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Category: Cowden Advisers News
The Internal Revenue Service (IRS) has announced cost-of-living adjustments (COLAs) applicable to dollar limitations for pension plans and other items for the 2009 tax year.
There are several web sites you can visit for specific information on the new COLAs.
IRS.gov offers
• a full summary of COLAs
• a comprehensive list of COLA increases dating back to 1989
401khelpcenter.com provides
• a full summary of the new adjustments
For further information, please contact Jere Cowden, President/CEO of Cowden Associates, or Jim Bartoszewicz, President/CEO of Cowden Advisers. They can be reached at 412-394-9330 or toll-free at 888-889-9432.
Amid an economic crisis affecting regions around the world, Time Magazine calls Pittsburgh “One Bright Spot on Main Street.” Click that headline to read the article, published this week, that looks at how the Pittsburgh region’s transformation over the last 25 years to a more diverse economy has enabled us to weather the storm of uncertainty better than many others – and how we are not only surviving but actually investing for our future prosperity.
On August 22, 2008 The U. S. Department of Labor (DOL) released proposed regulations in the Federal Register, that if adopted make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs).
“These proposals would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts,” said U.S. Secretary of Labor Elaine L. Chao.
The Pension Protection Act of 2006 amended the Employee Retirement Income Security Act (ERISA) by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased, the other is through an adviser compensated on a “level-fee” basis.
Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.
In December 2006, the department solicited public comments to determine what expertise and procedures may be needed to certify a computer model under the exemption, and to assist in developing a model form for the exemption’s disclosure of adviser fees.
The proposed regulation provides general guidance on the exemption’s requirements, including computer model certification, and includes a non-mandatory model form that advisers may use to satisfy the exemption’s fee disclosure requirement. In addition, to further the availability of quality and professional investment advice, the department is proposing a class exemption that permits advisors to provide individualized advice to a worker after giving advice generated by use of a computer model.
Separately, the department also released its determination relating to the feasibility of using computer models for providing investment advice to participants of IRAs.
For further information, please contact Jere Cowden, President and CEO, or Jim Bartoszewicz, Executive Vice President, Cowden Advisers, Inc., Defined Contribution & Investment Advisory Services. They can be reached at 412-394-9330 or toll-free at 888-889-9432. Full Proposed Regulations can also be found at the DOL website.
The Department of Labor (DOL) released proposed regulations that if adopted impose new requirements for the disclosure of fee and expense information to participants in self-directed individual account plans (such as 401(k) plans). The proposed rule is expected to be effective for plan years beginning on or after January 1, 2009 and is part of an ongoing effort to ensure that participants receive sufficient information about plan fees and expenses so that they can make informed investment decisions. In the same notice, DOL proposed changes to the regulations under Section 404(c) of the Employee Retirement Income Security Act (ERISA) to integrate the disclosure requirements and to restate DOL’s position with respect to the scope of ERISA Section 404(c)’s protection.
...in the Pittsburgh Business Times (full article requires a subscription):
Senior executives are taking a much more active role in administering 401(k) plans than in the past, according to a survey of more than 125 employers in the tri-state area around Pittsburgh.
Of the respondents in this year’s survey by Downtown Pittsburgh-based consultant Cowden Associates Inc., 94 percent said senior executives are involved in making decisions about investments, up from 30 percent in 2007.
...in the Pittsburgh Post-Gazette (full article):
The survey of 128 area employers also found that 25 percent of companies were automatically enrolling employees in 401(k) plans, up from 16 percent in 2007.
Cowden said the survey also identified a major deficiency among plan sponsors: One-quarter said they did not have an investment policy statement, which outlines the general investment goals and objectives of a retirement plan.
...in the Pittsburgh Tribune-Review (full article):
Employers in the Pittsburgh region are taking action to retain and attract top employee talent by increasing contributions to their workers' 401(k) and related retirement plans well above the standard 3 percent mark, a consultant's survey found.
Cowden Associates Inc.'s second annual survey of employers who sponsor defined-contribution plans released Thursday found a substantial year-over-year percentage increase in employer matching contributions.
The U.S. Department of Labor (DOL) has released additional clarification of the "QDIA regulation," the final regulations governing Qualified Default Investment Alternatives (QDIA). These regulations provide plan sponsors relief from certain fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) for investments made on behalf of participants or beneficiaries who fail to direct the investment of assets in their individual accounts. The guidance has been published in the form of a Q & A that can be found at the DOL website.
Jim Bartoszewicz was featured in a Pittsburgh Business Times article from the March 21 -27, 2008 issue:
A recent ruling by the U.S. Supreme Court is being called a victory for millions of workers and a reminder for employers to exercise the utmost fiscal responsibility regarding their 401(k) plans.
The court ruled on Feb. 20 that individual participants in 401(k) retirement plans can sue to recover losses caused by the mismanagement of funds, reversing a decision made earlier by the 4th U.S. Circuit Court of Appeals in Richmond, Va., in the case of LaRue v. DeWolff, Boberg & Associates.
Jim Bartoszewicz, president and CEO of Cowden Advisers Inc., a Downtown investment advisory firm, said companies can take action to guard against lawsuits.
"By creating Sound practices for governing their retirement plans, sponsors will reduce the number of legitimate claims, while putting themselves in a better position to defend the frivolous suits," he said.
The full article requires a subscription.
On February 20, 2008 the Supreme Court ruled that a participant in a 401(k) plan can sue the plan sponsor for mismanaging his account. That seems pretty logical, but until that decision, any suit brought against a 401(k) plan sponsor had to be on behalf of the plan (i.e. ALL the participants).
In this instance, (LaRue v. DeWolff), only one participant was harmed when the plan sponsor did not follow his investment instructions. Under the old law, the “plan” was not materially harmed so there would not have been an event to cause a lawsuit. The Supreme Court said what most of us would have said, “This man lost $150,000 and should be allowed to sue for restitution.”
Plan Sponsors Beware: the door is now open for many lawsuits against the plan and the plan fiduciaries. The LaRue case was one example of negligence, but this ruling could allow any of the following scenarios:
Join Cowden Associates on January 31, 2008 for a complimentary breakfast and seminar. Recent guidelines regarding default investments and fee disclosures have added important clarification. Process and documentation are critical features. This seminar will focus on practical examples and walk through actual case studies. Topics to be covered include:
- Formation and duties of an Investment Committee
- Review/creating Investment Policy Statements
- Investment review and selection of plan offerings
- Qualified Default Investment Alternative (QDIA)
- Full fee disclosures
- Performance monitoring and changes in offerings
- Documenting the process and rationale
- Employee communications
- Evolving DOL Fee disclosure requirements including 5500 data
This is your opportunity to learn the critical features of process and documentation requirements now required by Plan Sponsors.
The U.S. Department of Labor (DOL) has issued final regulations concerning Qualified Default Investment Alternatives (QDIA), allowing two individually-based options and one group-based option. Stable value funds were excluded as a long-term QDIA, however admitted as a short-term capital preservation option for administrative convenience.