More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
The Treasury Department is gearing up to release guidance that would make it easier for plan sponsors to conduct rollovers in an effort to mitigate “leakage,” and also plans to issue final regulations on hybrid plans, like cash balance plans.
According to Mark Iwry, Treasury’s Deputy Assistant Secretary for Retirement & Health Policy, coming guidance on rollovers “would make it easier for a plan sponsor to accept a rollover from other qualified plans and IRAs,” Iwry said Tuesday at the American Society of Pension Professionals and Actuaries’ annual conference at National Harbor, Md., just outside Washington. This would help make “leakage” from retirement plans “less likely.”
A recent “State of the Retirement Industry” report by New York Life found “leakage” from 401(k)s to be a major problem. The report found that the average contribution rate for a participant who takes out a loan from their 401(k) is 5.63%, compared with 7.23% for participants without loans. Also, more than two-thirds of participants with an outstanding loan balance who leave their employer will take a cash distribution from their retirement plan rather than paying back the loan. Both are characterized as “leakage” from plans.
A Principal Financial spokesperson said that the company “supports efforts to make it easier for plan sponsors to accept rollovers and for participants to roll over their retirement assets into the new employer-sponsored plan,” and the company “looks forward to the opportunity to review and provide comment on any proposed regulation.”
“At long last,” Iwry said at the ASPPA event, Treasury plans to issue its final regulations on hybrid plans, such as “cash balance pension plans and similar arrangements,” which “have taken longer than we’d hoped.”
Judy Miller, director of Retirement Policy at ASPPA, said in an email message that the final hybrid regulations "would include the issues covered in the October 2010 proposed regulations,” such as “restrictions on qualifying for ‘whipsaw’ relief, a special testing rule for accruals for plans with variable interest rates that could be negative, a limited exception to the rules for conversions from traditional to cash balance plans, and rules for crediting interest.”
Miller added that in addition to final regulations, Treasury may issue “another set of proposed regulations regarding some questions posed in the last round of proposed regs that were not specifically addressed in the proposed regs.” For example, she said, “comments were solicited on whether or not statutory hybrid plans should be able to offer participants a menu of hypothetical investment options."
Check out Fearful U.S. Investors Hold Half of Assets in Cash: BlackRock on ThinkAdvisor.