Fundamentals of ERISA Fiduciary Responsibility - PowerPoint Presentation

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Fundamentals of ERISA Fiduciary Responsibility February 25, 2015

CIEBA

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A brief history of ERISA:Statute enacted September 2, 1974 in response to Congressional concern over mismanagement and misappropriation of funds.Statute applies only to employee benefit plans of private employers and employee organizations.

Does

not require employers to establish employee benefit plans or to provide a minimum level of benefits, but regulates the operation and funding plans once established

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The ERISA Proposition:If you as a fiduciary:apply a disciplined process of analysis, to arrive at a reasonable set of alternative solutions, and

select from among those alternatives considering only the best interests of plan participants for the purpose of providing them benefits,

you will never be held liable for the consequences of that choice.

But that doesn’t mean you won’t get sued

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Definition of fiduciaryWho is a fiduciary?Anyone designated as the “named fiduciary;”

Anyone who has been delegated discretionary authority over plan assets or who exercises such discretionary

authority.

a

functional definition.Named fiduciary has overall fiduciary responsibility for the planNamed fiduciary may delegate fiduciary responsibility; in fact, may delegate the entire fiduciary responsibility for the plan, or a group of assets, or a function, except for the duty to prudently select and monitor the performance of the delegate.

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Your duties as a fiduciary:Duty of Loyalty – Also known as the Exclusive Benefit Rule. Fiduciary must act solely in the interest of plan participants and their beneficiaries

for

the exclusive purpose of providing benefits and defraying administrative expenses.

Seminal case: Donovan v. Bierwirth - a fiduciary must always act with an “eye single” to the interests of the plan participants and beneficiaries.

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Your duties as a fiduciary (cont.):Duty of Prudence - A fiduciary must act with the care, skill, prudence and diligence under the circumstances that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

The “prudent-expert” standard. Elements of a prudent decision-making process include:

Identifying relevant information;

Using experts when necessary; and

Monitoring the performance of those to whom duties are delegated.Courts have held that the test of prudence is one of process, not the ultimate success or failure of the investment.

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Your duties as a fiduciary (cont.):Duty to Diversify Plan Investments – Diversification helps minimize the risk of large losses to plans. Diversification is required unless under the circumstances it is clearly not prudent to do so (or the plan is investing in employer securities).

Diversification

is measured on a plan-wide basis.

Duty to Follow Plan Documents –must comply with the documents and instruments governing the plan to the extent such documents and instruments are consistent with the requirements of ERISA. Documents include:plan document;trust agreement;summary plan description; investment policy statement.Duty to Avoid Prohibited Transactions – A fiduciary must not cause the Plan to engage in a non-exempt prohibited transaction (prohibited transactions to be discussed in greater detail).

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structure of the prohibited transaction rules: Prohibited Transaction RulesEvery transaction between a plan and a party-in-interest is prohibited, except those that are expressly exempt from the prohibition by statute or rule.Two basic types of prohibitions:

Transactional prohibitions

Self-dealing prohibitions

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structure of the prohibited transaction rules: (cont.):Who is a party-in-interest?any fiduciary to the plan;

the employer;

any service provider to the plan;

any employee organization (union) whose members are covered by the plan;

an employee, officer, director or 10% shareholder of b, c, or d; and certain other parties affiliated with or related to them.klgates.com

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structure of the prohibited transaction rules (cont.):Section 406(a) of ERISA prohibits the sale, exchange or leasing of property

Lending of money or extensions of credit

Furnishing of goods, services or facilities

Transfer to or use by a party-in-interest of plan

assetsSection 406(b) of ERISA prohibits a fiduciary fromdealing with the assets of the plan for his own account;representing or acting on behalf of a party whose interests are adverse to the plan; orreceiving any consideration from a party dealing with the plan in a transaction involving plan assets.

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structure of the prohibited transaction rules (cont.):Types of exemptions:Statutory exemptions (enacted by Congress); and

Class exemptions (issued by administrative rule of the

Department of

Labor)are broad-based exemptions and may be relied on by anyone, provided the conditions are met.

Individual exemptions may be granted by the Department of Labor and may be relied on only by the parties and for the transactions specified in the individual exemption. Characteristics of exemptionsIn order to eliminate or minimize conflicts of interest, exemptions focus on:The identity of the fiduciary having authority to engage in the transaction;The nature of the transaction; andThe identity of the party-in-interest and their relationship with plan and the fiduciary.When investing plan assets, two levels of inquiry:Can you hire the manager or make the initial investment?What transactions can the manager or fund engage in after the initial investment?

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Emerging issues:

New Definition of Fiduciary

Current rule:

One offering advice about plan investments will be considered a fiduciary only if the

advice is given on a regular basis pursuant to a mutual agreement or understanding that the advice will serve as a primary basis for the investment decision. Under the proposed rule, it will take far less to bestow fiduciary status, but how much less remains uncertain.Major impact on rollovers to IRAsBrokers are currently subject only to the SEC suitability rule. Under the proposed DOL rule, recommendations about taking a distribution and rolling over to a brokered IRA would be considered fiduciary advice and must be provided solely in the best interest of the plan participant.The importance of the issue to providers of brokered IRAs was dramatically demonstrated recently by Charles Schwab when it “fired” plan recordkeeping clients with aggregate assets of $25 billion because they would not permit Schwab access to participants in order to market IRAs.

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Choosing an Investment Manager

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Retaining an investment manager:“Named Fiduciary” of plan has overall responsibility for operations of the plan, including investment managementERISA 402(c)(3) permits a named fiduciary to appoint an investment managerERISA provides that other plan fiduciaries are not liable for the acts or omissions of a duly appointed investment manager

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Retaining an investment manager (cont.):“Investment Manager” defined in 3(38)Has the power to manage, acquire or dispose of assets of the plan;

Has acknowledged

in writing

that it is a fiduciary of the plan; andIs either:Registered investment adviser under the IAA;Certain state registered advisers;

Bank; orInsurance company.klgates.com15

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Retaining an investment manager (cont.):3(38) Investment ManagerFull discretionary authorityGreater protection for other plan fiduciaries as long as prudently selected and monitored

3(21) Fiduciary

Usually, non-discretionary adviser

Named sponsor must approve and implement all transactionsNamed sponsor may be liable for 3(21) fiduciary's actions

Note: 3(38) investment manager is a 3(21) fiduciary also, but not necessarily vice versaklgates.com16

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Retaining an investment manager (cont.):Named fiduciary's duties when hiring an investment managerPrudent selectionIf no in-house expertise, consider hiring expert (e.g. investment consultant)

Ongoing monitoring

Performance reviews

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Retaining an investment manager (CONT.):PROHIBITED TRANSACTION ISSUESParty-in-interest prohibited transactionFiduciary of plan cannot cause plan to enter into a transaction with a party-in-interest

Party-in-interest includes service provider to plan (e.g. investment managers)

So, causing the plan to enter into an IMA with an investment manager is prohibited

BUT, ERISA 408(b)(2) provides exemption

“reasonable compensation”Regulation 408b-2 requires significant compensation disclosure to planklgates.com18

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Retaining an investment manager (cont.):QPAM ExemptionQualified Professional Asset ManagerImportant (but not technically required) that investment manager will qualify as QPAM

Party-in-interest prohibited transaction effectively prohibits the plan from transacting with anyone who provides any services to the plan and their affiliates

Assumption that most financial service firms are somehow parties in interest

So, plan prohibited from transacting with financial services firms (e.g. brokers, etc.)

But not prohibited if transaction is directed by a QPAM (PTCE 84-14)klgates.com19

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Retaining an investment manager (CONT.):QPAM definitionMust acknowledge in a written management agreement that it is a fiduciary with respect to the plan that has retained it as a QPAM

Must be:

a

bank or savings association with equity capital of at least $1 million;

An insurance company with a net worth of at least $1 million;An investment adviser registered under the Investment Advisers Act of 1940 which has (i) more than $1 million shareholders’ or partners’ equity, and (ii) more than $85 million total client assets under its management and control as of the end of its most recent fiscal year.klgates.com20

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Retaining an investment manager (cont.):When QPAM will not workIf party-in-interest (e.g. broker) is affiliated with QPAMIf party-in-interest can hire or fire QPAMIf plan makes up more than 20% of QPAM’s AUMEmployer securitiesSecurities Lending

Mortgage financing arrangements

Mortgage pools

“QPAM for a Day”klgates.com

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ERISA Considerations Relevant to Investments in Funds

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ERISA CONSIDERATIONS FOR PLAN INVESTMENTS IN HEDGE FUNDS AND SIMILAR VEHICLES

Questions

 

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)Real Estate Fund (Privately Offered)Private Equity Fund(1) Is investment in the fund permitted under the plan documents?

A plan fiduciary is obligated to act in accordance with the plan’s governing documents insofar as such documents are consistent with ERISA. ERISA § 404(a)(1)(D).

Since ERISA does not establish lists or categories of permissible or prohibited investments, the fiduciary should be permitted to invest in any type of fund if the investment (i) is expressly permitted, or not expressly prohibited, by the plan documents, and (ii) conforms to other relevant requirements of ERISA described in questions (2) through (5) below.

(2) Is investment in the fund being made for a proper purpose?

A plan fiduciary must discharge his or her duties “solely in the interest” of the plan participants and for the “exclusive purpose” providing benefits to participants and defraying reasonable expenses of plan administration. ERISA § 404(a)(1)(A).

While each situation must be examined in light of its particular facts and circumstances, it would be improper if, for example, a plan invested in a fund for the purpose of “seeding” the fund or “shoring up” a fund experiencing significant outflows.

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Questions 

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

Real Estate Fund (Privately Offered)

Private Equity Fundklgates.com24(3) Is investment in the fund prudent? Basis for selection Diversification Other considerations A plan fiduciary satisfies ERISA’s prudence requirement with respect to a particular investment if, among other things, the fiduciary determines that the investment is reasonably designed, as part of the plan’s portfolio (or the portion of the portfolio managed by the fiduciary), to further the purposes of the plan, taking into the account the risk of loss and opportunity for gain associated with the investment. DOL “Prudence” Regulation (safe harbor), 29 CFR § 2550.404a-1.

Diversification is judged with respect to (i) the portion of plan assets managed by the fiduciary making the investment, and (ii) the ultimate investment of plan assets (i.e., look through to fund portfolio). ERISA Conference Report, at 304-05.

The fiduciary should take other aspects of fund internal operations into account in determining whether it is appropriate to commit plan assets to the investment (e.g., “reasonable” fees, as required by ERISA § 408(b)(2), conflicts of interest, valuations, liquidity restrictions, exculpation/indemnity of fund manager, leverage/UBTI, and whether or not fund assets are “plan assets,” as discussed in Question (6) below)

For more information, see ERISA Advisory Council Report: “Hedge Funds and Private Equity Investments” (November 2011) recommending that the DOL provide guidance for plan sponsors, including suggested best practices, for evaluating plan investments in these funds in a manner consistent with the obligations of plan sponsors as fiduciaries under ERISA.

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Questions 

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

Real Estate Fund (Privately Offered)

Private Equity Fundklgates.com25(4) Would an investment in the fund be a prohibited transaction between the plan and a “party in interest” of the plan?A plan investment in a pooled investment fund maintained by a bank or insurance company should not be prohibited, even if the bank or insurance company is a party in interest of the plan, if the requirements of ERISA § 408(b)(8) are satisfied.Although arguments have been raised on both sides of the issue, a plan investment in a fund should be viewed as a transaction between the plan and the fund, not between the plan and the fund manager (or general partner). In such case, the issue is whether the fund itself is a “party in interest” of the plan.

Although rarely the case, a fund could be considered a party in interest of the plan if, e.g., 50% or more of the fund’s equity interests (LLC member/LP interests, shares, etc.)

or

voting power is owned by a person (e.g., the fund manager) who otherwise is a party in interest of the plan by reason of being a plan fiduciary or service provider (e.g., investment manager of the plan). ERISA § 3(14)(G). This situation arises most often in the case of funds established under offshore jurisdictions that include “founders shares” or “manager shares” that hold all voting power with respect to the fund, where such shares are held by the fund manager.

If the fund is a party in interest of the plan, the plan fiduciary should ensure that the investment conforms to an available prohibited transaction exemption (e.g., QPAM).

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Questions 

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

Real Estate Fund (Privately Offered)

Private Equity Fundklgates.com26(5) Would an investment in the fund be a prohibited transaction involving self dealing or conflict of interest by a plan fiduciary?An investment that satisfies conditions of ERISA § 408(b)(8) should not be considered to involve prohibited fiduciary self dealing or conflict of interest, even if the bank or insurance company is a fiduciary of the plan. DOL Advisory Opinion 96-15A.Whether a plan investment in a fund would involve fiduciary self dealing or conflicts of interest generally depends on the facts and circumstances of each situation. A situation that typically gives rise to these issues is that in which an investment manager of a plan causes the plan to invest in a fund advised or managed by the manager or an affiliate (an “affiliated fund”). Similar issues arise where the manager of a “plan asset fund” (described below) in which the plan has invested invests the assets of that fund in an affiliated fund.

While each situation must be addressed based on its own facts and circumstances, the issues typically will be whether the plan fiduciary would receive an additional fee as a result of the investment or whether the fiduciary would be viewed as acting on behalf of both the plan and the fund in connection with the investment transaction.

(6) Will fund assets be treated as the assets of investing ERISA plans (i.e., “plan assets”)?

Yes, unless the fund is registered under the Investment Company Act of 1940. DOL “Plan Asset” Regulation, 29 CFR § 2510.3-101(h)(1).

Yes, unless “benefit plan investors” hold less than 25% of the equity interests in the fund. DOL “Plan Asset” Regulation, 29 CFR § 2510.3-101(a)(2), (f).

Yes, unless (i) “benefit plan investors” hold less than 25% of the equity interests in the fund, or (ii) the fund qualifies as a “real estate operating company.” DOL “Plan Asset” Regulation, 29 CFR § 2510.3-101(e).

Yes, unless (i) “benefit plan investors” hold less than 25% of the equity interests in the fund, or (ii) the fund qualifies as a “venture capital operating company.” DOL “Plan Asset” Regulation, 29 CFR § 2510.3-101(d).

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(7) Is the fund manager eligible to be appointed as an “investment manager” under ERISA so that asset management responsibility can be delegated properly and other plan fiduciaries may be protected from liability for the manager’s acts/omissions?

A bank or trust company that satisfies the definition of “bank” under the Investment Advisers Act of 1940 (“Advisers Act”), and an insurance company qualified under the laws of more than one state to manage plan assets may be an investment manager. ERISA § 3(38)(B)(iii), (iv).

An investment adviser registered under the Advisers Act or state law (subject to certain filing requirements) may be an investment manager. ERISA § 3(38)(B)(i), (ii).

(8) Have the necessary procedural steps been taken to appoint the fund manager as an investment manager?

The investment manager must be appointed as such by a “named fiduciary” of the plan with respect to control or management of plan assets. ERISA § 402(c)(3).The investment manager must acknowledge in writing that it is a fiduciary with respect to the plan. ERISA § 3(38)(B)(iii), (iv).The appointment process generally is handled in the fund documents (i.e., participation agreement, insurance contract, subscription agreement).klgates.com27

Questions

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

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 QuestionsBank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

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(9) Where the fund may invest in other funds that may be ERISA plan-asset funds (“underlying funds”), does the fund manager have the necessary authority to appoint the managers of the underlying funds as ERISA investment managers?If permitted by the plan, the plan may appoint the fund manager as a named fiduciary of the plan for the limited purpose of appointing other investment managers. DOL Advisory Opinion 83-026A.Alternatively, a named fiduciary of the plan with authority to appoint investment managers may delegate that authority to the fund manager. DOL Advisory Opinion 82-30A.The appointment or delegation process generally is handled in the fund documents.

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(10) Does the fund manager qualify as a Qualified Professional Asset Manager (“QPAM”) eligible to rely on the QPAM Exemption (PTE 84-14)?

A bank or trust company that satisfies the definition of “bank” under the Advisers Act qualifies as a QPAM if it has equity capital in excess of $1 million.

An insurance company subject to supervision and examination by a state insurance company authority qualifies as a QPAM if it has net worth in excess of $1 million.

The bank or insurance company also must have the power to manage plan assets under applicable law.An investment adviser qualifies as a “QPAM” if the adviser (i) is registered under the Advisers Act, (ii) has more than $85 million total client assets under its management and control, and (iii) has more than $1,000,000 shareholders’ or partners’ equity, or all of its liabilities (including liabilities for breach of fiduciary duty under ERISA) unconditionally guaranteed by certain qualifying entities.In addition, neither the QPAM, an affiliate, nor a person who owns 5% or more of the QPAM may have been convicted or released from imprisonment within ten years prior to the date of a transaction undertaken pursuant to the QPAM Exemption for (i) any felony involving abuse or misuse of its position of trust with respect to a plan, (ii) any felony involving the business of an adviser, bank, broker-dealer, or insurance company, (iii) crimes described in ERISA § 411, and (iv) certain other crimes.The QPAM also must acknowledge in a written management agreement that it is a fiduciary with respect to the plan that has retained it as a QPAM. The appointment process generally is handled in the fund documents.[In addition to requirements for qualifying as a QPAM, the QPAM exemption is subject to a number of special rules and exceptions. The investing plan fiduciary generally should be satisfied that the fund manager will take appropriate steps to conform to applicable transactional requirements of the QPAM Exemption.]

 

Questions

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

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(11) Have the fund’s disclosures and other documents been reviewed to identify additional potential ERISA issues?

[Note that the fund manager will be a fiduciary of the plan along with the plan fiduciary making the decision to invest in the fund and other plan fiduciaries and that the relationship among the fiduciaries will be subject in part to ERISA’s co-fiduciary liability rules contained in ERISA § 405. A non-exhaustive list of questions and potential issues described in next column.]

Does the fund manager have appropriate procedures in place to ensure compliance with prohibited transaction restrictions under ERISA and the Internal Revenue Code and with ERISA rules and restrictions under ERISA § 407 relating to investments in employer securities and/or real property?

If the fund manager receives asset-based fees, will fund asset values be determined in a manner that does not involve a conflict of interest for the fund manager?If the fund manager receives a performance fee, does the manner in which the fee is determined meet conditions specified in relevant DOL advisory opinions (e.g., Advisory Opinion 89-28A)?Are any restrictions on withdrawals or redemptions from the fund consistent with the requirement of ERISA § 408(b)(2), which requires that the plan be able to terminate the services of the fund manager without penalty on reasonably short notice under the circumstances?Are expenses paid from fund (plan) assets permissible under ERISA and relevant DOL pronouncements? (Expenses that may raise issues include, e.g., expenses associated with fund marketing and the purchase of insurance covering the fund manager.)Will the fund provide disclosures required by ERISA (i.e., information required to complete Form 5500, including Schedule C, fund manager compensation disclosures required by ERISA § 408(b)(2))?Questions

Bank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

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(11) Have the fund’s disclosures and other documents been reviewed to identify additional potential ERISA issues?

[Note that the fund manager will be a fiduciary of the plan along with the plan fiduciary making the decision to invest in the fund and other plan fiduciaries and that the relationship among the fiduciaries will be subject in part to ERISA’s co-fiduciary liability rules contained in ERISA § 405. A non-exhaustive list of questions and potential issues described in next column.]

Does

the fund manager have conflicts of interest (described in the fund documents), apart from any relating to valuations described above, that raise ERISA issues (e.g., use of affiliates, cross trading)?Are provisions in the fund documents providing for the exculpation and/or indemnity of the fund manager consistent with limitations on fiduciary exculpation/indemnity imposed by ERISA § 410 and applicable DOL pronouncements?Is the fund manager (and any other person considered to “handle” fund (plan) assets) bonded to the extent required by ERISA?If fund invests in securities of foreign issuers and/or foreign currency, will the fund conform to requirements of ERISA § 404(b), relating to location and custody of “Indicia of ownership” of plan assets?If the fund permits (or requires) contributions or redemptions “in kind,” will such transactions be handled in a manner that does not involve an impermissible conflict of interest by the fund manager?QuestionsBank Collective Trust Fund / Insurance Company Separate Account

Hedge Fund (including Fund-of-Fund)

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Fundamentals of ERISA Fiduciary Responsibility

Miscellaneous Hot Topics

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Litigation involving portfolio securities2010 US Supreme Court decision in Morrison v. National Australia Bank Ltd. held that there is no private right of action under federal securities laws for fraud involving securities that were not offered and sold in the United States.

Securities

fraud litigation

brought in the UK and other international venues require that all claimants file claims as named plaintiffs; no unnamed class members.In the face of the restrictions of Morrison,

a unique case was brought by US shareholders of BP in Texas state court alleging that BP deception before and after Deep Water Horizon constituted common law fraud.Cases highlight the potential for conflicts between corporate interests and fiduciary responsibility.klgates.com33

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SEC examination of private equityIn a speech in May, 2014 Andrew J. Bowden, Director, Office of Compliance Inspections and Examinations discussed recent findings leading to enhanced examination of private equity portfolios, suggesting a need for more thorough due diligence by qualified plan investors:As a result of lack of effective controls, the private equity adviser can instruct a portfolio company it controls to:

hire the adviser, or an affiliate, or a preferred third party, to provide certain services and to set the terms of the engagement, including the price;

instruct the company to pay certain of the adviser’s bills or to reimburse the adviser for certain expenses incurred in managing its investment in the company

Limited

partnership agreements may lack clearly defined valuation procedures, investment strategies, and protocols for mitigating certain conflicts of interest, including investment and co-investment allocation.klgates.com34

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investment in employer securitiesFifth Third v. DudenhoefferCourts of Appeals

had applied a

“presumption of prudence”

in analyzing a plan fiduciary’s decision to buy or hold employer stock, particularly where the plan documents require the plan to maintain an employer stock fund.

The presumption could be overcome only by showing “a precipitous decline in the employer’s stock, combined with evidence that the company is on the brink of collapse,” or undergoing serious mismanagement, or faced “impending collapse” or “dire circumstances.” Supreme Court rules there is no presumption of prudence. However . . .Plan fiduciaries can rely on the fact that the market is the best indicator of the value of the company, absent “special circumstances.”A plan fiduciary who is privy to adverse inside information need not violate the federal securities laws by acting on that inside information in order to satisfy his fiduciary obligation to plan participants.But, see Harris v. Amgen – Ninth Circuit rules that disclosure of non-public information would not harm plan participants any more than the harm that ultimately resulted after public disclosure, and earlier disclosure would have prevented additional losses.

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Regulatory Enforcement:Department of LaborFor many years, a principal focus of DOL enforcement was actions against employers for failing to timely deposit employee salary reduction contributions in trust, and those enforcement actions will continue (see, e.g., settlement with Miles Associates, a 401(k) recordkeeper). There is likely to be an increase in enforcement actions taken with respect to plan investments.

Western Asset Management – I

n a joint action with the SEC, the DOL reached a $21 million settlement with Western Asset over the purchase of prohibited securities.

Western

Asset used funds from ERISA accounts  to purchase approximately $90 million of securities that were prohibited for purchase and ownership by such accounts. The investigation determined that the company's own compliance system recognized that the terms of the securities prohibited their ownership by ERISA-covered entities. However, Western Asset overrode the system, allowing the accounts to improperly purchase and hold the securities in their portfolios.

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Margin collateralLehman bankruptcy exposes risk of broker insolvency to security of customer collateralISDA standard agreements continue exposure of qualified plan collateral to counter-party credit riskMutual funds entitled by law to have collateral “held away” by third-party custodian eliminating broker or counter-party credit risk

Managers generally unable or unwilling to arrange for margin collateral to be held by third-party custodian

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Investment Advice arrangements

Computer-based models :

Must be certified by an “eligible investment expert” that describes the methodology used in the model and how that methodology applies generally accepted investment theories, takes into account historic performance, investment fees and individual information about a plan participant, and does not inappropriately

favor

investments offered by the fiduciary adviser or result in greater income to the fiduciary advisor. Level fee arrangement: Investment advice can also be provided on an individual basis provided that the advisor does not receive any fee that varies depending on which investment choices the advisor selects.Target Date Funds: Proposed parallel DOL and SEC regulations would require additional disclosures about the glide path for a target-date fund as well as the relative mix of equities and fixed-income investments at the fund’s stated target date.Hybrid arrangements: Model asset allocation portfolios using only designated investment options currently available under the plan. Characterized by manager as a “managed account” and not investment advice program or a target date fund. Additional fees are paid by participants on top of management fees in underlying

funds; requires careful scrutiny.

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