible to participate under the terms of the plan, without regard to whether the participant has actually become enrolled in the plan.

13 ERISA Section 404(a)5 Disclosure Covered Employees & Timing All employees that are eligible to participate under the terms of the plan, without regard to whether the participant has actually become enrolled in the plan. Timing: On or before they make the first investment decision & every year thereafter

14 ERISA Section 404(a)5 Disclosure General Operational and Identification Information Explanation of circumstances under which participants and beneficiaries may give instructions; Explanation of any specific limitations on such instructions under the terms of the plan, including any transfers to or from designated investment alternative; A description of or reference to plan provisions relating to the exercise of voting, tender and similar rights appurtenant to an investment in a designated investment alternative as well as any restrictions on such rights; An identification of any designated investment alternatives offered under the plan; A description of any brokerage windows, Self-Directed brokerage accounts, or similar plan arrangement if any Legal, Accounting, & Recordkeeping, Not Included in investment related fees and are charged to the participants account Basis for allocating to accounts (Pro Rata, Per Capita)

15 ERISA Section 404(a)5 Disclosure Individual Expenses (At Least Quarterly) Loans QDRO s Investment Advice Loads: Front End, Back End, and Sales Charges Redemption Fees: Investment Management Fees

16 ERISA Section 404(a)5 Disclosure Investment Related Charges Name and category of the fund A web site where additional information may be found Fixed Return Investments (CD s, GIC s Variable Annuities): Annual rate of return and term of the investment Variable Rate of Return: 1, 5, 10 year returns (or for the life of the designated investment option) and comparison to appropriate benchmark Funds Expense Percentage (% expense ratio) Dollar Amount (dollar($) per $1,000 invested) A description of fees charged directly to the participants account (e.g. sales loads, redemption fees) A description of any restriction or limitation on the ability to purchase, transfer or withdraw from an investment option A statement that fees and expenses are only one of several factors a participant should consider when making investment decisions A Statement that fees and expenses can substantially reduce the growth of a retirement account A general glossary of terms to assist participants in understanding designated investment options

17 ERISA 408b-2 & 404(a)(5) 17

18 ERISA Section 408b-2 Reasonable Contract or The regulation states: Arrangement No contract or arrangement for services between a covered plan and a covered service provider, nor any extension or renewal, is reasonable within the meaning of section 408(b)(2) unless disclosure requirements are satisfied.

19 ERISA Section 408b-2 Reasonable Contract or Arrangement A covered plan is a pension plan, except that the term covered plan does not include: SEP IRAs SIMPLE IRAs IRAs Annuity Contracts in 403(b) Plans issued before January 1, 2009 Note that non-covered plans nonetheless must comply with ERISA section 408(b)(2), and the corresponding Code exemption, to avoid being prohibited transactions.

20 ERISA Section 408b-2 Reasonable Contract or Arrangement A covered service provider is a service provider that enters into an arrangement with a plan and reasonably expects to receive $1,000 or more in compensation, direct or indirect, in connection with the services described in the regulation.

21 ERISA Section 408b-2 Reasonable Contract or Arrangement Where covered services are provided to covered plans, the following disclosures must be made: Services Status (Fiduciary) Compensation (Direct & Indirect)

22 ERISA Section 408b-2 Reasonable Contract or Arrangement Initial disclosure requirements: The service provider must disclose the following information to a responsible plan fiduciary (defined), in writing Services: A description of the services to be provided to the plan pursuant to the arrangement.

23 ERISA Section 408b-2 Reasonable Contract or Arrangement Status: If applicable, a statement that the service provider will provide, or reasonably expects to provide: Services directly to the plan (or to an investment contract, product or entity that holds plan assets and in which the plan has a direct equity investment) as a fiduciary, and/or Services pursuant to the arrangement directly to the plan as an investment adviser registered under either the Investment Advisers Act of 1940 or any State law.

24 ERISA Section 408b-2 Reasonable Contract or Arrangement For disclosure purposes, compensation is divided into four categories: Direct compensation Indirect compensation Compensation paid among related parties Compensation for termination of arrangement Note: Indirect Compensation (compensation received from a source other than the plan or plan sponsor) must include the identification of the payer and a description of the arrangement between the payer and the covered service provider, affiliate or subcontractor pursuant to which the indirect compensation is paid.

25 ERISA Section 408b-2 Reasonable Contract or Arrangement Direct Compensation: A description of all direct compensation (defined), either in the aggregate or by service, that the service provider reasonably expects to receive in connection with the services.

26 ERISA Section 408b-2 Reasonable Contract or Arrangement Indirect Compensation: A reasonable and good faith estimate of indirect compensation (defined) that the service provider expects to receive in connection with the services; including: Identification of the services for which the indirect compensation will be received; and Identification of the payer of the indirect compensation.

27 ERISA Section 408b-2 Reasonable Contract or Arrangement Indirect Compensation: A reasonable and good faith estimate of indirect compensation (defined) that the service provider expects to receive in connection with the services; including: Identification of the services for which the indirect compensation will be received; and Identification of the payer of the indirect compensation.

28 ERISA Section 408b-2 Reasonable Contract or Arrangement Changes in the information provided must be given to the responsible plan fiduciary as soon as practicable but no later than 60 days after the service provider becomes aware of it.

29 ERISA Section 408b-2 Reasonable Contract or Arrangement If the service provider fails to provide the information upon request, the plan fiduciary is required to terminate the relationship.

30 Fiduciary Required Notices 30

31 Participant Notices WHO RESPONSIBLE PARTY DUE DATE Summary Annual Report All plan participants and beneficiaries reported on the Form 5500 Record Keeper prepares Plan Sponsor Due within 9 months after the plan year end (2 months after 5500 filing deadline, plus any extensions) Safe Harbor* All eligible employees Record Keeper prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. QDIA* Each participant or beneficiary who may have retirement plan funds defaulted to the QDIA Record Keeper prepares Plan Sponsor Annually at least 30 days prior to the start of the plan year. ACA* Each participant to whom the arrangement applies NA Annually 30 days prior to the start of the plan year. Participant Fee Disclosure 404(a)5 All participants and beneficiaries eligible to direct investments to the plan Record Keeper Prepares Plan Sponsor Annual notice New Employees: On or before the date participants can first direct their investments The dollar amount of the fees charged to participant accounts must be disclosed quarterly Black Out Notice All plan participants and beneficiaries Record Keeper Prepares Plan Sponsor Required at least 30-days, but not more than 60-days prior to a blackout period QACA Each participant who is eligible to participate in the retirement plan Record Keeper Prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. EACA Each covered participant Record Keeper Prepares Plan Sponsor Annually 30 to 90 days before the start of the plan year. Summary of Material Modifications All plan participants and beneficiaries Plan sponsor 210 days after the end of the plan year when modification was adopted. Summary Plan Description (SPD) All plan participants and beneficiaries Record Keeper Prepares the draft Plan Sponsor New Employees and Beneficiaries: Within 90 days after individual receives benefits Every 5 year if any of the information which is required to be included has changed, or Every 10 years if no changes have occurred since the SPD was last updated

32 Soltis Retirement Plan Services 20 N Main Suite 400 St George, UT 222 South Main Suite 1776 SLC, UT (800) Soltis Investment Advisors is proud to be among the first investment advisors globally to successfully complete the independent certification process of CEFEX, Centre for Fiduciary Excellence. CEFEX certification independently analyzes the trustworthiness and best practice processes of investment fiduciaries.