More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Department of Labor's Employee Benefits Security Administration (EBSA) just announced a new assistance effort for 403(b) pension plans subject to Title I of the Employee Retirement Income Security Act (ERISA). EBSA is sending a letter to administrators of the approximately 16,000 403(b) plans subject to ERISA to remind them that their 2009 Form 5500 annual reporting requirements have changed and to direct them to various EBSA resources for help in understanding and complying with the new requirements.
EBSA points out that 403(b) plan administrators now must file basic financial and other compliance information annually with the government on a Form 5500 or Form 5500-SF (a simplified report that many small 403(b) plans can use). Large plans (generally those with 100 or more participants) must include a report of an independent qualified public accountant with their Form 5500. All Form 5500s beginning with the 2009 plan year must be filed electronically using the department's new EFAST2 system.
Previously, notes Aaron Friedman, national practice leader, non-profits, for Principal Financial Group, "Erisa 403(b) plans only had to file more or less a registration statement; they did not have to file financial schedules and they were not subject to the annual audit." The change now for the 2009 plan year, is 403(b) plan administrators "have to file the 5500 according to all of the rules of any other retirement plan." Friedman says plan sponsors are putting together all of the required information to do the Form 5500 filing now. "The deadline for calendar plan years is in the summer, and if you file for an extension it could take it into the fall," he says.
The EBSA just issued a new Field Assistance Bulletin (FAB) 2010-01 developed to answer many frequently asked questions from the 403(b) community on the new Form 5500 reporting requirements. The department also published a brochure entitled Getting Ready for Changes in Filing Your Plan's Annual Return/Report Form 5500. All of these materials are available on a newly created EBSA Web site at www.dol.gov/ebsa/403b.html that focuses on Code 403(b) plan issues, EBSA says. The letter to plan administrators also directs them to a toll-free Form 5500 help desk that is available from 8:00 a.m. to 8:00 p.m. (ET) at 866-463-3278.
Principal Financial Group recently developed two online tools that it says helps plan sponsor's streamline data collection and investment expense disclosure. The Consolidated Disclosure Tool, Principal says,helps large-plan filers meet the eligible indirect compensation requirement mandated by the DOL. "The tool puts the information plan sponsors need at their fingertips. It's intuitively designed to help make the review and reporting of investment expenses faster, easier, and more accurate," says Jacque Mohs, VP Retirement and Investment Services, at The Principal, in a statement. "The tools are especially helpful to 403(b) sponsors who are compiling information for auditing requirements and a full Form 5500 for the first time."
The Data Collection Tool has been updated and improved, Principal says, to help plan sponsors comply with the new requirement to file forms electronically through the EFAST2 DOL filing system. Plan sponsors can also now include outside assets electronically instead of adding them manually. "These new regulations can be overwhelming to plan sponsors, especially those with 403(b) plans who have to fulfill so many new requirements," Mohs said.