Pension Administration Changes - Update from WPBC

Three of us from Benefit Resources attended the Western Benefits Conference in Seattle in mid July. (The Pension Administration "who's who" and "what's what" that  happens annually) We were the only Sacramento TPAs there, and I’m so glad that we went.  We all went to different breakout sessions, so together we were able to learn from the best of the best in the industry.

POLITICS OF BENEFIT PROGRAMSPension Administration Conference in Seattle

The conference started with an address from Brian Graff the CEO of our trade association, the American Society of Pension Professionals and Actuaries (ASPPA).  He talked a lot about the politics of benefits:

  • If the Bush tax cuts expire and the debt ceiling is not increased, huge spending cuts will be initiated at the end of this year.  Tax “reform” will also be needed to close the budget gap.
  • Retirement benefits are often at the top of the list when congress looks at eliminating tax deductions.  Unfortunately, they only look at the cost of deductions in a ten-year window, not at the fact that taxes will eventually be paid on those accounts.
  • The proposal to reduce contribution limits to 20% of pay up to a maximum of $20,000, and the elimination of the $5,500 catch-up contribution are being floated. 

There are many myths that ASPPA is trying to dispel when testifying before congressional committees are taken from the Employee Benefits Research Institute (EBRI) such as:

  • 80% of all full-time workers are covered by a retirement plan
  • 62% of retirement tax incentives are going to families with incomes under $100,000 per year.
  • 401(k) plans are for middle-class workers.  71.5% save if they have a plan available.  Only 4.6% would save in an IRA if they didn’t have a plan.
  • Employees over age 50 average over $200,000.

I committed to ASPPA to help them pass the message along that the private retirement system works! One of the best way I can fulfill that promise is by performing my part (Pension Administration) to the absolute best of my ability. Without it, more people will be looking for social services in the future putting undue pressure on an already overwhelmed system.  I encourage you to pass this message along too!


The Department of Labor representative indicated that they’re working on a few projects:

  • The definition of fiduciary (being revised again)
  • Abandoned plan regulations will be expanded to include bankruptcy trustees
  • Developing language for Target Date fund disclosures
  • Considering the statement of lifetime income stream on participant benefit statements
  • Finalizing the rules for sending out notices by electronic media
  • Clarifying some of the confusion surrounding the fee disclosure rules


Third on the dais in this first session was the Internal Revenue Service representative.  The IRS is looking at projects of their own, including:

  • Updating their Employee Plans Compliance Resolution System (EPCRS) to include provisions for fixing 403(b) plans
  • Working with document providers to develop an approved 403(b) plan prototype plan document
  • Developing a late filer program for Forms 5500EZ
  • Trying to reduce the number of interim amendments they require
  • Clarification into the rules about what is a government plan (of particular interest to Charter schools)


We had an update on the fee disclosure rules in one of the break-out sessions.  July 1, 2012 was the deadline for companies to enter into formal agreements with the service providers of their plans.  (We always had a formal agreement with our clients, but sent to all clients in June an updated Administrative Services Agreement). 

Absent a formal agreement, any fees paid by the Plan to a service provider are considered a Prohibited Transaction under ERISA.  The transaction would also be considered a breach of fiduciary duty.  That’s a big deal!

Plan fiduciaries need to understand these agreements and the fees being charged and the services being provided.  The decisions to be made should be based on the services being provided, not just the dollar amount being charged.  Plan fiduciaries may want to get a Request for Information from other providers to best understand how their current provider measures up against others.  Review the following:

  • Is your plan working?
  • What exposure does the business owner have?
  • Pay attention to prudence and process.  Document all decisions in writing.
  • Consider having a participant education policy, and monitor its effectiveness


On 9/11/2006 there were 30 suits submitted to the courts.  Most of those were settled, but one went to trial and resulted in a big judgment.  A summary of Tussy v. ABB, Inc. was discussed at our conference.  This is a very short summary of what I learned – I encourage anyone who wants additional information to review the case itself.

  • ABB, Inc., a power company, had 2 plans with about $1.5 billion in assets
  • Fidelity acted as the advisor and the recordkeeper for the plans
  • The Investment Policy Statement for the ABB plans said that revenue sharing would be used to offset fees being charged to participant accounts
  • Fidelity started providing other services, such as payroll.  The cost of those other services were combined with the costs for the plan, so the plan was viewed as subsiding these costs that should have been paid for by ABB.
  • ABB, Inc. is liable for $35 million, and Fidelity was liable for $1.7 million for breaches of fiduciary duty as a result of this case.

The lessons learned from this case are:

  • Packaging plan services and corporate services is a recipe for disaster
  • If you have an Investment Policy statement, follow it!

This post is just a summary of some of the sessions I attended.  We will debrief the other attendees and provide more updates in future posts.  As always, you are welcome to call us if you would like additional information about any of these updates.

Photo courtesy of porbital.