The Four Pillars of Retirement Plans: The Fiduciary Guide to Participant Directed Retirement Plans

257 Pages·2009·1.64 MB·English

by  David B. Loeper

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practical solutions to these new problems, identifying H In the February 2008 landmark Supreme Court rul-
Praise for
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how some of the “safest” fi duciary actions are no lon- ing LaRue v. DeWolff, Boberg & Associates, Inc., the

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ger so safe, what you can do about getting ahead of the Court ruled on the ability of an individual participant
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THE FOUR PILLARS of
curve to avoid needless liability, and where to locate U to sue retirement plan fi duciaries. This ruling signifi -
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free resources that fi duciaries can use to help mitigate cantly changed the landscape of fi duciary liability and

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their risks and help to document procedural prudence risks for trustees. With the Court’s decision that any
RETIREMENT PLANS I
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in the future landscape for participant-directed plans. individual can sue for breaches based solely on the im-
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For fi nancial advisors, attorneys, and other fi - A pairment of their personal plan balances, a potential
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duciaries, The Four Pillars of Retirement Plans will be fl oodgate of new lawsuits may have been opened. This
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“This up-to-the-minute book shows how the Supreme Court’s recent LaRue de-
an invaluable resource for dealing with the monumen- has profound implications for exercising new forms of
cision has reshaped the world of retirement plans. Rules governing fi duciaries of O
tal changes ahead. F procedural prudence designed specifi cally for partici-
defi ned benefi t plans may no longer protect fi duciaries of defi ned contribution

plans and may actually harm them. The Four Pillars of Retirement Plans is indis- R pant-directed funding and investment selection.
DAVID B. LOEPER is the E
pensable for plan sponsors and other fi duciaries, and for all those advising them, The Four Pillars of Retirement Plans provides a
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founder and CEO of Financeware, including investment advisors and attorneys.” IR road map that all fi duciaries can use to adjust their ac-
Inc. He has appeared on CNBC and E
—W. Scott Simon, JD, CFP®, AIFA®, author of The Prudent tions to shelter themselves from the massive liabilities
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Bloomberg TV, served on the Invest- Investor Act: A Guide to Understanding and Morningstar they may face—as well as serving as a guide for attor-
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ment Advisory Committee of the $30 “Fiduciary Focus” columnist N neys representing retirement plan participants.
billion Virginia Retirement System, and was chairman T
Drawing on his nearly twenty-fi ve years of
“This book is a must-read for all plan sponsors, fi nancial advisors, and ERISA
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of the Advisory Council for the Investment Manage-
attorneys if they have any hope of defending themselves from the mountain of L ERISA experience as a fi duciary, author, and Regis-
ment Consultants Association (IMCA). He earned the litigation looming on the horizon for all participant-directed retirement plans A tered Investment Advisor, David Loeper details his
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CIMA® designation (Certifi ed Investment Manage- and provides a road map to easily modify antiquated procedures born in the four pillars of retirement plans—the specifi c four pil-
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ment Analyst) from Wharton Business School in 1990 defi ned benefi t era that contradict today’s participant-directed retirement plans.
lars of ERISA concepts that need procedural adjust-
in conjunction with IMCA. Loeper is also the author Plaintiff’s counsel is sure to have read this book; if you don’t, you will be defense- TH ment by trustees and advisors. In Part I of the book,
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of Stop the Retirement Rip-off and Stop the Investing less in these suits.” DIR FID he examines each of the four pillars from a perspective
Rip-off, both published by Wiley. —Edward Siedle, Esq., “The Pension Detective” and President of E U
C C of the changing landscape toward participant-directed
Benchmark Financial Services, Inc. T IA
ED RY retirement plans, the generally accepted procedures
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Jacket Design: Ciro Eliseo “If you are a trustee, plan sponsor, or fi nancial advisor serious about the retire- E U of the past that have become outdated, the actions
Jacket Photograph: © Ciro Eliseo ment plan marketplace, you MUST read this book, or you will be ill-equipped to TIRE IDE all fi duciaries need to take to adjust to this landscape,
deal with the fi duciary meltdown non-readers will be facing.” ME TO and perhaps, more importantly, the rationale behind
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—John Lohr, ERISA attorney and author T P AR such changes. In Part II, he explains to plan sponsors,
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AN IC investment managers, plan consultants, and fi ducia-
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A ries why the Supreme Court’s ruling will change the
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- environment for measuring their responsibilities and
liabilities in years to come. In Part III, he offers some
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The Four Pillars of
Retirement Plans
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The Four Pillars
of Retirement Plans
The Fiduciary Guide to
Participant-Directed
Retirement Plans
David B. Loeper
John Wiley & Sons, Inc.
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Copyright © 2009 by Financeware, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted
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to the accuracy or completeness of the contents of this book and specifi cally disclaim any
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Library of Congress Cataloging-in-Publication Data:
Loeper, David B.
The four pillars of retirement plans : the fi duciary guide to participant directed
retirement plans/David B. Loeper.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-470-44999-8 (cloth)
1. Pension trusts—United States—Management. 2. Pension trusts—Investments—
United States. I. Title.
HD7105.45.U6L599 2009
658.3'253—dc22
2009004134

Printed in the United States of America
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This book is dedicated to the 100 million retirement plan
participants that trust the fi duciaries of their plan to act in the
interest of plan participants. May each fi duciary refl ect upon
the profound weight of this responsibility and how their actions,
or lack thereof, impact the lives of others.
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Contents
Acknowledgments ix
Introduction 1
Part One: Pillars Made of Sand? 11
Chapter 1 The Four Pillars of Fiduciary Conduct 13
Chapter 2 Pillar #1: Assets Are Invested for the Sole Benefi t
of Participants 29
Chapter 3 Pillar #2: Minimize Risk of Large Losses 41
Chapter 4 Pillar #3: Costs Are Reasonable for the Services
Being Provided 53
Chapter 5 Pillar #4: Diversifi cation Rule Applied to Participant Direction 59
Part Two: Returns and Wealth Do Not Necessarily
Go Hand in Hand—Emerging Fiduciary
Standards 83
Chapter 6 Exposing the Wealth Management Contradiction 87
Chapter 7 Comparing Approaches—Managing Wealth versus
Managing Return 97
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CONTENTS
Chapter 8 Market Misbehavior: Over- or Underfunding Investor Goals 113
Chapter 9 The Data: Seeing the Effect of Real Markets on Client Goals 127
Chapter 10 Superior Results with True Wealth Management 153
Part Three: Practical Solutions and Resources for
Meeting Fiduciary Obligations 169
Chapter 11 Safe Harbors that Are Unsafe (Particularly
Section 404(C)) 171
Chapter 12 Tools and Resources for Fiduciaries 181
Chapter 13 The Skill versus Luck Debate 195
Summary 225
Notes 231
About the Author 235
Index 237
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