Based on our experience as advisors to many ERISA retirement plans, we are aware of the significant risks faced by business owners and plan sponsors relative to their retirement plan investments. 

As a consequence, we utilize SAFE  and CAFE  tools (as developed by the Center for Fiduciary Studies) in establishing investment fiduciary standards of care. Our founder and principal, John J. Mulligan, has earned the Accredited Investment Fiduciary AnalystTM (or AIFA ®) professional designation, awarded by the Center for Fiduciary Studies, which is associated with the University of Pittsburgh, and certifies him to conduct investment fiduciary audits and/or reviews. He is experienced in evaluating and making recommendations regarding investment related issues for retirement plans and especially those “new” set of services required the by the Pension Protection act of 2006.

Pension Protection Plan 2006 highlights

The Pension Protection Act of 2006 covers many important provisions for 401(k) plans. Effective December 31, 2006, 401k Plan sponsors must meet a number of new provisions.

1. Broker of record and investment advisers to the plan and the new fiduciary advisers who provide investment advice to participants will have to acknowledge their fiduciary status in writing.
2. All conflicts of interest held by the above must be disclosed in writing.
3. All forms of compensation of the above must be disclosed in writing.
4. An annual audit or assessment of the investment adviser is required. 

Added Safe harbor protection is available for those plans already compliant with the 9 (8 old plus 1 new) requirements of 404-c and who prudently select and monitor the new fiduciary adviser, whose advice is appropriate for the plan and whose fees are fair and reasonable in addition to required disclosures 1 – 4 noted above.

The new “Eligible Investment Advice Agreement” must include fee - neutral compensation of the fiduciary adviser and use a computer model to provide such advice.  The computer model is required to be audited annually.
 
A “new” second “404(c)” Safe Harbor may be elected (a safe harbor election is voluntary, requires full compliance and affords a form of “free insurance” to the plan sponsor). Plan sponsors may choose to offer a Qualified Default Investment Option, referred to as a (“QDIO”).
 
This is a reaffirmation of an important concept - ERISA plan fiduciaries and co-fiduciaries are liable for the acts and omissions of each other; which means that each can not turn a blind eye to the acts of the other(s).  

An example cited by the Center for Fiduciary Studies (www.fi360.com) states,

“The best participant advice in the world will still fall short if the plan itself is not being properly managed and administered.  Therefore, a fiduciary adviser should begin an engagement with a 401(k) plan sponsor by assessing whether the plan is appropriately carrying out its roles and responsibilities. Specific to this topic are the 22 prudent investment practices that have been identified to define the procedural prudence of a plan sponsor.  Each of the practices has been fully substantiated by ERISA, relevant case law and regulatory opinion letter.”

List of Services for ERISA Plans

• A detailed plan fiduciary review (assessment) for plan fiduciaries of possible liability issues and ongoing consultation regarding the prudent investment management of the Plan.
• Investment policy development.
• Monitoring and evaluation of both fiduciary practices, as well as plan investments and investment managers and/or allocation models.
• Fiduciary management – Mulligan Capital acknowledges, in writing, its fiduciary responsibility as to ERISA plan trustees.      

Things to consider:

• By following a structural process based on “Prudent Investment Practices,” the fiduciary can be confident that critical components of an investment strategy are being properly implemented.
• Liability is not determined by investment performance, but rather by whether prudent investment practices were followed.
• Fiduciaries have the most important yet misunderstood role in the investment process: to manage the investment practice without which the other components of the investment plan can be neither defined, implemented or evaluated.
• The Prudent Investor Rule states, “A fiduciary shall discharge their duties with respect to a plan with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man in like capacity and familiar with such matters would use in conduct of an enterprise of a like character and with like aims.”
• Responsibilities of the Fiduciary
• Act solely and exclusively on behalf of plan participants and beneficiaries.
• Carry out those duties prudently.
• Follow, consistently, ERISA plan documents.
• Diversify plan assets.
• Manage for and pay only for reasonable plan expenses.