PLANSPONSOR - October/November 2019 - 19

quoted a DOL Field Assistance Bulletin
(FAB) from 2007: " With regard to the
prudent selection of service providers
generally, the department has indicated
that a fiduciary should engage in an objective
process that is designed to elicit information
necessary to assess the provider's
qualifications, quality of services offered
and reasonableness of fees. The process
also must avoid self-dealing, conflicts of
interest or other improper influence. "
Best practices that sponsors should
follow when offering SDBAs include
that the window should comply with the
requirements of Employee Retirement
Income Security Act (ERISA) Section
404(c), Droblyen says. " This absolves fiduciaries
from being liable if the plan participant
makes bad investment decisions.
If an employer is considering brokerage
accounts, it should ensure the core funds
meet 404(c) requirements. " he says.
It is also common for sponsors to
set limits on the percentage of a participant's
balance that he may invest in the
brokerage window-e.g., 10%, 25% or
50%, says Andrew Oringer, a partner at
Dechert LLP. " This gives participants the
flexibility they are yearning for, yet limits
their risk, to an extent. " Further, sponsors
may limit the types of investments that
may be used in the window, perhaps to
only traditional stocks, he says.
Constantine Mulligan, a partner and
director of investments for the retirement
plan services group at Cerity Partners,
says his clients typically confine the
investments in their brokerage window to
mutual funds and watch to keep investors
from choosing a product there that is also
available but at a lower cost on the investment
menu. A best practice many publicly
traded companies observe is to restrict the
percentage of company stock that participants
may purchase, " to make sure they
aren't putting their entire nest egg in an
over-concentrated allocation. " He points
to Enron as an example of how this could
be a dangerous move. -Lee Barney
TALKING POINTS
Own Up
Employee-owners have 92% higher
median household wealth than
workers who are not employee-owners.
Their wages are 33% higher, and they
have a 53% longer median job tenure.
Source: National Center for Employee Ownership, " Employee Ownership & Economic
Well-Being "
Disconnect Over Aging
Seventy-five percent of employers
say their company is " aging-friendly, "
but only 54% of workers say their
employer has such policies, across
all company sizes.
Source: Transamerica Center for Retirement Studies
States Raise Public Pension
Contribution Rates
Since 2009, over 35 states have
raised required contribution rates for
workers in public pension plans. The
median rate has risen to 6% of pay
for those who participate in Social
Security and remains at 8% for those
who do not.
Source: National Association of State Retirement Administrators
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PLANSPONSOR - October/November 2019

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