The Definition of a Fiduciary - The Times They are a Changin

Transcription

1 The Definition of a Fiduciary - The Times They are a Changin Bob Kaplan, CFP, CPC QPA, APA VP, National Training Consultant

2 Important Information CIRCULAR 230 DISCLOSURE: Any tax discussion contained in this communication was not intended or written to be used, and cannot be used by the recipient or any other person, for the purpose of avoiding any Internal Revenue Code penalties that may be imposed on such person. Any tax discussion contained in this communication was written to support the promotion or marketing of the transactions or matter discussed herein. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. Retirement - Insurance - Investments 2

3 Definition of Fiduciary DoL released Proposed Regulations on October 21st which update the definition of Fiduciary First update since 1975 The way professionals deal with defined contribution plans has obviously changed over the past 35 years Retirement - Insurance - Investments 3

4 Definition of Fiduciary No reason to panic yet Comment period ends in mid-january DoL then must review comments, consider any changes and publish Final Regulations Effective 180 Days after the Final Regulations are published Retirement - Insurance - Investments 4

5 Definition of Fiduciary DoL does not show its hand on a key item Requested comments on how to handle the situation in which an advisor suggests taking a distribution when a distributable event has been reached Capturing rollovers Retirement - Insurance - Investments 5

6 Definition of Fiduciary Fiduciary: Provides investment advice for a fee Does NOT have to be on a regular basis This is a proposed change A person who represents to be performing functions is a fiduciary even if does not meet definition This is a proposed change Aimed at marketing material Retirement - Insurance - Investments 6

7 Definition of Fiduciary Fiduciary: i) Provides advice or appraisal concerning value of securities or property This is a proposed change Plans rely on value of investments ii) Recommends investing, purchasing, holding or selling securities This is really expanding those considered iii) Provides advice or recommendations to a plan, a plan fiduciary, plan participant or beneficiary If: Is an investment advisor (1940 Act) or is defined as a fiduciary or any of the above Retirement - Insurance - Investments 7

8 Definition of Fiduciary Not a Fiduciary: i) Provides investment education and materials ii) Marketing a platform - if disclose in writing that the person is NOT providing impartial advice iii) Provides general financial information to assist fiduciary in selection Retirement - Insurance - Investments 8

9 Questions I will be happy to answer any questions on Fiduciary Definition Thank You Retirement - Insurance - Investments 9

10 Roth In-Plan Conversions Mike Smith, QPA, QKA Director, Qualified Plan Consulting

11 What is a Roth Conversion? Conversion of Non-Roth assets to Roth IRA or Designated Roth Account Assets taxable upon conversion 401(k) to Roth IRA $100,000 AGI Limit until 2010 In Plan Roth Conversion now permitted Retirement - Insurance - Investments 11

12 Roth In Plan Conversions 401(k) and 403(b) Plans Plan must have Roth Contribution feature Only amounts distributable as Eligible Rollover Distribution (age 59/1/2, termination of employment, etc.) No 10% premature w/d penalty upon conversion Conversion is irrevocable Special tax relief for 2010 conversions: Option to spread tax liability over 2011 and 2012 Retirement - Insurance - Investments 12

13 Roth In Plan Conversions Retroactive Amendments to add conversion feature However communication to employees is important Timing for related amendments is not clear RMD rules still apply after conversion Retirement - Insurance - Investments 13

14 Distribution of Roth Amounts Roth qualified distribution rules apply Tax free if : After age 59 ½, or due to death, disability, and After 5 year period beginning when first Roth contribution is made. Distributions not meeting these rules would result in taxation of earnings: 10% penalty would apply Retirement - Insurance - Investments 14

15 Who may be interested in Roth Conversions? Plans with existing Roth provisions Allows participants to take greater advantage HCEs with large account balance plans Elimination of $100,000 AGI limit Retirement - Insurance - Investments 15

16 Additional Guidance Needed Many outstanding issues around the operation of Roth conversion provision Government officials have suggested that plan sponsors may want to wait for guidance before implementing Roth Conversion feature Plan sponsors should only proceed with caution and discuss with plan s attorney Retirement - Insurance - Investments 16

17 Need for Guidance Roth contribution source or Roth rollover source? When does 5 year holding period start? Is tax withholding required? Source to source transfer or rollout/repurchase? 1099R reporting Eligible Rollover treatment for all purposes? Can outstanding loan amounts be converted? Plan amendment timing for related amendments? Conversion of employer money? Is Spousal Consent required? Retirement - Insurance - Investments 17

18 Need for Guidance Potential impact of proceeding without guidance: Improper recordkeeping if wrong source is used Improper calculation of 5 year holding period Inaccurate tax reporting Reprocessing of conversions Inaccurate or untimely amendments Consult an attorney! Retirement - Insurance - Investments 18

19 QUESTIONS Retirement - Insurance - Investments 19

20 Participant Fee Disclosure Requirements Carla Ennis, QPA, QKA, APA Compliance Consultant

21 Participant Fee Disclosure DOL final regulations under ERISA makes it a fiduciary duty to: Periodically disclose certain fee and expense information to participants and beneficiaries Plan administrator must disclose: General plan related information and Detailed investment related information Intended to give participants access to information needed to make an informed investment decision Generally effective for plan years beginning on or after November 1, 2011 Retirement - Insurance - Investments 21

22 Affected Plans and Participants Applies to individual account plans Subject to ERISA That are participant directed Disclosure must be provided to any participant or beneficiary eligible to direct their investments Retirement - Insurance - Investments 22

23 Plan Related Disclosures General plan information, such as: Investment instructions including any limitations and restrictions Voting, tender rights Identification of investment alternatives and investment managers Description of brokerage windows and similar arrangements Plan administrative expenses that may be charged to participant accounts Legal, accounting, recordkeeping, etc., and Basis on which they will be allocated (e.g., pro-rata, per capita) Plan administrative expenses that are actually charged to participant accounts in dollars and Description of related services Retirement - Insurance - Investments 23

24 Plan Related Disclosures (con t) Individual participant and beneficiary expenses that may be charged to participant accounts, such as Qualified Domestic Relations Orders Loans Investment advice Front/back end loads Commissions Individual participant and beneficiary expenses actually charged to participant accounts, in dollars and Description of related services Retirement - Insurance - Investments 24

25 Plan Related Disclosures Time and Form of Disclosures Date participant is eligible to direct investments for the first time and Annually thereafter Quarterly statement of amounts actually charged to participant accounts during preceding quarter Any changes to required disclosures must be reported 30 days but not more than 90 days prior to the effective date of the change Unforeseeable events beyond plan administrator s control As soon as reasonably practicable May report on SPD or benefit statement if frequency requirement is met Retirement - Insurance - Investments 25

26 Investment Related Disclosures Based on latest information available to plan Identifying information for investment alternatives including name, type and category (e.g., money market, balanced fund, etc.) Performance data for investments that are not fixed Average annual return for 1, 5 and 10 calendar year periods Broad-based benchmark data Performance data for investments that are fixed or have stated return Term of investment Annual fixed rate Retirement - Insurance - Investments 26

27 Investment Related Disclosures (con t) Fees and expenses for investments that are not fixed Shareholder-type fees charged against participant accounts (e.g., commissions, sales loads, redemption fees) Description of restrictions or limitations on purchase, transfer or withdrawal Total annual operating expenses (i.e., expense ratio) and An example illustrating the effect of the annual operating expenses for a oneyear period, for $1,000 investment, expressed as a dollar amount Fees and expenses for fixed investments Term of investment Information regarding shareholder-type fees that may apply to purchase, transfer or withdrawal Retirement - Insurance - Investments 27

28 Investment Related Disclosures (con t) Internet Web site address providing access to additional information regarding investment alternatives Glossary of investment related terms Retirement - Insurance - Investments 28

29 Investment Related Disclosures Time and Form of Disclosures Date participant is eligible to direct investments for the first time and Annually thereafter Comparative Format required for presentation of all investment related information Use of DOL provided model chart deemed to meet this requirement Retirement - Insurance - Investments 29

30 QUESTIONS??? Retirement - Insurance - Investments 30