The Data Elements Best Practices document was modified from an earlier version (see SPARK Answers Questions about 403(b) Best Practices) due to a number of complicated and technical questions received from companies that are actively developing systems to follow the best practices, according to Larry Goldbrum, General Counsel.
The document is designed to help vendors and employers comply with new IRS regulations scheduled to take effect January 1, 2009, according to a press release.
“Since the initial release of the Data Elements document in July, many vendors had begun making system changes to follow the Best Practices, and during that process several beneficial and technical changes were warranted and were added to the new version,” Goldbrum said. The SPARK Institute has been posting answers to many of the questions on its Web site and has just added answers to 10 new questions.
“Some of the most complicated questions that were raised related to reporting and calculating loan amount available data for information sharing purposes,” Goldbrum said. “As a result, The SPARK Institute project team prepared examples that illustrate the best practices methodology for sharing available loan amount data.”
Goldbrum said that the new document, “Best Practices for 403(b) Plans Information Sharing—Minimum and Comprehensive Data Elements Version 1.02,’ and the Q&As are available here.
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Financial markets are reeling, and anxious pre-retirees watch their DC accounts with added worry. Uncertainty abounds and a growing number of participants are beginning to understand that their nest eggs are too small for retirement. Uncertainty has the potential to become blame, as a flurry of new ERISA-related lawsuits demonstrates, and the spotlight of scrutiny shines brightly on employers.
Mimms v. AIG: In September, a former AIG employee filed suit against the company, alleging that 15 of its directors are personally liable for violating ERISA guidelines.
Keri Evans and Timothy Whipps v. W.R. Grace & Co.: The 1st U.S. Circuit Court of Appeals decided, in response to the LaRue case, that the plaintiffs have a right to file suit under ERISA against their employers for alleged breach of fiduciary responsibility.
Vaughn v. Bay Environmental Management Inc.: Coming from the appellate courts last month, the 9th U.S. Circuit Court of Appeals overturned a lower court decision and ruled that participants, indeed, have the right to pursue fiduciary breach lawsuits. The 9th Circuit is now the seventh such appellate panel to recently come to such a decision.
The cases above point to a potentially alarming trend. It’s not clear whether the lawsuits are being driven by ex-employees or ambitious law firms. Either way, these lawsuits are taking advantage of LaRue to sue plan sponsors.
So why are former employees still on your plan books?
Rolling out former employees seems obvious, but advisers should consider how to roll them out while minimizing the risk of a lawsuit. Remember, the alleged liability comes from having a fiduciary responsibility for all participants, including terminated participants. This is your opportunity, as the expert, to help your sponsors best limit their exposure to terminated participants; and a key opportunity is to offer them a program that helps them make a sound rollover decision.
Rather than rely on a rollover alternative that steers all terminated participants into one–and only one–rollover IRA, advisers should seek to introduce an independent provider of rollover services to their plan sponsor clients. By partnering with an independent provider that emphasizes participant help from trained experts, you can set up a rollover program that will help participants gain:
One-on-one investment education,
Access to unbiased investment options,
Assistance with their rollover transaction, and
The opportunity to either take control of their retirement destiny or elect that they are content to stay in the plan and satisfied with their employer’s management of their funds.
Providing your participants an easy and informed solution for managing their own retirement account is crucial. With a proactive program that can document participant outreach and response, you can demonstrate that your participants have been afforded the opportunity to review their personal circumstances and have chosen to take control of their own retirement assets. With access to these resources, participants who elect to stay in the plan effectively decide that, at least up to this point, staying in the plan is a better option than moving out of the plan. If the former employee chooses to leave the plan, they do so with the aid of a helpful process and an informed decision.
Spencer Williams is President and CEO of RolloverSystems, an independent provider of rollover services. Over his career, Spencer’s experience spans starting, building and leading businesses in the financial services industry. Prior to joining RolloverSystems, Spencer served in numerous roles with MassMutual, including founder and CEO of Persumma Financial, LLC (a MassMutual Financial Group company) and as a leader in creating and building the company’s retirement income and rollover IRA lines of business.