Five Biggest Changes to the 401(k) Fee Disclosure Law

Posted on February 10, 2012 by Brian Menickella

After months of delay, the Department of Labor (DOL) released final regulations that have modified the July 16, 2010 rule requiring plan service providers to disclose their services and fees to plan sponsors. Among other changes, the final regulation delays the compliance deadline to allow plans sponsors more time to comply with the new fee disclosure rules.

The final rule made changes in response to comments received on the interim final rule.
The biggest  changes are:

The Definition of a Covered Plan
The definition of covered plan now excludes certain 403(b) annuity contracts and custodial accounts that were issued to employees before January 1, 2009, where no additional contribution has been made, the contract or account is fully vested, and individual employees can enforce contracts without the employer’s involvement.


Indirect Compensation
The final rule requires a more detailed explanation of the “indirect compensation” arrangement between a payer and the covered service provider. The disclosure must now include both the identification of the payer and a description of the arrangement between the payer and payee. This will ideally bring to light any conflicts of interest.

Employers must Fire Advisors if they don’t Provide Information
Under the final rule, plan sponsors are required to fire their advisors if they fail to provide plan and fee information within 90 days of a written request. The wording in previous versions of the rule was more relaxed, stating that this would be grounds for firing their advisors; the final regulation has made it a requirement. This strong message from the DOL affirms their zero-tolerance approach to comply with the rule.


Effective Date Changes
The effective date, previously scheduled for April 1, 2012 was extended by three months to July 1, 2012 to allow additional time for compliance. Participant-level fee disclosures must be provided 60 days after the ERISA section 408(b)2 final rule effective date or Aug. 30, 2012. The first quarterly statement must be furnished by Nov. 14, the fact sheet states.


Manner of Delivery
The final regulation clarifies that nothing in the regulation limits the ability to use electronic media.

Disclosures denoting whether plan providers are acting as ERISA fiduciaries have been delayed to provide additional time to clarify wording and the definition of a fiduciary.

Over the past few years, there has been increased focus directed
towards ensuring employees are able to comfortably retire.

For more information on the changes to the final fee disclosure rule Click Here.

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Beacon’s 2012 Market Outlook

Posted on January 26, 2012 by Brian Menickella

Although 2011 may still linger in our thoughts as an uninspiring year filled with market volatility and skepticism coupled with political crisis, the market ended the year on a high note which has many believing that the positive momentum will carry on and continue into 2012.

US Companies are Strong and Getting Stronger

Driven by the significant amount of cash (checking deposits, savings deposits, money market funds, etc) on corporate balance sheets combined with lean expenses, it has become widely accepted by investors that U.S. corporate balance sheets are in good health.

“Cash accounted for 7.1% of all company assets, everything from buildings to bonds, the highest level since 1963,” according to the September 17, 2011 Wall Street Journal Article titled “Companies Shun Investments, Hoard Cash,” co-authored by Ben Casselman and Justin Lahart.

The theory is that as corporations build cash on their balance sheets, it’s a sign of operational health and provides motivation to make acquisitions. The health of corporate balance sheets is cited as a reason to be supportive of higher stock prices.

Corporations are also benefiting from very low interest rates on corporate debt, which substantially reduces the services burden of these obligations.

Despite slower overall economic growth, corporate revenues are accelerating, according to the US Bureau of Economic Analysis.


US Retail Sales Continue to Grow

The 2011 holiday season kicked off with record-setting shopping days on Black Friday  and Cyber Monday and continued strong throughout the holiday for many businesses. Consumer sentiment continued to rise into the New Year, as American grew more optimistic about job prospects.

January’s preliminary reading on its overall index of consumer sentiment rose for the fifth month of gains and the highest level since May 2011, according to The Thomas Reuters/University of Michigan preliminary January reading on its overall index of consumer sentiment rose for the fifth month of gains and the highest level since May 2011.

Interest Rates are at Historic Lows

While over-valued bond prices are causing investor concerns, stocks are selling below their historical prices relative to earnings which are making them incredibly attractive to investors.

The Presidential Election

Historically, an election cycle where either a Democrat or newly elect a Republican is a particular sweet spot for stocks. According to Fisher Investments, stocks have averaged 14.5% in election years a Democrat is re-elected, and 18.8% when a Republican is newly elected.

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Five Common Wage and Hour Violations and How to Avoid Them

Posted on January 4, 2012 by Stacia Bradley

Continuing from our last blog regarding the Department of Labor and non-compliance with the Fair Labor Standards Act (FLSA), as promised, here is our blog on 5 common wage and hour violations.  We hope this blog gives attention to potential problems and lawsuits that businesses may be unaware of.

Five common age and hour violations:

1.  Misclassification of an employee as exempt from overtime pay is the single potential greatest liability.  Many do not understand the laws of classifying employees, and doing so may have tremendous financial consequences.

2. Granting paid time off to non-exempt employees in lieu of paying overtime wages.

3. Combining and averaging work weeks to avoid paying overtime.  For example, if an
employee works 50 hours this week, and 30 hours next week, an employer cannot
average the two weeks to avoid overtime.

4. Unfair deductions from pay.  This includes traveling for work, short work breaks, and working during meal breaks.

5. Requiring or allowing work off the clock.  For example, an employer does not believe that an employee productively completed a task in a 40 hour work week, and requires the employee to work overtime without pay to complete the project.

To avoid liability exposure under FLSA and wage hour law:

1. Keep accurate records.  You’ve heard it time and time again…documentation is the key to success.  Employees and employers should both sign current time sheets to avoid confusion on hour’s works.  The need to document also falls in job descriptions, which should be updated every few months.  Having up-to-date job descriptions can and will help you make the proper classifications for your employees.

2. Be sure to pay for all hours worked; this seems obvious but is still extremely important.

3. Consistently and constantly train all managers and supervisors on FLSA and state laws.

4. Seek professional advice if you have any questions.

Updates and changes need to occur now, before you (as an employer) are paying ridiculous amounts of money on lawyers and settlements.

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Four Reasons a Wellness Program Evaluation is Important

Posted on January 3, 2012 by Alice Fala

How did you decide which wellness vendor and/or program was best for you?  Did you look at vendors on your own, or, did your broker recommend a vendor with whom they have partnered with?  How do you know whether or not that was the right vendor for your organization? Did you look at others?  Or did you take your broker at his/her word?

According to Workplace Wellness Magazine, there are several important reasons why you should evaluate your wellness program.

Feedback is the one way to obtain information that you will need to improve your present program efforts.  A short employee survey will help you get the information that you need to make any necessary modifications.

  1. Having the data necessary to impact your program is vital to your wellness initiative.  If you have “before the program” was installed data, and “after the program” data, this will help you determine what changes in behavior have occurred, and if the biometric measures have changed.  If both of these components have happened, you are in an excellent position to promote or even defend your program.
  2. Funding the program can be an issue in these uncertain economic times. Wellness programs are viewed as an added cost; they should be viewed as an investment.  Much like having to wait for your 401k money to gain interest and make you money, the same applies to your wellness program. Typically, you won’t see a significant ROI the 1st year; you may not see one until well in to the second year of the program. If you are patient, and understand the true value of your wellness program you will see an ROI. (This depends on what type of program you have in place. If you are just putting apples in the kitchen, you will see nothing) However, some programs have seen a 6:1 ROI.
  3. Who is minding the wellness store? A well run wellness program must be monitored regularly to keep it on track.  A wellness coordinator can assist you in keeping your organization accountable for the success of your program.  Wellness initiatives need to be proactive, not reactive.  The most successful programs are those that reach out to your high risk employees.  It is important to evaluate this step on a regular basis.
  4. Lastly, you should consider evaluating your program so that you can compare the effectiveness of different programs.  Employers have complained that they have tried every type of wellness program, but nothing works.  It is one thing to put a program in place; it is another to modify the behaviors of your employees. Successful programs are based on the time and the effort that you are willing to invest; it is not about which wellness vendor your broker has partnered with. You need to make an educated decision by exploring all available options.
Posted in Health Insurance & Employee Benefits, Uncategorized | Leave a comment

Employment Practices Liability Insurance Extensions

Posted on December 27, 2011 by Harry Cylinder

Employment Practices Liability policies have been available since the early 1990s. Traditionally they have covered a wide variety of wrongful employment practices excluded by the Commercial General Liability policy, and discrimination or harassment to third parties. In the last few years some insurers have extended coverage into two more controversial areas, wage and hour coverage and immigration claims.

As noted in a recent blog on “Wage and Hour Violations” by our Human Resources department, 70% of businesses are not in compliance with the Fair Labor Standards Act, and in 2008 over $185 million in back wages was paid due to violations. Settlements in major wage and hour suits against corporate defendants rose 44% between 2008 and 2009, and with the Department of Labor hiring additional investigators this trend can be expected to increase if not accelerate.

Because of the pervasive exposure, insurers have excluded wage and hour claims from coverage. Now some insurers are providing a sub-limit of $100,000 to $250,000 aggregate for wage and hour claims. Usually this applies only to defense costs, but at least one insurer will cover settlements. While the sub-limit could well be inadequate for a firm with multiple claims, it is an improvement over a total exclusion.

Immigration claims cover a criminal investigation by any government agency of an insured for actually or allegedly hiring or harboring illegal aliens.  With cities and states passing their own laws targeting illegal aliens in addition to federal statutes, a business with one or more immigrant employees could be dragged into court or forced to produce  documentation. This coverage extension only covers defense costs, not fines or penalties. The aggregate sub-limit is $100,000.

In today’s world Employment Practices Liability should be carried by all but the smallest
businesses, and broad coverage can be purchased for little or no additional cost.

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Mold, Fungus and Bacteria – Exclusions and Coverage

Posted on December 22, 2011 by Harry Cylinder

As a result of increased concern about the effects of mold, fungus and related causes of loss insurers in the past few years have introduced exclusions into both Property and Liability policies. However, limited coverage is available and in some cases can be broadened.

“Fungus” is defined as including mold, mildew, and any products produced or released by fungi. Together with wet or dry rot, fungus is excluded in Property policies unless it results in a specified cause of loss covered in the policy (most of the specified causes of loss are not likely to result from fungus or rot). The exclusion does not apply when fungus or rot result from fire or lightning. There is also limited coverage when fungus or rot result from a specified cause of loss covered in the policy that occurs during the policy period, if all reasonable means have been used at or after the time of loss to protect the property from further damage. For example, if a building is damaged by wind or water (other than flood if excluded) and at least temporary repairs are made promptly, any subsequent mold should be covered, but if the damaged building is left unattended there would be no coverage.

Coverage includes cost to remove fungus or rot, tear out any part of a building to gain access to fungus or rot, and subsequent testing. The coverage limit is $15,000 for all loss within a 12 month period. If fungus or rot damage results in a suspension of business operations, or remediation prolongs a business interruption loss, any Business income/Extra Expense coverage is limited to 30 days. Both the dollar limit and the number of days can be increased, and insureds with a potentially high exposure should investigate higher limits.

Commercial General Liability policies exclude bodily injury or property damage which would not have occurred but for the existence of fungi or bacteria, regardless of whether
any other cause, event, material or product was a contributing factor. There is an exception for fungi or bacteria contained in a good or product intended for bodily consumption. In a recent case a Florida district court applied this exception to a death from Legionaires’ disease resulting from using a spa tub at a hotel. (The case is Westport Insurance Corp. v. VN Hotel Group, LLC ; I won’t go into the court’s analysis.)

Finally, Pollution Liability insurance can be extended to cover “microbial matter” including fungi or bacteria. This extension should be purchased where appropriate.

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Wage & Hour Violations

Posted on December 19, 2011 by Stacia Bradley

The Department of Labor estimates that 70% of businesses are in some way not in compliance with the Fair Labor Standards Act (FLSA), and in 2008 alone U.S. businesses paid over $185 million in back wages to over one quarter million employees. The Department of Labor’s Wage and Hour Division (WHD) is responsible for enforcing the FLSA’s minimum wage, overtime, and child labor provisions.

The WHD has the authority to investigate, gather data, and enter to inspect any employer’s place of business.  This includes inspecting records and questioning employees. Record keeping and correct classification is extremely important during these inspections.  An “exempt” employee is exempt from the protections of Federal wage and hour laws, meaning the wage and hour regulations do not apply.

Employers should be aware that non-exempt employees must be paid for all hours worked and must be paid overtime for any hours more than 40 worked in one week. By law, employees must be paid the federal or state minimum wage, whichever is higher, and paid an overtime rate of 1-1/2 times their regular rate of pay.  All businesses need to be compliant regarding regulations of proper documentation in order to be up-to-date with federal laws.   Of all employment lawsuits occurring, those coming from wage and hour issues are currently the most common.

The Department of Labor recently hired an additional 90 investigators, increasing their budget by $244 million to expose more wage and hour violations. These violations are often brought to light from past or current employee complaints regarding wage and hour practices, but more so through having large numbers of low-wage employees.

Stay tuned for the next blog posting:  The most common wage and hour violations made by employers.

Posted in Human Resources, Uncategorized | 1 Comment

Wellness Is Not About Putting Apples in the Kitchen

Posted on December 7, 2011 by Alice Fala

When you think of wellness, what comes to mind? Weight loss, smoking cessation,  walking programs? Wellness is not just about those things, it is so much more.  It is a form of risk management, population risk management. You purchase Property & Casualty insurance to manage your property risk, why not take a look at managing your claims risk? It doesn’t matter how big or small your organization is; any type of risk management is bound to save you money.

In order to truly save on your premiums, employers must consider doing more than putting apples or healthy snacks in the kitchen. While it is a great morale builder within the organization, it will do absolutely nothing for your premium, and you will not see a ROI on your purchase of healthy snacks.

Biometric testing and data mining are necessary components for a well-run wellness
program. In order to effectively manage your medical costs, you must first manage your claims with proactive intervention. Through blood testing and Rx analysis, employers can determine the number of high risk potential claimants and how many of those high risk claimants will turn into a catastrophic claim. Data mining can also assist those who are at medium risk, helping them  to stay on the path to the  low risk category. The goal is to avoid or mitigate catastrophic claims through pro-active intervention through a well-run, properly managed wellness program. Then, maybe we can talk about apples in the kitchen.

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DOL Changes the Role of Retirement Plan Advisors

Posted on November 29, 2011 by Brian Menickella

Effective December 27, 2011, the Department of Labor (DOL) will impose new regulations to improve quality and access of investment advice for 401k and IRA participants.

This new regulation clarifies which type of retirement plan advisors will be permitted to give such advice. In an effort to minimize conflicts of interest, the DOL will allow advice to be given by retirement plan advisors who meet one of two requirements:

1. The fees they receive must not vary
2. The advice must be generated from a computer model that’s been verified as unbiased

The retirement plan market is currently served by two types of Financial Advisors:

Registered Representatives of a Broker/Dealer (commonly referred to as “brokers”) are paid commissions for retirement plans in the form of 12b1 fees from the investment options available for those plans. These fees and/or commissions vary from fund to fund creating a conflict of interest. Concern exists that if investment advice was to be given the participants could be led to the higher commission paying funds. Registered reps are held to a suitability standard.

Registered Investment Advisors (RIA’s) are paid a level fee as expressed as a percentage of assets under management and are paid directly from the plan assets, not the plan’s investment options. This eliminates ANY potential for conflicts of interest and paves the way for unbiased objective advice. RIA’s are held to a much higher fiduciary  Standard.

Currently under the new regulation, only the RIA’s will be permitted to give investment advice to the plan participants. Advice given by brokers will be considered a “prohibited transaction” under ERISA and subject to fines and penalties from The DOL.

Now, plan providers such as Vanguard, Fidelity, Principal Financial and many others will be able to continue to offer their plan services and partner with qualified retirement plan advisors to offer advice to plan participants.

It is anticipated that small companies will be very interested in the bundled options of a 401k plan with advisory services as they seek simple solutions without having to deal with many different vendors.

Given the rise in participation of retirement plans, the retirement security of America’s workers will increasing depend on the strength of their investment decisions and the quality of advice they receive.

Posted in Corporate Retirement | 2 Comments

The Economy’s Impact on Your 401(k)

Posted on November 21, 2011 by Stacia Bradley

In the current turmoil of the economy, many businesses are forced to make major  decisions that may negatively affect the overall morale their employees.  Unfortunately, these decisions are necessary to keep business afloat in such an economy.  Now more than ever, we are seeing layoffs, hiring freezes, organizational restructuring, reduction of benefits, the list goes on and on…

Overall, companies are juggling to control costs while still maintaining positive employee morale. Employees must be informed and recognize that a down economy is a natural part of the business cycle. Always remember that even in a down economy, investments are still assets…they may lose value and fluctuate, but they will never entirely disappear.

Employees are wondering many things, and amongst those most important is retirement planning.  “How does the economy affect my investments made to 401(k)?”

The 401(k) deduction is a specific percentage applied to the actual income received by a certain employee. Therefore, when an organization decides to cut an employee’s pay,
401(k) contributions will decrease as well. Many organizations have stopped matching their employee’s 401(k) contributions, and some have even adjusted their contribution levels.

A 401(k) is a long term investment that must be carried out with a long term view and goals.  Employees are encouraged to design their own investment strategy around their personal goals and objectives, and to always remember that regardless of the economy,
investments are assets.

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