401(k) Day is Almost Here

Yes, it's real, this is not a hoax. There is really a 401(k) day! The website is www.401kday.org. From the website:

What is 401(k) Day?

401(k) Day is an annual celebration spotlighting the importance of employer-sponsored profit sharing and 401(k) plans. As retirement follows work, 401(k) Day follows Labor Day. In 2008, 401(k) Day is officially September 5, 2008, the Friday after Labor Day.

The website offers great tools to plan sponsors that help increase awareness of retirement savings. The website appears to be managed by PSCA - Profit Sharing/401(k) Council of America and has the support of several corporate sponsors such as, ADP, Fidelity, The Hartford, Lincoln Financial Group, Principal Financial Group, The Standard, T. Rowe Price, TransAmerica, and Charles Schwab. Keep up the good work!

U.S. Labor Department proposes rules on investment advice exemption for 401(k) plans and IRAs

While I was out last week, the DOL proposed a rule on investment advice exemption for 401(k) Plans and IRAs. Here's the news release. More to follow as I review the August 22nd Federal Register.

Washington – The U.S. Department of Labor today announced publication of two proposed rules under the Pension Protection Act (PPA) to make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs). The proposed regulation and class exemption are to be published in the August 22, 2008 Federal Register.

“These proposals would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts,” said U.S. Secretary of Labor Elaine L. Chao.

The PPA amended the Employee Retirement Income Security Act (ERISA) by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased, the other is through an adviser compensated on a “level-fee” basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.

In December 2006, the department solicited public comments to determine what expertise and procedures may be needed to certify a computer model under the exemption, and to assist in developing a model form for the exemption’s disclosure of adviser fees.

The proposed regulation provides general guidance on the exemption’s requirements, including computer model certification, and includes a non-mandatory model form that advisers may use to satisfy the exemption’s fee disclosure requirement. In addition, to further the availability of quality, professional investment advice, the department is proposing a class exemption that permits advisors to provide individualized advice to a worker after giving advice generated by use of a computer model.

Separately, the department also released its determination relating to the feasibility of using computer models for providing investment advice to participants of IRAs.

[emphasis added]

Weekend DOL Blotter - Labor Day Special

U.S. Labor Department settlement provides $5 million in restitution for Pennsylvania builders health plan and reforms plan operations:

Philadelphia – The U.S. Department of Labor has obtained a consent judgment in which the Pennsylvania Builders Association (PBA), its wholly-owned subsidiary and its trustees agree to restore $5 million to the fund and pay a civil penalty of $500,000. The judgment also permanently bars the trustees from using plan assets to pay royalties and/or licensing fees to the association, prevents the trustees from contracting with the subsidiary for administrative services in exchange for fees, and prohibits the use of trust assets for lobbying purposes. In addition, current and future trustees must receive eight hours of fiduciary training annually over the next five years.

“This $5 million judgment protects the benefits plan’s participants by restoring the funds and taking steps to make sure the plan is managed properly in the future,” said Secretary of Labor Elaine L. Chao.

The lawsuit being resolved alleged that PBA of Lemoyne, Pennsylvania; its wholly-owned subsidiary Builders Services Inc. (BSI); and trustees Robert Basile, Patrick Brewer, Dennis Brislin, Scott Cannon, James Conner, Brad Elliott, Charles Farrell, Chuck Hamilton, David Knipe, Gene Kreitzer, Gary Naeser, Michael Rodino, Toni Rogan, Mack Smith, Chauncey Wirsing, Clarence Yeagley, Jack Zimmer and Roger Zimmer violated their fiduciary duties to the Pennsylvania Builders Association Benefits Trust. PBA sponsored the trust, and BSI was administrator of the trust.

The suit alleges that PBA received royalty payments and BSI received administrative fees under arrangements with BSI and the trust’s third party administrators. The royalties paid to PBA represented a percentage of the administrative fees paid by contributing employers. The department alleged that these royalty payments were prohibited because the sponsor had provided its name and endorsement to the trust when it created and named the trust. The trustees allegedly misused plan assets to pay royalties to PBA from 2000 to 2007, administrative fees to BSI from 2000 to 2007 and for political lobbying from 2002 through 2004.

The trust provided health, life insurance, dental, vision and temporary disability benefits to 12,616 participants as of 2006.

The court action, filed in the U.S. District Court for the Middle District of Pennsylvania, resulted from an investigation conducted by the Washington District Office of the Labor Department’s Employee Benefits Security Administration (EBSA). Employers and workers may contact the Washington District Office of the EBSA at 202.693.8700 or toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Pennsylvania Builders Association
Civil Action Number 1:08-cv-01564-SHR

The restitution and penalty aside, it looks like the board of trustees got off easily with barely a slap on the wrist with only 8 hours of annual fiduciary training. Now if only the training sessions were offered at the Armitage G.C.
[emphasis added]