In the months since the Pension Protection Act of 2006 was passed, it has seemed strangely quiet on the retirement front. The silence has surprised some of the experts who had prepared for an avalanche of inquiries about one of the more contentious and challenging provisions of the 900-page act: Title VI, describing new regulations for the prov
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sion of professional investment advice to retirement plans and participants. The lull, however, is probably deceptive. Industry insiders expect corporations will soon actively seek out investment professionals who can provide fiduciary advice to 401(k) investment committees, as well as to their participating employees.
The PPA provides a major motivator for shaking up the status quo of workplace retirement plans. Trial attorneys, who have already filed some high-profile lawsuits against corporations and their 401(k) providers, are scaring comp
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nies into re-examining their retirement plans. This fear, says ERISA attorney and benefits consultant Brooks Hamilton of Brooks Hamilton & Partners in Santa Fe, N.M, is completely justified. “One day we will see a flurry of 401(k) litig
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tion that will dwarf tobacco lawsuits,” predicts Hamilton, who suggests that workers’ attorneys will argue that undi
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closed 401(k) fees and expenses as well as menus of mediocre funds have destroyed the average worker’s ability to retire with dignity.
Most press coverage of the ambitious pension legislation has focused on the more easily digestible aspects of the act. What should capture the attention of advisors, however, is Title VI, which spells out how personalized advice can be dispensed to the millions of workers who desperately need a helping hand. Under certain circumstances, the act provides a safe harbor for plan sponsors who voluntarily decide to provide workers with investment advice. Some e
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perts are suggesting that the looming changes will ultimately roil far more than the 401(k) market. “We are beginning to see Congress telegraphing its intent to have all retirement assets safeguarded under a fiduciary standard of care, including IRA rollovers, which now top $3.7 trillion,” says Donald B. Trone, founder and chief executive officer of Fid
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ciary360, a fiduciary advisory firm in Sewickley, Pa. “Advisors,” he adds, “will have to start ramping up to provide fid
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ciary services.”