Posts Tagged ‘Investments’
Message to Wal-Mart – Act like a Fiduciary
November 30th, 2009 | 
Author: Recently Wal-Mart has been in the news. No not because of the holiday sales or how sales were on Black Friday. Wal-Mart employee Jeremy Braden has taken his company to court over excess fees associated with their 401(k) retirement plan. A lower court ruling was recently overturned on appeal. The appellate panel, citing a 6th Circuit opinion that said information is material if there is a substantial likelihood that nondisclosure “would mislead a reasonable employee in the process of making an adequately informed decision regarding benefits to which she might be entitled.” The information referred to is the disclosure of revenue sharing arrangements and other information related to the 401(k) under the Employee Retirement Income Security Act (ERISA).
In Braden’s complaint, he estimated that fees cost the plan $60 million over the past six years and will continue costing approximately $20 million per year in excess fees. Braden complaint says seven of the plan’s ten funds charge 12b-1 fees from which participants derive no benefit.
We couldn’t agree more. Not surprisingly Bank of America Merrill Lynch is the trustee for the plan.
The complaint also alleges that despite the very large pool of assets, the ten funds available offers only retail class shares, which charge significantly higher fees than institutional shares for the same return on investments.
Again, we agree with Braden.
Another point Brandon made was that no changes to the plan investments were made despite the fact that most of them underperformed the market indexes they were designed to track.
At this point, Braden should be protected under Whistle Blower laws. Wal-Mart has a history of terminating troubling employees.
It appears to us that both Wal-Mart and Merrill Lynch do not understand their fiduciary duties. There is no reason why a plan of this size in not in institutional shares. We would also question the need for 12b-1 fees. The amount of estimated fees collected by Merrill Lynch is astonishing. In previous reports, Wal-Mart required Merrill Lynch not to disclose its fees. Unfortunately, at this point, ERISA and the Department of Labor still do not require full disclosure.
Lastly, a simple review of the investment selection on a regular basis would suggest a change in investment line-up. Apparently, neither Wal-Mart nor Merrill Lynch thought this was necessary. Mr. Braden has really hit the ball out of the park. He has nailed this 401(k) retirement plan as being a revenue generator for Merrill Lynch. Like most bundled plans, the employees are captive to the plan and to poor fiduciaries decisions.
When we work review 401(k) retirement plans, the fiduciary responsibility comes first. Apparently, Wal-Mart and Merrill Lynch do not see it that way.
It is important to recognize with businesses of any size and retirement plans of any size that the plan sponsor act as a fiduciary at all times when making decisions on their retirement plan. Regular review of the plans investment selection, fees, performance and service are vital to the responsibility held by the fiduciary.
Posted in Retirement Plans | 
Tags: 401K, Bank of America Merrill Lynch, fiduciary, Investment, Investments, Retirement Plans, retirement savings, savings, Wal-Mart | 
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Retirement Plans – 401K, 403B and Volatile Markets
Dennis K. O’Brien Offers Some Advice to Plan Sponsors of Retirement Programs such as 401ks as They Navigate Today’s Volatile Markets.
He Also Provides Some Tips to the Participants of Those Retirement Plans, Who Are Struggling With the Effects of the Economic and Market Downturns.
For Retirement Plan Sponsors:
The economy has not been treating anyone’s retirement money very well. And yet even in the midst of serious downturns, opportunity exists. For Plan Sponsors, the opportunity lies in the evaluation of fees.Many Plan Sponsors fail to have their providers fully break out the fees that they are paying, and so, many of the expenses are “hidden” – rolled into the plan and neatly presented as one package.
As a Plan Sponsor, it’s important to understand, however, that these costs can affect your plan’s assets as much as the slide in the stock market. And so now is the time to act.
To start with, review your Investment Policy Statement. Then contact your plan provider and review all of the expenses. Make them uncover the true cost of your plan, including all 12b-1 fees and other revenue-sharing expenses. Consider seeking out an independent provider and get a comparison of fees.
Next review the investment selection you have in your plan offering. Examine the types of equity offerings as well as the income or bond funds that are being offered in your program. Consider the costs associated with each mutual fund and the performance. Have your provider make suggestions on replacing poor performing funds, and be sure they fit the profile of your Investment Policy Statement (”IPS”). If you do not have an IPS, you should write one immediately.
Now is the time to take action, and consider making important changes to your plan. Your retirement program may depend on it.
For Retirement Plan Employees:
There’s no doubt that today’s volatile markets are scaring a lot of investors. The whipsawing stock market has led many employees to move their 401k money to cash, most commonly in money market or “stable value” funds. While it may feel safe, this may not have been the best course of action.
One should remember that 401k savings are retirement savings. Retirement savings are long-term savings. The economic cycle we are currently in will be relatively short-term. It is generally better to stay the course and stay in the market rather than be in cash. While in cash, you miss the opportunity to collect dividends and the modest growth that will feed your plan assets.
While many are looking for the home runs, it is the base hits that win the game. Most market declines last less than 400 days. This is the time to review your allocations and position yourself for future growth.
So what can you do? First of all, review all of your assets – this means those outside of your 401k savings as well as in the retirement program. Next consider your age and time horizon until retirement.
For a younger person, this is a great opportunity to increase your contribution and buy in while stocks are “on sale.” For an older person, think about when you plan to retire, and take a look at the allocation of all of your assets, not just the ones in your retirement program. If you are not satisfied with the income-oriented fund selection in your 401k plan, visit the human resources department and make it known.
And don’t hesitate to seek out more information about your options. Your HR department should be holding education sessions with your plan provider. If they are not, call them on it. Your plan is paying for it and you should be able to get your questions answered properly.
Posted in Retirement Plans |
Tags: 401K, 403B, Investments, Retirement Plans, SEP, SIMPLE, Volatile Markets |
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