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Los Angeles Chapter of the California Society of CPAs
December 18, 2007—Encino
Debra Davis and Stephanie Bennett will present “Recent Developments for 401(k) Plans” to the San Fernando Valley CPA Discussion Group of the Los Angeles Chapter of the California Society of CPAs.
New of Counsel Specializing in Tax and Employee Benefits
The firm is pleased to announce that David Pratt, Professor of Law at Albany Law School in New York, has become Of Counsel and will join our already well-established and growing Employee Benefits practice group. [Read more]
California CPA Education Foundation 2007 Retirement Plans Conference
June 12, 2007--Universal City
June 13, 2007--San Francisco
Jon Karp is co-chair of the conference. Nick White will be a featured speaker on "Common Plan Mistakes: How to Correct and Avoid Them." [Read more]
ASPPA Benefits Council
May 14, 2007--Jacksonville, Florida
Nick White will present the new EPCRS under Rev. Proc. 2006-27... [Read more]
2007 Fifty Most Influential Persons
The 401kWire recently determined the 401(k) Industry’s 2007 Fifty Most Influential Persons. At the top of that list was Fred Reish, as the #1 influencer, for 2007.
Debra Davis was Appointed to Board of Directors
Debra was recently appointed as a member of the Board of Directors of the Los Angeles County Chapter of the Society of Financial Service Professionals.
PLANSPONSOR Awards Fred Reish the 2006 Lifetime Achievement Award
Each year the editors of PLANSPONSOR magazine acknowledge significant individual career contributions to the field of employee benefit plans with its Lifetime Achievement Award. Lifetime Achievement Award recipients will have demonstrated a commitment that both sustains and expands the ability of employee benefit plans to serve the national interest in providing employee benefit plans in the workplace through: [Read more]
Spotlight Archive
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RLR&C sponsors academic research at UCLA concerning employee behavior in participant directed plans. Professor Shlomo Benartzi, a leading academic in behavioral finance, oversees the research and analysis. Our goal is to enhance the benefits community's understanding of fiduciary responsibility and participant behavior in participant-directed plans. Articles by Dr. Benartzi and others.
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Sales & Marketing Forum - 2008 ASPPA 401k Summit
Fred Reish, Bruce Ashton and Debra Davis conducted a seminar on the new 408(b)(2) regulation at the 401k Summit in Orlando, Florida. The seminar focused on the requirements under the proposed regulation for RIAs and financial advisers to disclose their revenues, both direct and indirect, prior to entering into a contract or arrangement with a plan. The impact of the proposed regulation, when finalized, will be substantial. It will require every investment adviser and financial adviser to have a written contract with client plans that explains the services rendered, the revenues received, and any potential conflicts of interest. To download a copy of the powerpoint, please click on the following link.
Red, Yellow, and Green: A Taxonomy of 401(k) Portfolio Choices
This working paper was written by Gary Mottola and Steve Utkus of the Vanguard Center for Retirement Research. It evaluates the investment behavior of participants by classifying the investment behavior in their 401(k) accounts as "green," "yellow," and "red." It explains the types of egregious mistakes that can result in a red portfolio, as well as the long-term cost to participants of that behavior.
Written Comments for Testimony of C. Frederick Reish
On September 20, 2007, Fred Reish testified before the Working Group on Fiduciary Responsibilities and Revenue Sharing Practices of the U.S. Department of Labor (DOL) Advisory Council. The DOL Advisory Council is evaluating current industry practices to determine whether it will recommend that the DOL issue guidance on the proper use of plan revenues generated by revenue sharing arrangements. Fred's testimony recommended that the DOL issue guidance on whether amounts received from revenue sharing constitute plan assets and the duties of fiduciaries to investigate the revenue sharing practices of providers.
Heuristics and Biases in Retirement Savings Behavior
This paper was written by Shlomo Benartzi of The Anderson School at UCLA and Richard Thaler of the University of Chicago. It examines participant behavior in deferral-based, participant-directed retirement plans. The paper describes several ways in which, through plan design or investment processes, participants can, with plan sponsor and fiduciary assistance, achieve greater retirement security. As the paper indicates, our law firm contributed to the funding of this research as a part of our efforts to improve the quality of benefits being provided by 401(k) and 403(b) plans through a better understanding of participant behavior.
School District 403(b) Plans Subject to IRS Scrutiny
In the last few months, the IRS has targeted the 403(b) plans of public school districts to determine their level of compliance with Internal Revenue Code requirements. They are specifically looking at the "universal availability" requirement, which requires that all employees (other than those who may be specifically excluded by class) are given an opportunity to participate in the plan. We are providing for your review, initially without analysis, copies of the first contact letter, the questionnaire that accompanies it and a follow up letter the IRS is sending out if the response from a school district indicates a problem. We will send out another bulletin in a few weeks with our analysis of what this means to public school districts and other sponsors of 403(b) plans. The first letter from the IRS (they refer to these as "soft contacts") asks the district to complete a questionnaire about the employees eligible to participate in the plan and return it to the IRS. While the response is voluntary, the IRS does indicate that a failure to respond could lead to an examination of the plan.
Initial IRS Contact Letter
Section 403(b) Questionnaire
Follow Up Letter
Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds
Unfortunately, many participants do not understand the importance of fees when they make investment decisions about mutual funds. This report documents a study by faculty members from Yale, Harvard and Wharton. In the study, the authors gave Wharton MBA and Harvard students prospectuses for four S&P 500 Index Funds. The index funds had front-end loads (or commissions) that ranged from 2.5% to 5.25°/Q; the expense ratios ranged from .59% to .80%. Substantially all students failed to choose the lowest cost fund, even though, gross of expenses, each of the funds simply mirrored the performance of the S&P 500 index.
Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment
Three key issues face companies in improving the quality of their 401(k) plans. Those are: participation; participant investing; and deferral rates. While, in terms of increasing participation, automatic enrollment is receiving most of the attention, 401(k) consultants are developing other practices that are successful in increasing participation. The same is true in terms of participant investing. This study found that, through a simplified enrollment process, participation increased by 10 to 20 percentage points among the affected employees. Since the participant asset allocation decisions were also expedited the same percent of employees enjoyed the benefits of quality asset allocation.
Other Current Developments
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