Fall 2007 issue of Horizons

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Other allegations included insufficient investment information provided to participants and lack of disclosure of fund and other plan expenses to participants. The plaintiffs seek restoration to the plans of all losses that allegedly resulted from breaches of fiduciary responsibility. Defendants will attempt to prove that they followed a careful and prudent process in selecting plan providers, monitoring providers, and quantifying and negotiating fees. Whether such suits trickle down to smaller companies remains to be seen. Whether publicity surrounding these cases compels service providers to provide full fee disclosure also remains to be seen. In the meantime, the best defense for a plan sponsor is KNOWLEDGE. Consider the following recommendations: 1. Determine how much your company and its plan are paying in fees and expenses. Ask each service provider for full disclosure of all fees and expenses being charged, including any amounts received through revenue-sharing arrangements, commissions, 12b-1 fees and other soft dollar arrangements. Disclosure should include contract fees, investment fees, fees for plan administration and recordkeeping, and trustee fees. Fund fees are generally the most significant cost that impacts a participant’s return on investment. 2. Make sure that investment fees and fees charged to the plan are fully disclosed to participants through prospectuses or other media.

3. Make sureplan or company files includedocumentation of the service provider selection process and review of contracts and similar agreements. 4. Ensure that the plan’s investment policy statement is being followed with respect to investment decisions and actions. 5. Delegate investment recommendation and monitoring to advisors who specialize in providing such services to retirement plans. Determine and document which investment advisors serve in the capacity of “fiduciary” and agree that they serve in that capacity. 6. Retain documentation that demonstrates continuing vendor review and investment performance review. Keep in mind that fiduciary standards involve acting prudently and in the best interest of participants. With respect to service providers, that involves reviewing not only cost, but also experience, credentials and appropriate service delivery. Investment review involves a series of qualitative and quantitative measures, including manager tenure, investment in accordance with a fund’s stated objectives, fund expenses and performance reviewed against appropriate benchmarks.

Questions? Contact Dolores Lawrence, CPA, QKA Manager, RubinBrown Benefits Group 314-290-3224 dolores.lawrence@rubinbrown.com

18 u winter 2007 issue