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November 8, 2002
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Assistant Secretary Combs met with the Advisory Council at its first meeting
this year and indicated that the Department was considering an educational
initiative to help fiduciaries comply with the myriad requirements of ERISA.
This is, she noted, consistent with the Department’s view that generally it is
preferable to assist fiduciaries with compliance than to catch and correct
errors after the fact. It is more cost-effective for the department and for
plans, and works better for participants (since errors once made can be
difficult to correct).
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Assistant Secretary Combs urged us to take on as one of
our projects this year the topic of fiduciary education, which she said would be
particularly valuable to the Department. The Council agreed to take on this
project, with the hope that it would provide important information for the
Department in its educational initiatives. In doing so, the Council was also
aware that earlier this year the House of Representatives passed a pension bill
that included an amendment offered by Representative Marge Roukema, which would
have required the Department of Labor to make educational resources available on
an ongoing basis to persons serving as fiduciaries.
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At the outset we tried to work out the issues that we would need to consider.
A list of these questions appears as an Appendix to this report. But among the
most important of these questions were (i) what do we mean by fiduciary
education; (ii) what types of educational opportunities are currently available
to plan fiduciaries; (iii) how effective are these programs in helping fiduciary
performance; (iv) what are the types and causes of fiduciary errors; (v) do
fiduciaries in large and small plans have different educational needs; (vi) what
types of subjects and issues should fiduciary education emphasize; and (vii)
what is the proper role for the Department of Labor to take in developing,
expanding, and improving fiduciary education.
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We want to make four additional observations at the outset:
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First, we heard from an extraordinary array of able and thoughtful
individuals, some representing professional organizations and some speaking on
their own behalf. They included representatives of the major organizations of
professionals who advise fiduciaries on compliance issues (the American Bar
Association, the American Institute of Certified Public Accountants, and the
American Society of Pension Actuaries); attorneys for small and large plans
(including attorneys who educate their clients about fiduciary matters);
attorneys for participants; a representative of the largest insurer of ERISA
fiduciaries; representatives of the primary professional organizations
representing large and small plan sponsors; the professional organization of
human resource professionals; representatives of sponsors of the some of the
most imaginative and comprehensive educational programs for fiduciaries; the
creator of BenefitsLink, the computer-resource most utilized by benefits
professionals; a former administrator of EBSA; representatives of the IRS, the
Department of Labor, and the National Association of Securities Dealers (NASD)
involved in educational outreach. There were, not surprisingly, important
differences in perspectives, but there was also a surprising amount of agreement
on where education can help fiduciaries perform better. We strongly urge anyone
interested in the issue of fiduciary education to read through the transcripts
of our work group’s hearings and the many educational materials and other
exhibits provided to us during those hearings.
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Second, most fiduciaries have their hearts in the right place and want to
perform well. This may not be surprising but it certainly supports the idea that
education has an important role to play in fiduciary compliance: a pure heart
and an educated head are the prerequisites for a high level of fiduciary
performance. A Departmental initiative to expand and improve fiduciary education
can make a real difference for the well-meaning but untrained fiduciary.
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Third, there was virtual unanimity that fiduciaries in small and medium sized
plans are different from fiduciaries of large plans: they face different issues,
have less time and resources to obtain education and professional advice, and
pose particular problems with respect to outreach efforts by the Department of
Labor and organizations that sponsor educational programs. We heard witness
after witness indicate that many fiduciaries of small plans are unaware that
they are cloaked in fiduciary status and ignorant of the duties such status
requires. Many of our recommendations are aimed at providing education for such
fiduciaries, for this is where we think educational efforts can have the most
substantial positive impact.
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Fourth, as one of our witnesses put it, with the collapse of retirement
savings plans in Enron and other recent corporate failures focusing attention on
and awareness of fiduciary responsibility, we may be in a “teachable moment.”
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At our first meeting, on July 17, 2002, the working group discussed the
issues to be studied. The working group also heard testimony from Donald Trone,
President of the Foundation for Fiduciary Studies; Martha Hutzelman, a partner
in the law firm of Bosley Hutzelman; William Schmidt, a partner in the law firm
of Kirkpatrick Lockhart; John Baylely, Vice President of the Chubb Group of
Insurance Companies; David Rhett Baker, a benefits lawyer who runs BenefitsLink;
Marc Machiz, a partner at the firm of Millstein, Cohen, Hausfield & Toll;
Eli Gottesdiener, a partner at the Gottesdiener Law Firm; Jane Zanglein, Provost
of the National Labor College at the George Meany Center; Bob Pleasure,
Executive Director of the AFL-CIO’s Center for Working Capital; Laurie P.
Havanec, Director, Employee Benefits and Human Resources Systems at United
Technology Corp., on behalf of the ERISA Industry Committee; Ed Ferrigno, Vice
President, Profit-Sharing/401(k) Council of America; and Mary Jost, Senior
Director of Education, International Foundation on Employee Benefits.
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At our second meeting, on September 19, 2002, the working group heard
testimony from Phyllis Borzi, counsel at the law firm of O’Donoghue & O’Donoghue
and a research professor in the Center for Health Services Research and Policy
at George Washington University; Bruce Ashton, a partner in the law firm of
Reish, Luftman, McDaniel & Reicher, on behalf of the American Society of
Pension Actuaries; Richard Koppes, counsel at the law firm of Jones-Day and
Co-Director of Executive Education Programs at Stanford University School of
Law; Scott Henderson, a partner at the law firm of Bingham & McCutchen and
program advisor and faculty member at the Fiduciary College, Stanford University
School of Law; John Hotz, Deputy Executive Director, Pension Rights Center; Gary
Tidwell, Vice President, National Association of Securities Dealers; Michael
Barry, President, Plan Advisory Services Group; Joyce Mader, a partner at the
law firm of O’Donoghue & O’Donoghue; Antoinette Pilzner, a lawyer at
Butzel Long, on behalf of the Society of Human Resource Management; Mark O’Donnell,
Director of Customer Education and Outreach, Employee Plans Division, Internal
Revenue Service; and Alan Lebowitz, Assistant Secretary, Program Operations,
EBSA, Department of Labor.
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At our third meeting, on October 17, 2002, the working group heard testimony
from Dennis Mahoney, Director, Certified Employee Benefit Specialist Program,
Wharton School, University of Pennsylvania; Lisa Winton, Technical Manager,
AICPA, Ian Lanoff, a partner at the Groom Law Group; and Paul Antsen, Technical
Training Director, EBSA, Department of Labor.
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Fiduciary Education Can and Does Play an Important
Role in Compliance with ERISA
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No witness testified against the value of fiduciary education. Indeed, we
heard considerable testimony that fiduciaries want to do the right thing but
need to be educated about their responsibilities in order to fulfill them. One
of our witnesses, Richard Koppes, put it well when he said that a pure heart and
an empty head were not enough, “that there is no such thing as a prudent
klutz.” Indeed, the need for education of ERISA fiduciaries is pronounced,
whether a fiduciary is involved with plans of large or small employers. ERISA is
an exceedingly complex and continually evolving statute. Several of our
witnesses have noted that the statute is at once complex and sweeping in scope,
and that over time a sometimes bewildering array of judicial and agency
interpretations have made it more so.(1) ERISA is one area in which you may not
only need a weatherman but may need to obtain an advanced degree in meteorology
to know which way the wind blows.
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Education for fiduciaries of both deferred compensation and employee welfare
plans is essential if such fiduciaries are to keep current. And as we will
discuss below, while it may be unreasonable to expect that fiduciaries of plans
in small firms can keep abreast of every development in such a complex
regulatory environment, such fiduciaries are still in need of education,
particularly about what a fiduciary under ERISA is and what responsibilities
such fiduciaries have.
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Small Plan (and other “part-time”) Fiduciaries
Have Different Educational Needs than Professional Fiduciaries of Large
Plans
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Virtually every witness who appeared before us stressed that there are two
universes of ERISA fiduciaries: professional fiduciaries, who generally are
responsible for the administration and asset management of large plans; and “part-time”
fiduciaries, who tend to come in two varieties: the fiduciary of a plan of a
small employer and the relatively inexperienced employee or union member
suddenly thrust into a fiduciary role by being named to a company benefits
committee or to a trustee position in a Taft-Hartley Trust. As noted above,
professional fiduciaries are expected to keep current with regulatory
developments and investment strategies; they must know the statute well enough
to handle quotidian plan administrative details and to recognize complex
situations requiring professional advice. Programs for such fiduciaries are
probably not appreciably different from programs aimed at professionals
practicing in the employee benefits area.
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The fiduciary of a small plan and (the untrained employee or union member who
suddenly becomes a fiduciary) to a large extent have different needs. Several of
our witnesses noted that the fiduciary of a small plan is likely to have many
other job responsibilities and may be unaware that he or she is a fiduciary.
Dennis Mahoney, who develops materials for the EBSA’s internal training
program and who also develops curriculum for the Employee Benefits Specialist
Certification program jointly sponsored by the Wharton School and the
International Foundation of Employee Benefits, observed
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Oftentimes the administrator of benefit plans at a small employer has
multiple administrative responsibilities within the organization and spends a
minor portion of his or her time with benefit programs. He or she may have so
many other job responsibilities that he or she is hardly aware of the fiduciary
requirements of the law. At seminars on fundamentals, I've often met individuals
who are literally amazed to learn of the attendant fiduciary responsibilities in
administering a benefit plan.
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This idea that many small plan fiduciaries are unaware of their status or
responsibilities was echoed by numerous other witnesses. For example, Antoinette
Pilzner, speaking on behalf of the Society of Human Resource Management, notes:
“Many HR professionals fail to realize that the basic day-to-day tasks of
administering an employee benefit plan can give rise to fiduciary
responsibility.” Similarly, Ed Ferrigno of the Profit Sharing/401(k) Council
of America, testified that “while many small plan sponsors are adequately
aware of their fiduciary responsibilities, we all know that many others when
asked will likely respond what is a fiduciary?” Thus, education for
fiduciaries of small plans must be concerned with such basics issues as what a
fiduciary is and what responsibilities a fiduciary has.
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In addition, small plan fiduciaries are not likely to have to deal with
sophisticated investment issues or the voting of proxies on stock. They are more
likely to need education about how to exercise prudence when selecting plan
service providers and investment providers, how to resolve questions regarding
plan benefits, how to fulfill statutory obligations on reporting, disclosure,
and participant communications, and how to recognize and solve other compliance
issues as they arise. Martha Hutzelman, for example, noted that some of the
areas in which small plan fiduciaries would benefit from education are “claim
administration, communicating with participants, preparing required notices and
disclosure.” Some of our witnesses, including Ian Lanoff, also suggested that
small plan fiduciaries would benefit from elementary education about types of
investments.
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There are Numerous Educational Resources Available
Today, But they are Mostly for the Professional Fiduciary and Their
Professional Advisors
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We heard testimony indicating that there is a rich plethora of educational
resources available today. The International Foundation for Employee Benefits
sponsors numerous high quality programs. The Fiduciary College at Stanford
University and the Institute for Fiduciary Studies offer sophisticated programs
dealing with sophisticated investment and other asset management issues. The
Foundation for Fiduciary Studies has been developing best practices for
determining investment choices and the Related Center for Fiduciary Studies at
the University of Pittsburgh sponsors programs to deepen fiduciary understanding
of investment management. The Labor College at the George Meany Institute and
the National Coordinating Committee on Multiemployer Plans run training and
education programs for trustees of Taft-Hartley plans. ASPA, the ABA, the
American College of Employee Benefits Counsel, AICPA all sponsor high-quality
programs for their members. More than 11,000 individuals, many plan fiduciaries,
subscribe to BenefitsLink, a daily computer newsletter on regulatory and other
developments. There are live programs, web-based programs, satellite programs,
phone-in conferences, written materials. One of our witnesses, Phyllis Borzi,
noted that one could, if one wanted, attend an ERISA educational program every
day of the year.
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We also note that not all of the available programs are sponsored by
independent organizations. Scott Henderson, a partner at Bingham & McCutchen
and a program advisor and faculty member at the Fiduciary College, Stanford
University School of Law, noted that some programs, for example, are sponsored
by investment firms; while these programs can be quite valuable, they are not
likely to give much attention to controlling investment fees. Such programs are
also likely to contain sales pitches.
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There are Obstacles to the Creation of Formal
Educational Programs for Small Employers
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There are reasons why the market has not produced many formal educational
programs for fiduciaries of small plans. Such fiduciaries often have many
non-benefits responsibilities at their firm and cannot afford the time to attend
educational programs for fiduciaries. Small firms might find it hard to justify
the financial cost of tuition, travel and other expenses to attend out-of-town
programs. Moreover, it is not necessarily easy to do outreach to such
fiduciaries to make them aware of programs. It is not surprising, then, that
market forces have not resulted in the creation of an abundance of programs for
fiduciaries of small plans. Some witnesses suggested that one means of reaching
the small plan fiduciary was through groups and organizations that interact
regularly with small businesses. Ed Ferrigno of the Profit Sharing/401(k)
Council, for example, suggested that the Department “Think about the Chamber
of Commerce, the Restaurant Association, the home builders, the printers, that
kind of an organization.” Martha Hutzelman similarly observed that trade
organizations and chambers of commerce are good organizations for educational
outreach to such employers.
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Plan Type May Also Be a Significant Driver in the Type of Education
Sought By Fiduciaries
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Some witnesses suggested that fiduciaries in defined benefit plans are more
likely to seek education on maximizing investment returns than fiduciaries of
defined contribution plans, since good performance in defined benefit plans
directly helps the bottom line of the plan sponsor while good performance in
defined contribution plans does not. One witness, Michael Barry, suggested that
the availability of data about defined contribution plan performance could
motivate fiduciaries to perform better, particularly if private entities used
such data to rate fiduciary performance. This might create demand for better
performance of fiduciaries in defined contribution plans.
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In addition, several witnesses noted that fiduciaries of welfare benefit
plans, particularly health care plans, had some distinct educational needs,
particularly in the area of compliance with a detailed and complex regulatory
structure providing a variety of participant protections, ranging from benefit
continuation, privacy, benefit access, and restrictions on pre-existing
condition limitations.
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There is a Perception Among Some Fiduciaries that the Department of Labor
Does Not Encourage Use of Plan Resources for Fiduciary Education
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Some witnesses, particularly those who work with Taft-Hartley plans indicated
that at one time the Department of Labor sometimes raised questions in audits
about the appropriateness of using plan resources for sending fiduciaries to
educational conferences. Although the Department is no longer skeptical about
the value of education and in fact believes it is critical to ensuring statutory
compliance and building retirement income security for the nation’s workers,
stories of the Department’s former ambivalence continue to circulate among
some plan fiduciaries and their advisors. In part because of this, some in the
employee benefits community have a perception that the Department does not
regard fiduciary education as important.
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(We note that several witnesses lauded the Department’s efforts to send
Departmental representatives to educational programs for fiduciaries and their
advisors and that this has helped counter the misperception that the Department
does not strongly endorse the value of fiduciary education. Richard Koppes, for
example, observed that this” sends a very important message. That if someone
from Washington is going to travel across country and interrupt a vacation, or
whatever it is, to participate, that tells the plan sponsor community that, hey,
they are paying attention to this.”)
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Fiduciary Education Comes in Many Forms
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Several witnesses told us that education means more than simply seminars.
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For example, guidance from the Department of Labor and other governmental
agencies is an important educational resource. Some witnesses also suggested
that fiduciaries would be helped by a plainly-written handbook, which might
identify common fiduciary issues (and perhaps include best practices)—what
Bruce Ashton referred to as “Fiduciary Obligations for Dummies.” Chubb &
Sons has prepared a book for its clients entitled “Fiduciary Liability Loss
Protection,” which may be a model for this sort of education. Bruce Ashton
testified that ASPA and Nationwide Insurance have also developed materials of
this nature, including both written materials and a web-based program.
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Information provided to fiduciaries about compliance from attorneys,
accountants, actuaries and other professionals, and by service providers, is
also a source of fiduciary education. Best practice information, whether it
comes from the Department of Labor, professional or other organizations, can
also be useful to fiduciaries. (See below)
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David Baker described numerous internet-based educational resources for
fiduciaries. The web sites maintained by the Department of Labor,
the Internal Revenue Service, and the
Pension Benefit Guaranty Corporation, are particularly
important educational resources.
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Benefit advisors at the Department of Labor are also a valuable educational
resource. Alan Lebowitz told us that last year the Department received almost
20,000 phone inquiries from plan sponsors, fiduciaries and service providers;
some of our witnesses, however, were not aware that this service was available.
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Computer and Other Electronic Technology Offer New and
Cost-Effective Means of Providing Educational Outreach for Fiduciaries
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Several witnesses noted that new technologies have made delivery of education
easier and more cost-effective. For example, phone-in conferences and
computer-based conferences and teaching materials are relatively inexpensive and
do not require a fiduciary to travel to attend a conference. Mark O’Donnell,
Director of Customer Education and Outreach, Employee Plans Division, Internal
Revenue Service, testified about a computer-delivered newsletter on compliance
developments, which now has 14,000 subscribers. One advantage of computer-based
materials is that they can often be accessed at a time most convenient for the
fiduciary.
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David Baker, the publisher and editor of BenefitsLinks, presented an
imaginative and stimulating vision of how the Internet can play an expanded and
more important role in fiduciary education in the future. Mr. Baker also
described the rich of array of materials currently available on the Internet.
(We recommend that the summary of Mr. Baker’s testimony, which appears in this
report, and that his actual testimony, be consulted by interested persons. For
information on how to acquire Mr. Baker’s testimony, contact the EBSA Public
Information Office.)
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Governmental Agencies Sending Representatives to
Speak at Conferences Enhances the Effectiveness of Such Conferences
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Several witnesses spoke about the value of governmental speakers at
conferences and were complimentary of the Department’s efforts in ensuring a
governmental presence whenever requested. Participation in conferences can be
exceedingly helpful in notifying fiduciaries and their advisors about
Departmental concerns and regulatory activities, and in providing informal
guidance about compliance. Deputy Assistant Secretary Alan Lebowtiz noted that
the Department sends representatives to hundreds of conferences each year.
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Most Witnesses Opposed Mandating Fiduciary
Education or the Standardization of Conference Curricula
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Laurie Havanec, who testified for the ERICA Industry Committee, spoke for
most witnesses in opposing mandated fiduciary education. In her view (and the
view of many other witnesses, mandating such education
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will discourage employers from establishing and continuing plans and expose
fiduciaries and employers to greater legal liability and a storm of litigation
in disputes over whether the mandate has been complied with. . . .Worse yet, a
mandatory program runs the risk of creating the impression that it is
sufficient; that employers and fiduciaries need do no more than what is
mandated. This would not be merely disappointing, it would be damaging to the
system.
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Similar objections were raised to mandatory certification or licensing of
fiduciaries.
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Moreover, Ms. Havanec and several other witnesses were skeptical that the
Department should be involved in efforts to standardize curricula for
educational programs, at least for large employers, who are served by existing
programs and have differing needs that would not be addressed by, as Phyllis
Borzi put it, "one size fits all" fiduciary training programs.
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Some witnesses, however, testified that the Department might sponsor some of
its own programs or partner with other organizations. Mary Jost, of the
International Foundation for Employee Benefit Plans, for example, suggested
three models for the Department to consider if it planned to sponsor its own
programs: one in which the Department would directly develop programs; one in
which the Department would work with universities; and one in which the
Department would use a university extension approach.
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Several Witnesses Indicated that the Department Could
Provide Valuable Fiduciary Education by Making Available Additional
Guidance, Especially Guidance Including Best Practices
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Several witnesses discussed the desirability for increased guidance from the
Department of Labor. For example, Bill Schmidt, a partner at Kirkpatrick
Lockhart, indicated that a cornerstone of fiduciary education should be
Department “standards that are predictable, consistent and well articulated.”
And Phyllis Borzi argued that “the most important thing that the Department of
Labor can do in the fiduciary education area is to continue to issue, on a
regular and consistent basis, guidance for fiduciaries.”
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Bruce Ashton, who testified for ASPA, Donald Trone, Ian
Lanoff, Bill Schmidt,
and Joyce Mader who testified for the National Coordinating Committee on
Multiemployer Plans, each suggested that the Department consider guidance that
includes best practices in particular fiduciary areas. Bill Schmidt, for
example, observed that a useful kind of guidance “could merely be observations
of people who are knowledgeable in the area about what they feel best practices
should be.” Here is what Mr. Ashton said: “the DOL should work towards
developing best practices for fiduciary conduct – fiduciary conduct by both
in-house fiduciaries and experts hired to assist the plans. . . .
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What should best practices cover?” Mr. Ashton provided some examples:
information about creating a written investment policy statement; the frequency
of and methods for monitoring activities; and record retention. Donald Trone’s
Institute for Fiduciary Studies has been developing a best practices approach to
investment decisions, to “identify the minimum procedures for selecting
investment options, diversifying portfolio assets, preparing an investment
policy statement, controlling investment related expenses, monitoring investment
options, and avoiding prohibited transactions and conflicts of interest.” Mr.
Trone suggested that the Department might set up a standing committee of outside
advisers to create and continually update such standards.
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Joyce Mader pointed out that the Advisory Council in 1997 did in fact prepare
a best-practices guide to selecting and monitoring service providers. We note
with parental pride that this report has been the most frequently requested
report of this council. Ms. Mader indicated other types of “plain English” guides for fiduciaries
should cover the legal effect of a fiduciary’s delegation of responsibilities
to service providers and the extent to which a fiduciary may prudently rely on
advice provided by service providers.
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Laurie Havanec indicated that in addition to providing additional guidance,
the Department of Labor should focus on making existing guidance more
accessible:
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One approach we believe worth considering is for the Labor Department to
offer more accessible educational material that is useful to fiduciaries. The
EBSA already does a good job producing some educational material, but much more
could be done. For example, the EBSA now produces interpretive bulletins,
advisory opinions, speeches, and reports, including Advisory Council reports. If
these materials were more accessible, they could help to educate those
fiduciaries who need educating.
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The EBSA's Web site makes it apparent that the EBSA's emphasis has been on
educating participants, on assisting fiduciaries to correct breaches that have
already occurred, and on assisting plan administrators in completing their Form
5500s. Greater emphasis might be placed on using the Web site as an educational
resource or tool for fiduciaries to give them guidance in advance, before
problems arise.
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Ian Lanoff suggested that the Department could also profitably expand the use
of district offices to provide education; that such offices could organize more
conferences for fiduciaries and benefits consultants.
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Witnesses Disagreed About the Role of Service
Providers in Facilitating Fiduciary Education
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Several witnesses observed that record-keeping and investment service
providers have close contact with fiduciaries of small plans. Some witnesses
suggested that such service providers could be (and are) a source of education
for fiduciaries or could (and do) encourage fiduciaries to seek education. Other
witnesses were skeptical, since such service providers generally do not want to
take actions that might make them a fiduciary and since service providers might
have conflicts of interest that would affect the type and quality of education
that they might provide. In addition, Martha Hutzelman suggested that some
service providers are not well informed and are not in a position to provide
adequate information to plan fiduciaries.
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Most witnesses who considered the issue, however, seemed to believe that
lawyers, accountants and other professionals do provide valuable education to
fiduciaries of plans both large and small. Indeed, some of the professional
advisers who testified before the working group—including Martha Hutzelman,
Bill Schmidt, Ian Lanoff, Joyce Mader, and Phyllis Borzi—that they often
provided hands-on, personalized fiduciary education for their clients. Phyllis
Borzi
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The greatest purveyors, the most numerous purveyors of fiduciary education,
are really the people who provide services to the fiduciaries, because they are
the people that interact with the fiduciaries on a regular basis. And the JCEB,
the ABA, and all of the other professional organizations see it as part of
an important part of their mission to help educate the people
who provide advice and guidance to fiduciaries.
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It should be said, though, that organizations such as the ABA and AICPA,
which provide educational programs for professional advisers to employee benefit
plans, do not generally include sessions in such programs on how to communicate
effectively with their client fiduciaries about fiduciary status and the
responsibilities such status imposes.
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Numerous Partnering Opportunities are Open to the
Department
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Representatives of the providers of fiduciary and professional benefits
education without exception indicated an eagerness to work with the Department
of Labor, particularly in developing programs for fiduciaries of small and
medium-sized plans.
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Several Witnesses Noted that Fiduciary Education
Should Not only be Focused on Compliance, But with Enhancing the Benefits
Participants Receive from
their Plans
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Michael Barry was one of the witnesses noted this distinction in the context
of fiduciary management of defined contribution plans:
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[W]e talked a lot about education for compliance . . . and I want to change
the subject and focus on another issue, which is probably the one that bothers
me most about the sort of level of education of fiduciaries in the pension world
. . . and that is education for performance, and the performance of fiduciaries.
In fact, if I could make a distinction between compliance and performance.
Compliance is basically not doing anything that breaks the law. To me,
performance in the pension area is defined very, very roughly, is that if you do
a good job, participants have more money when they retire than if you don’t do
a good job.
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Most Witnesses Praised the Department’s Efforts in
Making Available Educational Resources for Fiduciaries
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Several witnesses praised the Department for its current efforts at making
educational resources available to fiduciaries. For example, several witnesses
praised the Department’s timely, thoughtful and clear guidance on fiduciary
matters growing out of the terrorist attacks on the United States in 2001. As
noted, witnesses lauded the Department’s participation in educational
conferences. The Department’s continually improving Web site was also commented
on by several witnesses, including David Baker, the editor of BenefitsLink. The
recent decision to release field memoranda was also singled out for praise.
Witnesses indicated that the Department is moving in the right direction in
providing guidance and other educational resources and should not only continue
in this direction but should also further publicize its efforts and the
availability of educational resources.
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Witnesses Suggested Numerous Topics and Issues that
Might Be Appropriate Areas for Fiduciary Education
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Our witnesses had numerous suggestions about what might be appropriate topics
for fiduciary education. Many witnesses, for example, indicated that fiduciary
education should cover the following areas: financial background; how to select,
monitor and evaluate service providers and investment managers and vendors;
benefits claim administration; disclosure and reporting; substantive health plan
rules; who is a fiduciary; to whom do fiduciaries owe duties; the nature of
those duties. Bob Pleasure, Executive Director of the Center for Working
Capital, indicated that fiduciary education should be aimed at helping the
fiduciary ask “the pertinent question.” Dennis Mahoney, who develops
curriculum and teaches in the Certified Employee Benefits Specialist program
sponsored by Wharton and the International Foundation of Employee Benefit Plans,
suggested that fiduciary education should also include an historical and policy
overview of employee benefits regulation, to create meaningful context for
rules.
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Interactive Education, Particularly in a Format that
Encourages Participants to Direct Accumulated Knowledge and Experience to the
Solution of Problems, Can Be Highly Effective
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Witnesses affiliated with the Stanford University Fiduciary College and the
National Labor College at the George Meany Center each testified about the
importance of interactive education. Richard Koppes and Scott Henderson
discussed the programs at Stanford’s Fiduciary College. These programs combine
lecture with interactive participant discussion. Here is Scott Henderson’s
description of the program:
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It is a 2½ day program, with a mix of academic B- there is black letter
law discussions, and together with some really nuts and bolts hypotheticals,
case studies, and practical advice for folks who actually run pension funds.
We gave you a set of three hypotheticals that we used last time around, and
gain one for each of the various types of plan sponsor, and it was a terrific
device to really get discussions started about not theoretical problems, but
real practical issues that face plan sponsors, whether it is conflicts of
interest, whether it is prudent management, whether it is how to report to your
superiors in a corporate setting about things it may not want to hear.
But a terrific discussion, I think, gave some folks some good ideas to take
back to their employers. You take a look at this directory, or this agenda, and
you will see that things were fairly carefully crafted.
We put together lectures about various principles, with follow-on discussions
about how to implement them, again with the case studies. So identifying
half-a-dozen different themes, and we took our time to weave them into a fairly
coherent narrative.
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Similarly, at the National Labor College’s programs for trustees, there is
strong emphasis on interactive education. Mr. Pleasure emphasized that the focus
on education should be on developing the ability to ask the pertinent question.
To develop this you cannot simply have lecturers. Education must be learner
centered. Programs should be interactive, involve discussion and teaching by the
participants, and simulations and role playing. Mr. Pleasure and Ms. Zanglein
indicated that this style of education best equips fiduciaries to develop the
type of focused critical facilities they need to meet their statutory
obligations.
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There are Limits to What Fiduciary Education Can Accomplish
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Don Baylely noted that fiduciary violations (among insured fiduciaries) are
most likely to occur when fiduciaries face conflicts of interest. It is simply
difficult, given human nature, for an individual to serve two masters. Mr.
Baylely noted that
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the single most troubling allegation or type of allegation when I have to
monitor the defense of one of these matters is that of the conflict of interest.
. . . The correlation between senior corporate executives with difficult
fiduciary obligations to their shareholders and to the corporation also sitting
in a joint capacity as fiduciary on employee plans, ESOPs, and investment plans
is frightening. Those dual capacities, although recognizable and appropriate
under the law, are very, very difficult to manage after the time of the loss.
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Eli Gottesdiener, a participant’s attorney, discussed examples in his
practice that illustrated how these conflicts can result in reduced investment
returns for participants.
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Education can sensitize fiduciaries to the problems of a conflict of interest
but will not make such conflicts disappear.
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In addition, fiduciary education will not have an impact on those few
fiduciaries with an impure heart. Marc Machiz, who served for 12 years as
Associate Solicitor of Labor responsible for the Plan Benefits Security
Division, noted that some “professional fiduciaries are just terrible at what
they do. But if they are terrible, they're not terrible for want of an
education, they're terrible by choice. They've chosen to make a living by
providing a cut-rate service. Worse, they've chosen to make a living by catering
to the very worst instincts of the people who hire them, or by deceiving the
people who hire them. . . . Government supplied, sponsored, encouraged
education, any variety of education you guys might be studying is not going to
do anything to help with the problem of bad professional fiduciaries.”
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Thus, education can never be a complete substitute for enforcement. Some
witnesses, including Mr. Machiz, and John Hotz of the Pension Rights Center
cautioned against moving resources from enforcement to education. On the other
hand, Ian Lanoff, who served as Administrator of the EBSA in two presidential
administrations, disagreed with the notion that enforcement resources should not
be used to provide education:
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I don't see it that way. I don't see that distinction between enforcement and
education. I don't see the Labor Department's role then in the early days or now
as being one of playing gotcha with plan fiduciaries where you come in and you
say we gotcha because you violated this requirement or that requirement. I see
the role of the Labor Department continuing to be one of providing education to
fiduciaries, not just enforcing the law and educating fiduciaries through
bringing lawsuits or even issuing regulations or letters on what the fiduciary
requirements are.
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Gary Tidwell, Vice President of the National Association of Securities
Dealers, discussed how he sees the relationship between education and the NASD’s
enforcement mission in a way that is instructive for the relationship between
fiduciary education and enforcement in ERISA:
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Education is one cornerstone of the greater NASD mission of investor
protection. Specifically, an effective educational program is the cornerstone to
carrying out the NASD's mission of investor protection and market integrity.
NASD subscribes to the adage, "Better trained financial professionals
lead to heightened regulatory awareness, and more consistent industry
compliance. Hence, better overall investor protection.
Our education and our training are seen as embracing, and are in furtherance
of our regulatory mission. Of course, and this goes without saying, nothing we
do in the educational area can in any way compromise our regulatory
responsibilities.
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We recommend that the Department of Labor make clear its commitment to
education in a variety of ways. First, we believe that the Department should
issue guidance making clear that a fiduciary has an obligation to perform
competently, which implies a duty to be educated with your responsibilities to
the plan. We recommend that this guidance indicate that Departmental audits of
plans may, in appropriate cases, include examining the efforts plan fiduciaries
are making to ensure adequate knowledge of their responsibilities under the
plan, the statute, and to participants and their beneficiaries. We do not,
however, believe that the Department should mandate any particular type of
education, nor do we believe that its resources can best be utilized by direct
involvement in the development of model curricula for educational programs.
Fiduciaries of different plans have different educational needs and the market
is already providing a rich variety of educational resources for professional
fiduciaries and their advisers.
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We recommend that the Department appoint a national coordinator of
fiduciary education and outreach to work with the field offices and to
periodically convene summits on how to stimulate demand for educational programs
and other resources and on how to expand and improve educational resources,
including web-based resources. This will allow the Department to get feedback on
the educational resources it provides, allow experts not in contractual
relationships with the Department to make recommendations to the Department, and
can facilitate dialog between individuals and entities that might not otherwise
have opportunities to discuss and coordinate educational resources.
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We recommend that the Department continue efforts to augment, improve, and
publicize its Web site. We specifically recommend that the Department work with
the Internal Revenue Service and the PBGC to coordinate their Web sites so that a
fiduciary dealing with a particular problem can have access to guidance from
each relevant agency. We also recommend that the Department take steps to
publicize its Web site, particularly with respect to small-plan fiduciaries. This
might include seeking links to the Department’s Web site on other Web sites,
both other ERISA Web sites and non-ERISA Web sites that might be used by plan
fiduciaries (such as those of trade associations.) The national coordinator
referred to in B. above should seek feedback from fiduciaries and their advisors
on how to enhance and publicize the Web site’s functions for fiduciaries and
their advisors.
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We recommend that the Department continue to expand its written guidance,
and particularly that it develop or otherwise make available best-practice
guidance. Examples of best practice guidance are the Department’s “A Look At
401(k) Fees for Employers”
and the Advisory Council’s report on selection of service providers. We also
recommend expanded use of question-and-answer format for guidance; publication
of common fiduciary errors (sort of a list of “worst practices”); that it
provide, where appropriate, fiduciary checklists. We also recommend,
particularly, that the Department publicize the availability of such guidance.
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We recommend that the Department encourage and stimulate the development
of educational opportunities for fiduciaries in the small plan universe.
Education for such fiduciaries should focus on their understanding that they are
fiduciaries, what a fiduciary is, and what a fiduciary’s role is under the
statute. We believe such education should emphasize, in particular, the
fiduciary’s responsibilities in selecting and monitoring plan service
providers; the areas in which the statute imposes substantive rules and
regulations, including rules on minimum standards, and disclosure and reporting;
and how to obtain assistance in resolving fiduciary issues.
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In carrying out this recommendation we specifically suggest the following
actions:
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That the Department convene a summit of the major organizations and
individuals who currently provide education to ERISA fiduciaries and their
professional advisors to discuss (a) the creation of educational materials and
programs aimed at such fiduciaries and (b) how to stimulate demand for such
programs.
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That the Department provide seed and grant money for the development of
programs and materials aimed at small plan fiduciaries by outside providers of
fiduciary education.
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That the Department create an experimental scholarship program to enable
small-plan fiduciaries to attend fiduciary education programs.
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That any programs developed through financial support from the Department
be evaluated for effectiveness and that recipients of scholarship assistance
from the Department provide feedback on the value of their educational
experiences;
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That the Department’s outreach to fiduciaries of small plans include
trade organizations, chambers of commerce, and the Small Business
Administration.
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That the Department prepare on both its
Web site and in hard copy a
fiduciary handbook/primer aimed primarily at fiduciaries of small plans.
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That the Department consider providing a dedicated hotline for
fiduciaries to obtain direction from Department personnel, and in any event,
publicizing the availability of benefit advisors to plan fiduciaries. We again
note that last year the Office of Participant Assistance and Communication
handled approximately 20,000 calls from plan sponsors, fiduciaries and their
advisors. With publicity about the availability of such assistance, the volume
of such calls might increase appreciably. We note that the current name of the
office suggests that its assistance is limited to participants; thus, we would
also suggest that a separate program within the Office be created aimed at
fiduciaries and their advisors.
-
That the Department issue guidance on best practices in areas
specifically germane to small-plan fiduciaries in their performance (we note
that currently most guidance from the Department is designed for consultants and
advisers to fiduciaries rather than the fiduciaries themselves).
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That the Department encourage regional offices to expand its sponsorship
of conferences and engage in other educational outreach to small employers.
-
That the Department encourage professional organizations such as the ABA,
AICPA, and ASPA to include in their continuing education programs sessions on
how to provide effective fiduciary education to their client fiduciaries as part
of their normal professional relationship with such clients.
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That educational efforts to reach fiduciaries of small plans and other
part-time fiduciaries be a priority for the national coordinator of education.
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We recommend that where appropriate Department consent decrees with
fiduciaries require the fiduciary to develop a plan for obtaining fiduciary
education.
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We recommend that the Department continue to make its employees available
as speakers at conferences sponsored by other groups. We also recommend that
speeches of Department representatives be placed on the Department’s Web site,
when available and where appropriate.
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We recommend that the Department’s own internal materials (for example,
the in-house training material) be made available to interested persons through
its Web site and in hard copy form.
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We recommend that the Department focus on what Robert Partician
characterized as the “community policing model,” in which education at the
field level is seen as part of a continuum with enforcement activity. We endorse
the concept of field offices sponsoring conferences and engaging in other
outreach to plan fiduciaries, which we understand the many offices are currently
doing.
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We also recommend that the Department explore having at least one
fiduciary in each plan periodically acknowledge in writing that he or she is a
fiduciary. Particularly, but not exclusively, in the small plan arena, such
acknowledgment might focus attention on the seriousness and importance of the
fiduciary enterprise. We also note that the Department should carefully analyze
the costs and benefits of such a requirement. In particular, several of our
members were concerned that such a requirement might foster the perception that
this is an added requirement that might subject fiduciaries to a greater risk of
liability. Although this perception would not be accurate, it might have an
adverse effect on plan formation. But to the extent it can focus the attention
of fiduciaries on their existing responsibilities under the statute, such a
requirement might contribute to a greater overall degree of compliance.
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We note that many of our proposals do not require expenditure of funds from
the Department and those which do (grants to seed the development of educational
programs for small employers, scholarship assistance on a limited and
experimental basis for fiduciaries in small business settings, one or more
summits) are not unusually resource intensive. We note that fines and penalties
assessed against breaching fiduciaries might be targeted to fiduciary education
(as well as to an orphan plan program, which is recommended by the Work Group on
Orphan Plans).
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Testimony of Donald Trone on July 17, 2002
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Donald Trone spoke on behalf of the Foundation for Fiduciary Studies, a
nonprofit foundation whose mission is the definition and promulgation of
practices that constitute a prudent process for investment fiduciaries. Mr.
Trone began by noting that there are no industry standards defining minimum due
diligence procedures for an investment fiduciary. Specifically, there is a
pressing need to “identify the minimum procedures for selecting investment
options, diversifying portfolio assets, preparing an investment policy
statement, controlling investment related expenses, monitoring investment
options, and avoiding prohibited transactions and conflicts of interest.” Mr.
Trone observed that under present law there is not even a clear mandate for a
plan to adopt an investment policy statement, which Mr. Trone suggested is
essential to prudent investment management. The Foundation that Mr. Trone
directs is in the process of preparing due diligence procedures that, if
followed, would satisfy these various concerns. (These standards, as they are
being developed, are in the public domain.) Mr. Trone suggested that many
investment fiduciaries, who believe they are behaving in prudent fashion, in
fact violate at least some basic elements of prudent investing.
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Mr. Trone suggested that the Department of Labor should form a committee of
investment fiduciary experts to draft a handbook or similar materials on prudent
investment practices. A standing committee would be able to adjust investment
practice standards in response to changes in our knowledge and understanding of
investments. Such a committee could also address ethical issues. Such
standards--which Mr. Trone suggests would be a sort of best practices
approach--would not have the force of regulations, but could be used to assist
training organizations in developing curricula and other training materials. Mr.
Trone indicated that the Foundation is ready, willing and able to assist the
Department with its educational and training efforts.
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The Council and Mr. Trone discussed whether investment standards such as
those that the Foundation is preparing should be in the province of the
Department of Labor, an organization such as Mr. Trone’s, or perhaps through
the International Standards Organization. A concern was that if the Department
produced a set of minimum standards that it would have something like the force
of law, which might not be desirable.
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Affiliated with the Foundation is the Center for Fiduciary Studies, which
operates in association with the University of Pittsburgh. The Center puts on
various training programs. One program, of two and a half days duration, teaches
how to run asset allocation studies, write investment policy statements, select
money managers and mutual funds, read performance reports, analyze fees and
expenses. A longer program instructs on how to conduct an audit or review of an
investment committee. This program is designed for attorneys and accountants,
primarily. Since 9/11, however, participation in the programs has dropped, from
about 500 annually to about 125. As a result, the Center is building web-based
tools to help fiduciaries meet investment prudence standards.
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Testimony of Martha Hutzelman on July 17, 2002
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Ms. Hutzelman practices exclusively in the area of employee benefits and
ERISA, and represents large, medium-sized and small businesses. Before
co-founding her law firm, Ms. Hutzelman was a senior attorney in the Employee
Benefits Division of the Office of Chief Counsel at the Internal Revenue
Service, and before that was a benefits lawyer for the Kerr McGee Corporation.
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Ms. Hutzelman testified that her clients, regardless of size, are “desperate
for information regarding their fiduciary obligations.” She and her partner
have often been asked to come in house and talk with the people responsible for
the plan. In such situations, the training is generally to determine who are
plan fiduciaries and then to determine their plan obligations.
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Ms. Hutzelman notes that when we speak of fiduciary obligation we often focus
on just investment matters, but obligations also involve the operational facets
of the plan: claim administration, communicating with participants, preparing
required notices and disclosure. Ms. Hutzelman also cautioned us not to ignore
health benefit plans, which are heavily regulated.
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Ms. Hutzelman indicated her concern that many small employers rely on third
party vendors for information; she believes that many such vendors are not
knowledgeable about many aspects of plan management and do not have the
resources to train their employees to provide fiduciary information to plan
sponsors. Yet “often the employers are assuming that their vendors are the
plan fiduciaries and that the employers have no responsibility at all for what
these vendors are doing, because they have hired these third party contractors
to handle it.” But this is not correct, the buck stops with the plan sponsor
and other fiduciaries. She noted that requiring better service from providers
would be helpful.
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Ms. Hutzelman gave as an example of effective government educational programs
the IRS’s efforts with respect to section 403(b), where there was a concern
with noncompliance. The IRS, using publications and seminars at a local level,
raised awareness of compliance issues.
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In response to questions, Ms. Hutzelman indicated one good way to reach the
small plan fiduciary is through chambers of commerce and trade groups. Education
at meetings of such groups can be alerting them to the need to focus on their
status as fiduciary and their responsibilities as such.
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Testimony of Bill Schmidt on July 17, 2002
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Mr. Schmidt began with the observation that “most fiduciaries want to be
compliant.” This is not only because the want to do the right thing or to
avoid liability for making errors. In the case of financial institutions, there
is reputational, or franchise, value in being a compliant fiduciary. He also
noted, though, that in a real world of finite resources there is always going to
be limitations on how much “time and brain power” will be available for
ERISA compliance. Given this, Mr. Schmidt stressed the importance of having “standards
that are predictable, consistent and well articulated.” And this insight
should be the cornerstone of fiduciary education and training.
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In looking at the availability of fiduciary education now, Mr. Schmidt
indicted that lawyers are pretty well served by such organizations as ALI-ABA,
PLI and trade associations. But moving away from lawyers, things get spottier.
Financial professionals do not get quite the same quality of training as
lawyers, and plan sponsors, because of their many competing responsibilities.
Even in large corporations, you often have people with responsibility for plan
management who have many other human resource responsibilities.
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The Department can best contribute to fiduciary performance by being clear in
what is expected. Part of this is simply issuing more guidance. “It could
merely be observations of people who are knowledgeable in the area about what
they feel best practices should be.” The government can also support private
organizations by lending them resources of various varieties. And finally, the
Department can lead by action, by having consistent priorities, which are
rewarded and penalized. Part of this could be the Department, on audit, asking
to see a plan’s compliance procedures. Enforcement should reflect “the need
of fiduciaries to follow prudent procedures in making plan investments.”
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Mr. Schmidt, in response to questions, indicated that an important way to
improve fiduciary performance is to improve the quality of services provided by
vendors. “The quality of service is only going to get raised if the plan
sponsors are demanding. Plan sponsors are only going to demand if they realize
that ultimately they’re at risk.”
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Mr. Schmidt indicated that he sometimes would go out to meet with clients
about fiduciary responsibilities. A problem, though, is that fiduciary
compliance services are not generally something “that many employers are
willing to pay a great deal for. I do it . . . to identify ERISA issues . . .
but they do get some training from their lawyers and I think that can be
helpful.”
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Testimony of John L. Baylely on July 17, 2002
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Mr. Baylely is claims counsel and vice president of Chubb & Son, the
largest issuer of insurance to ERISA fiduciaries. Mr. Baylely first described
the architecture of fiduciary liability insurance. Fiduciary insurance is
generally written on a claims made rather than occurrence basis. This means that
coverage is triggered only after the filing of an actual complaint. There are
strict reporting and notice requirements under fiduciary policies. Mr. Baylely
noted parenthetically that sometimes people defend themselves without realizing
that they had insurance protection. He also said that there is not an unusual
amount of awareness of the availability of fiduciary liability insurance. Most
policies cover both statutory breaches and negligence errors in plan
administration. Most policies do not cover deliberate dishonesty or willful
intentional statutory violations. They also have other exclusions, including
claims for benefits under a policy. The insurer will generally defend those
claims, but not pay if there is a benefit obligation at the end of the day.
Policies also generally do not cover claims for settlor functions.
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Underwriters look for many things, including the integrity of the sponsor
organization and its senior management. The also look at the financial solvency
of both the sponsor and the plan. The underwriters also review recent 5500s.
Underwiters also look at claims history, who administers the plan, who makes
investment decisions, and sometimes at third party service providers. The
insurer generally will ask the purchaser to certify that the plan is in
compliance with ERISA and whether they have any knowledge of prohibited
transactions or other facts that might give rise to claims in the future.
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Chubb does provide materials to their insureds on loss prevention. It is
difficult to measure how effective these materials are and whether they are
used. Mr. Baylely indicated a suspicion that such materials are generally used
by the conscientious and thus ironically by those with the least need for them.
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In terms of claims experience, between 40 and 50% of the claims involve
benefit disputes. About 15 to 20% involve imprudent investments,
misrepresentations to participants. The remaining 30 percent of the inventory is
harder to classify but involve terminations, spin-offs, mergers, section 510
discrimination claims, and various benefit reductions. Recent claims experience
reflects heightened scrutiny of investments in employer stock.
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Mr. Baylely said that from his perspective, “the single most troubling
allegation or type of allegation when I have to monitor the defense of one of
these matters is that of the conflict of interest. . . . The correlation between
senior corporate executives with difficult fiduciary obligations to their
shareholders and to the corporation also sitting in a joint capacity as
fiduciary on employee plans, ESOPs, and investment plans is frightening. Those
dual capacities, although recognizable and appropriate under the law, are very,
very difficult to manage after the time of the loss. I’m not sure that
corporate America understands the risks involved in those dual capacity
services. Similar problems arise in the labor management field involving
trustees with strong affiliations to union and management.
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In response to questions, Mr. Baylely said that underwriting does not
currently take into account educational efforts on the part of fiduciaries
because it would be too difficult to quantify. But if there were certification
programs, guidelines, “that when we looked at an insured, we could say this
insured is well-trained in its obligations . . . I think that that would have an
impact on the rating and premium charge for that risk.”
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Again in response to questions, Mr. Baylely indicated that he would emphasize
who a fiduciary is, how the sponsor organization should select a fiduciary, how
to train a fiduciary, who their obligations run to, the corporation versus the
participants in the plans, and the hazards of operating in a dual capacity,
potentially conflicting situation.
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Testimony of David Rhett Baker on July 17, 2002
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Mr. Baker publishes, writes and edits BenefitsLink, which is a daily
newsletter on benefit plans, linking to other Internet resources. BenefitsLink
has two editions, one on retirement plans and one on welfare benefit plans.
Eleven thousand people subscribe to the newsletter on retirement plans and
approximately 7,000 to the newsletter on welfare benefits plans. Mr. Baker
serves a “kind of middleman,” who directs the attention of benefit
professionals to important benefit news on the Internet.
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In thinking about the Department of Labor’s role in
education, Mr. Baker noted that the DOL should conceptualize itself as a vendor of sorts and provide
easy information access and technical support to what are in effect its clients.
The Internet provides effective possibilities. Mr. Baker indicated that the DOL Web site, which was recently
reorganized, does a very nice job towards providing
an educational foundation. Mr. Baker did think, though, that the Department
could improve its Web site by putting in one place clickable links to resources
about employee plans. He also indicated that differentiating perspectives on a
web page--so that there is information for participants, for plan sponsors,
etc., can be helpful. The PBGC Web site does a good job in terms of its ability
to put the language, the regulatory information into “Dick-and-Jane”
language, and also has good organization and menu display. Mr. Baker suggested
that the Department may want to look at this and the IRS Web site to get further
ideas on how to enhance its own Web site.
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Mr. Baker indicated that at this point, with the technology still developing,
he would not recommend that the Department get too involved in using its Web site
for interactive educational programs. He indicated with respect to interactivity
that “a well-designed series of simple static web pages, information,
presented in an organized way with the ability of the reader to click right to
that part of the table of contents that interests him or her, that’s a form of
interactivity. Really careful thinking about what it is you want to display on
the Web site and breaking it into small hypertext link chunks . . . should be
encouraged.” As an example, he said that the Department could “do things
that almost seem oblivious, but are sol helpful, like making defined terms,
fiduciary for example, a clickable link to a glossary that then refers the
person to similar pages about the definition of fiduciary.” Mr. Baker also
said in his experience, people generally prefer a text-based presentation of
information.
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Mr. Baker also described efforts that some groups--Corvel and the American
Society of Pension Actuaries--are doing with webcasts. He also singled out the
J. Kaiser Family Foundation for its webcasts in the health care arena. The web
also permits surveying of participants during a webcast.
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Mr. Baker suggested that the Department of Labor could benefit from
partnering with other organizations, building on their viewers by having them
link to the Department. There may be some disadvantages to this, too: privacy
concerns, image consciousness of some possible partners, etc. Among the
organizations that Mr. Baker said are doing very good jobs with their Web sites
or internet resources are the Employee Benefit Research Institute, the National
Center for Employee Ownership, the American Benefits Council, the Profit
Sharing/401(k) Council of America, the American Society of Pension Actuaries,
the International Foundation of Employee Benefit Plans, the International
Society of Certified Employee Benefits Specialists. There are other possible
media partners for the Department: for example, Plansponsor.com, and
401(k)helpcenter.com. And of course there is BenefitsLink. There is also
commercial media such as BNA and Tax Notes.
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Mr. Baker did note that there may be some conflicts with some potential
partners: BenefitsLink, for example, derives revenue from recruitment
advertising and this might, he suggested, be of concern to the Department.
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He also spoke some about the use of message boards, which form part of
BenefitsLink. This can be an easy way for a plan sponsor or fiduciary to get
information (on an anonymous basis) and then to have the information (in
question and answer form) available to others.
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Testimony of Marc Machiz on July 17, 2002
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Mr. Machiz served twelve years as Associate Solicitor at the Labor Department
for the Plan Benefit Security Division. He began by observing that there are a
stunning variety of people who are ERISA plan fiduciaries. There are investment
managers, third party administrators, plan sponsors. Mr. Machiz noted that “they
are all out there, the good, the bad, the ugly, the brilliant, and the stupid.”
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He divided the fiduciary world into two different categories: the
professional and the amateur fiduciary. The professional fiduciary is generally
an institution. He indicated that some professional fiduciaries are “just
terrible at what they do. But if they are terrible, they’re not terrible for
want of education, they are terrible by choice. They’ve chosen to make a
living by providing a cut-rate service. Worse, they’ve chosen to make a living
by catering to the worst instincts of the people who hire them, or by deceiving
the people who hire them.” No amount of education will transform these bad
fiduciaries into good fiduciaries. And the good fiduciaries will seek out
education on their own, whether the Department supplies, encourages or sponsors
it.
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The only thing that will force the bad professional fiduciaries to do a good
job is fear: fear of liability, fear of exposure, fear of loss of reputation,
fear of prison. Fear is a powerful motivator. The Department has awesome powers,
the power to issue an administrative subpoena and to bring light to wrongdoing.
It is critical for the Department to have a strong enforcement program, for it
is only a strong enforcement program that will incent the bad professional
fiduciary to do a decent job (and obtain education and training).
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Mr. Machiz did think Department involvement in the education of the amateur
fiduciary might have merit. These are the people, Mr. Machiz believes, “who
need whatever help it is we’re in a position to provide. These are the guys
who age going to benefit from it; these are the guys who deserve it.”
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Funds for education should come from industry, to the extent possible. On the
pension side, the investment industry benefits from small plan formation and
could finance at least some educational programs for the small plan sponsor. On
the health side, the insurance companies benefit from plan formation and might
be expected to sponsor some education. A board might be established with people
from the professions, academia, and the government.
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The government’s role should be in making clear what its enforcement agenda
is, which is the one area of expertise it has that the private sector does not.
“In describing its enforcement agenda, obviously the government is in the best
position to educate people about what the Government is doing and about what the
Government cares, and should be a fair broker between competing interests.”
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Testimony of Eli Gottesdiender on July 17, 2002
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Mr. Gottesdiener endorsed the testimony of Mr. Machiz (summarized above). He
added to the idea of fear the idea of shame: the Department should publicize
some of the more egregious cases, use its Web site to have links to cases of real
people who have stolen real money from plans.
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Mr. Gottesdiener focused on the role of the corporate employer who sponsors a
pension plan--they remain a fiduciary for the purpose of selecting, appointing,
monitoring and removing fiduciaries. They have the responsibility of overseeing
fiduciaries. Ensuring that they understand their role is critical and should be
part of any educational efforts on the part of the Department.
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Mr. Gottesdiener indicated that what he has seen in some cases is an
abdication of fiduciary responsibility, where basically no one is minding the
pension plan store because there is a conflict of interest that motivates or
incentives the company sort of not to put someone in charge of these other
people and to appoint fiduciaries who really don’t know what they’re doing
to allow conflicts to fester and be exploited by business considerations.
Drawing on some of his cases, Mr. Gottesdiener was skeptical that education
alone can be sufficient to counter conflicts of interest.
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Testimony of Bob Pleasure on July 17, 2002
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Mr. Pleasure is Executive Director of the Center for Working Capital, which
is affiliated with the AFL-CIO. Prior to his assuming this position, Mr.
Pleasure was Director of the George Meany Center for Labor Studies for 13 years.
Mr. Pleasure continues to work with the Meany Center’s National Labor College,
which sponsors programs for trustees of negotiated plans.
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Mr. Pleasure began by stating that he did not believe the Department of Labor
should offer its own education courses. There are educational institutions that
are better equipped to provide such programs than a governmental regulatory
agency. The regulatory agencies need to support educational programs and should
make available, through the web and otherwise, resources for fiduciaries. But
this is different than sponsoring coursework or developing curricula for such
programs.
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Mr. Pleasure emphasized that the focus on education should be on developing
the ability to ask the pertinent question; that a trustee of a pension plan
needs this ability. To develop this you cannot simply have lecturers. Education
must be learner centered. Programs should be interactive, involve discussion and
teaching by the participants, and simulations and role playing. It is only
through this type of experience that the important abilities for fiduciaries can
be developed.
|
The programs that Mr. Pleasure works with begin with a needs assessment, the
development of goals and objectives and criteria for evaluating the goals and
objectives. The programs also develop sets of instructional strategies.
|
|
Testimony of Jane Zanglein on July 17, 2002
|
Professor Zanglein began by discussing the distinction between education and
training. In training, a participant hears a well-educated person at a
conference who tells participants what he or she thinks the participants need to
know. But it does not come out in a way that most participants will retain it.
The participants will come away without the necessary building blocks, they will
not have spent time tackling difficult problems together. Education emphasizes
the building blocks and interaction and participation.
|
The most important thing for a teacher who is trying to educate is to be
clear and organized. Organization implies developing learning objectives and
translating those into a curriculum. The Labor College, in developing the
learning objectives, relies upon an advisory council, which helps in curriculum
development.
|
The Labor College has four courses that range from two to two and half days
each. They are sequential and the Labor College does them regionally. The first
course is an introductory one, an overview of the role of the trustee. The
second course is a fiduciary duty course. The third course is on capital markets
and investments. The fourth course focuses on corporate governance issues.
|
The first course looks at the duties of trustees, which comes from the trust
instrument. What course considers what responsibility and authority the trustee
has. The course looks at the difference between settlor and fiduciary functions.
The course also has a brief introduction to fiduciary duty.
|
The second course is a comprehensive course on fiduciary duty, covering the
exclusive benefit rule, the diversification rule, the rule requiring conformance
with the plan documents, and the rule of prudence. Much of the course examines
these duties in the context of a plan document. The third course focuses on
investment policy statements and also provides an overview of the capital
markets, asset classes, compounding, inflation, asset allocation, asset class
risk, etc. The idea is to prepare participants to draft and follow investment
policy statements.
|
The last course focuses on corporate governance and accountability, with
attention on proxy and voting guidelines.
|
|
Testimony of Laurie Havanec on July 17, 2002
|
Ms. Havanec, on behalf of the Erisa Industry Committee,
emphasized three points: first, that major employers are already making
substantial efforts to ensure that the fiduciaries of their plans understand
their responsibilities under ERISA; second, that a mandatory education
program will not help matters and could discourage plan sponsorship and
increase costs; and third, the Department should consider assisting in the
education of fiduciaries of smaller plans.
|
Employer sponsored plans have been remarkably successful
in providing a rich array of benefits efficiently and effectively. Fiduciary
breaches, at least serious ones, are rare. The publicized recent cases do
not appear to be so much about ERISA breaches as serious corporate
malfeasance. A requirement of education is response to these recent unique
high profile cases would be inappropriate.
|
Moreover, fiduciaries vary in their structure and
responsibilities. It is apparent that no single educational program will be
appropriate for all fiduciaries. Given the variety of plans, plan designs,
and types of fiduciaries makes it impossible to design a single or even
multiple educational programs for all programs.
|
Fiduciaries of large plans are also subject to strong
incentives to understand and comply with their statutory responsibilities.
Institutional fiduciaries have reputational interests in performing well and
employer fiduciaries understand that their employers’ interests in the
plans are serving the needs of its employees. Moreover, ERISA and the tax
laws provide strong enforcement and tax penalties, which discourage conduct
violative of a fiduciary’s statutory obligations.
|
One area in which the Department could consider is in
making more accessible educational materials useful to fiduciaries. The EBSA
already does a good job in this, but much more can and should be done. The
EBSA’s Web site traditionally has been oriented for the participant; the Web site
should include more information for plan fiduciaries.
|
|
Testimony of Ed Ferrigno on July 17, 2002
|
Mr. Ferrigno indicated first that he did not think the
issue of fiduciary education for fiduciaries of large plans is an issue,
since fiduciaries of these plans are concerned with compliance and training
and education are a part of compliance. In the small plan area, however,
some fiduciaries are not fully aware of their status or what their status
requires of them. In many cases, such fiduciaries believe that their
responsibilities are being fulfilled by their third-party service providers.
By and large service providers do a good job of keeping plans in compliance,
and to this happy fact we can add that the owners of small businesses
generally have a major stake in their plans and are thus have a personal
stake in the plan’s success.
|
But fiduciary education is nevertheless important. The
PSCA has a goal of no harmful fiduciary breaches; it is critical for this
goal to be achieved that all plan sponsors understand their roles vis-a-vis
the service provider and must know that they cannot delegate their fiduciary
responsibilities. This is especially important in the relatively rare case
where a third party administrator does not provide necessary services or
information to the plan sponsor.
|
The PSCA advocates a one-stop educational service that
covers all governmental compliance responsibilities. Thus, it is important
for the Department to coordinate with the Internal Revenue Service, which
has an active study of small plan compliance underway. It is essential that
any governmentally sponsored or supported educational program not add
additional mandatory requirements for plan sponsors, for this could dampen
employer willingness to sponsor plans. Emphasis should be placed on helping
plan sponsors comply with the law. The Department should also partner with
the private sector to take advantage of the numerous available educational
resources.
|
To reach small employers the Department should consider
partnering with the Small Business Administration, the Chamber of Commerce,
and trade associations in which small employers are active in disseminating
educational materials.
|
|
Testimony of Mary Jost on July 17, 2002
|
Ms. Jost testified about the purpose and organization of
the International Foundation, which is a non-profit educational association
that has been providing educational services in the employee benefits
industry for almost half a century. The historical focus has been on
education for trustees in multi-employer plans, but the Foundation has
broadened its educational mission to extend to other plans as well. The
Foundation has provided education to between 12 and 14 thousand labor and
management trustees that have attended some 35 different educational
programs.
|
Ms. Jost painted three alternative approaches that the
DOL might take in supporting fiduciary education. For each model, outreach
would be critical. In the first model, the Department with both governmental
and nongovernmental partners (including educational and professional
organizations such as the ABA, ASPA, AICPA and others) would create a
planning committee, which using focus groups, surveys and the experience of
its members would work in preparing curriculum for a two-day course,
reflecting the reality that not many people will be able to attend a longer
course of studies. The planning committee would also create assessment
methodologies.
|
The second model would use universities and their
faculties. The Department would work with universities to develop curricula.
The third model would use university extensions, with instructors drawn from
ERISA professionals. Ms. Jost noted that a number of universities currently
are involved in various forms of fiduciary education, including Stanford
University, the National Labor College, the University of Pittsburgh (the
Center for Fiduciary Studies), Cal State-Fullerton, and George Washington
University.
|
The Department might also consider funding courses so
that the cost to attendees could be reduced, thereby stimulating attendance.
|
|
Testimony of Phyllis Borzi on September 19, 2002
|
Ms. Borzi testified before the Workgroup as an individual
but also as an active participant and frequent co-chair in the many
educational programs of the Joint Committee on Employee Benefits (JCEB) of
the American Bar Association (ABA).
|
The educational activities of the JCEB are aimed
primarily at professional advisors rather than at fiduciaries themselves.
(Many JCEB programs are co-sponsored with other professional organizations
such as AICPA, the Society of Actuaries and the American Academy of
Actuaries.) Ms. Borzi expressed the view that it is critical to target
professional advisors for fiduciary education because it is those lawyers,
accountants, actuaries and other consultants that are the “greatest
purveyors of fiduciary education” because they interact with fiduciaries
on a regular basis.
|
She went on to note that ERISA is comprehensive,
complicated and continuing to develop through litigation and regulation. She
also noted its multidisciplinary nature that requires a variety of people
with varied skills. For these reasons, she cautioned against any “one size
fits all” fiduciary education program. Nor did she think that the
Department of Labor (DOL) should play a role in providing education
programs, except to the extent that it might encourage fiduciaries to
recognize their responsibility to be trained in this area as well as to
continue their education in later years.
|
Ms. Borzi stated that the most important thing that DOL
can do is to continue to issues guidance for fiduciaries. She complimented
the Department on its efforts in recent years to make its guidance more
user-friendly and accessible to the consumer. She noted the use of Q & A
formats and concrete examples.
|
She echoed concerns raised by other witnesses about
conferences held in exotic locations. She noted that even though a fiduciary
may be more interested in education than the locale, attendance at some of
these meetings might actually be imprudent.
|
The programs sponsored by the JCEB utilize a number of
techniques: live programs, satellite programs, teleconferences and the
recently introduced teleweb concept. She noted the networking opportunities
afforded by the live conferences, while recognizing that they may be the
least economical option. At the other end of the spectrum, some states are
reluctant to give Continuing Legal Education credits for participation in
teleconferences because there is a widespread fear that little education
actually takes place which participants are busy with other activities while
ostensibly listening to the conference.
|
For this reason, the JCEB uses the teleconference
approach to address “hot topics”. While the programs are fairly short,
they are generally enough to put people on notice as to a new development.
Another cost effective mode of delivery is the JCEB’s satellite programs.
For these conferences, participants are able to go to a location in their
home areas for a live video program beamed to as many as one hundred sites
around the country.
|
Ms Borzi noted that while the teleweb conference mode is
very inexpensive it could also be difficult for the presenter. In her
experience, the continual distraction of participants’ e-mails arriving on
her monitor screen was not conducive to a successful presentation.
|
With regard to the marketplace for fiduciary education,
Ms. Borzi noted that there is no shortage of opportunities for fiduciaries
to attend educational programs. However, there is a lack of direction to
convince fiduciaries that it is their responsibility to utilize those
programs rather than to rely on professional advisors.
|
In response to a question about whether these myriad
opportunities were available to small employers, Ms. Borzi noted that JCEB
had worked on a program in conjunction with the Small Business
Administration that focused on retirement plans of small businesses.
Attendance was not great. She suggested that small business owners are too
busy running their businesses and do not see such education as a priority.
She hoped that a teleconference might reach a greater audience.
|
Ms. Borzi noted that many of the problems with fiduciary
mistakes do occur in the small business arena. “And its all around the
questions of ‘whose money is it anyway? What are plan assets? Are there
plan assets at all? What are they and what can they be used for?” She
suggested that these are all areas that require fiduciary education.
|
In response to another question, Ms. Borzi noted that
despite improvements in the availability of guidance on fiduciary issues
from DOL and others, there remains a problem of professional advisors
disagreeing with one another on the proper course of action in important
areas. Unfortunately, the fiduciary may choose the advice provided by the
advisor with the answer he or she most wants to hear.
|
In a final note, Ms. Borzi stated that one of the areas
overlooked in fiduciary education is the health arena. It is her belief that
this is an area where much guidance is also needed.
|
|
Testimony of Bruce Ashton on September 19, 2002
|
Mr. Ashton s currently co-char of the American Society of
Pension Actuaries Government Affairs Committee and will become the
organization’s President-Elect n November. ASPA’s more than 5000
retirement plan practitioners provide services to more than half of the
pension plans n the United States.
|
ASPA supports many of the proposals that have been made
over the last year to expand remedies for participants and encourage
employers to make investment advice available to participants. However the
more important issue n Mr. Ashton’s opinion s fiduciary competence - the
ability of plan sponsors and service providers to fulfill their fiduciary
duties under ERISA.
|
He emphasis that while this has been a concern ever since
employers began to provide retirement plans t s even more a problem since
the shift to DC plans which place the financial risk of investments on
participants. While investment advice will help to improve results this can
only occur if fiduciaries have taken proper steps in the first place. “Put
another way even a brilliant job of allocating mediocre funds will still
produce a mediocre result.”
|
Ashton offered an example of an executive who acted
imprudently in his selection of investment options and providers. However
the fiduciary did not disregard his duties but rather acted out of ignorance
of the duty to perform due diligence in investigating options and the need
to employ advisors to assist him where he laced sufficient knowledge.
|
Ashton and ASPA suggest two steps that the DOL might take
to address these problems.
|
First, work toward “best practices” for fiduciary
conduct by both in-house fiduciaries and experts hired to assist the plan.
(Aston also noted that those experts might not be aware of their own
fiduciary duties under ERISA.)
|
He suggests, for instance, that DOL could provide clear
guidance to fiduciaries to the effect that they must prepare a written
investment policy and the steps to be taken in selecting and monitoring
investments or investment options.
|
In addition, best practices might include:
-
Issues to be covered in the investment
policy statement
-
Types of due diligence to be done in
selecting and monitoring investment options and providers.
-
Frequency of monitoring
-
Types of due diligence records and how
long they should be retained
|
Ashton recognized that some might find that the issuance
of best practices might hamper EBSA’s enforcement activities. Rather, ASPA
believes that best practices will reduce the number of situations requiring
enforcement action and the best practices will provide evidence of fiduciary
breach.
|
In addition, ASPA suggests that DOL should promote and
facilitate fiduciary education including widespread dissemination of those
best practices. These efforts might include:
-
Educational brochures from EBSA
addressing issues that fiduciaries need to consider in administering
their plans.
-
Outreach programs, in conjunction with
the private sector
-
Education of DOL investigators to
assist EBSA in locating problems when plans are investigated.
|
Suggested elements for an educational program included:
-
Fiduciary self dealing prohibitions
-
Agreements with plan service providers
-
Understanding plan cash flow and
distribution needs
-
Maintenance of plan assets
-
Trust requirements for assets
-
Deposit of deferrals and loan payments
-
Need for diversified asset classes
-
Need to obtain and review periodic
performance reports
-
Periodic review of qualitative and
organizational changes to money managers
-
Control procedures for the review of
money managers
|
Questions:
|
Q: Need for independent fiduciaries in cases where there
are conflicted loyalties
A: Especially true in dealing with company stock or issues that involve the
company itself…an independent fiduciary is an effective but expensive
device to address these concerns…hard to find someone willing to take on
the task and to understand the task they are taking on.
|
Q: Co-Fiduciaries in small plan situations
A: May increase expenses, and who’s watching the co-fiduciary? Monitors
his or her selection, etc?
|
Q: Relationship between small plan sponsors and advisors
pA: An advisor can only do so much. They cannot make decisions for the
sponsor. The people closest to the plan are the record keepers and yet they
still only see the client infrequently.
|
The plan sponsor must understand fiduciary duties and
fulfill them.
|
|
Testimony or Richard Koppes and R. Scott Henderson on
September 19, 2002
|
Koppes: The why of Fiduciary College:
|
The experience as general counsel to CALPERS and
involvement with the National Association of Public Pension Attorneys –
general counsel and assistant general counsel from major public pension
plans, those responsible for issues of fiduciary duty – and with the
Stanford Institutional Investor Forum . . . a place where “mid to large
institutions could come without public view, without the press. . .where
they could discuss issues of mutual concern. . . Saw the need for impartial
sponsor-free fiduciary education….”
|
The goal of the Fiduciary College was to establish a
place where fiduciaries could receive the training they need to meet the
standard set down in Donovan v Cunningham: “Pension trustees may not
escape the reasonable man, reasonable person, standard of prudence in making
investments by having a pure heart and an empty head.”
|
“There is no such thing as a prudent klutz.”
|
Henderson: Same kinds of issues face all large plans,
regardless of who the sponsor is: prudence, good management, and conflicts
of interest. Also face corporate plans, Taft-Hartley plans, foundation
endowments and public plans. The program allows for cross-fertilization
among people with varied backgrounds, leading to good discussions of best
practices.
|
There are lots of educational opportunities but many have
a very important problem: most are sponsored directly or indirectly by
investment managers, raising concerns about the quality of the education.
“Not going to hear a lot about negotiating fees, for example….”
|
Having an independent sponsor adds credibility to the
Fiduciary College program.
|
Koppes: Have received support from Stanford as an independent institution with lots
of experience with such things as Directors’ College and the Institutional
Investor Forum.
|
Focus on the proper management of other people’s money.
|
Henderson: Described the course format and materials – nuts and bolts, hypothetical
case studies, and practical advice from people that run pension funds. Lectures
on principles with follow-on discussions about how to implement them.
|
Materials are reduced to a CD-ROM, practical materials to take home –
ethics codes, governance codes.
|
Some sponsors, who don’t come to the meetings, underwrite costs. Coca-Cola
has provided funding for some scholarships.
|
Sent out 9,000 invitations last year, had 100 in attendance. Low turnout
reflects lack of priority for fiduciary education. Expect increased interest
with recent problems in these areas.
|
Raised several other issues:
|
DC plans as a source of potential liability for sponsors.
|
US based subsidiaries of foreign firms that are not familiar with the law in
this area.
|
|
Testimony of Gary Tidwell on September 19, 2002
|
Mr. Tidwell is a Vice President at NASD and is responsible for education and
training. The NASD is the world’s largest SRA - Self Regulatory Organization.
Over 5,500 brokerage firms are members of NASD, and over 700,000 registered
representatives. NASD has a staff of over 2,000, and a budget of over $400
million.
|
NASD provides educational programs for both outreach and compliance, and is a
cornerstone of the NASD mission. The feeling is that better training leads to
better compliance. Education can also prevent regulatory ”gotcha”.
|
NASD educational programs are tailored to forum target audiences: NASD Staff
and other regulators, dispute resolution, the investing public and financial
services professionals and member firms.
|
Offerings include CDT and IRT regional training programs, phone-in workshops,
district preventative and compliance seminars, advertising and regulatory
seminars, industry conferences and the NASD Institute for Professional
Development.
|
Questions:
|
Q: Would the educational programs be as effective or pervasive if not
mandated?
A: Some NASD education is required; some is not. Continuing education is
offered.
|
Q: Is there a difference in participation between the mandated and
non-mandated programs?
A: Mandated education is critical. NASD provides basic and advanced
educational programs. If members want the programs, they are there for them. If
not, they don’t have to participate.
|
Q: Is the certificate program mandated?
A: No.
|
Q: Is participation in the certification program adequate?
A: Yes. Participation is god, and is a capstone experience for compliance
professionals.
|
Q: Smaller firms - are they participating or is it just the larger firms?
A: Smaller firms are participating. They are aware need it. Smaller firms
look for guidance from NASD. NASD wants to make sure the tools are there to
ensure compliance.
|
Q: How are the programs funded?
A: Through dues, and fines.
|
Q: Why is there a firm element and a regulatory element?
A: NASD wants to make sure everyone is aware of the regulatory
requirements. Then, the firms can set up their own training and educational
programs suited to their needs.
|
Q: Does the public use the information available on violations by brokers?
A: Yes, the public uses it extensively.
|
Q: To what extent does NASD participate in the creation of programs in
which they are not sponsoring?
A: The NASD has steered away from approving or endorsing other programs,
due to the regulatory aspect.
|
Q: In the NASD citation system, would settlements sometimes require
attendance at educational programs?
A: No. There are guidelines for breaking rules, sentencing guidelines, but
they do not include educational requirements.
|
|
Testimony of Michael Barry on September 19, 2002
|
Mr. Barry focused his testimony on education relating to the performance of
fiduciaries. There is a distinction between compliance and performance. One can
be educated about compliance, and not break any laws, but still have poor
performance as a fiduciary. In the DC world, the big problems are that the
interests of the person appointing the fiduciary are not directly connected with
the kind of performance that the fiduciary delivers, and that there is no
consensus on what is good performance for a fiduciary. The person appointing the
fiduciary of a DC plan may be a CFO or someone from HR, but the performance of
the participant’s accounts does not impact anyone’s bonus.
|
It is critical to grade the performance of fiduciaries. Plans should be
graded on performance, including risk and fees, then the market will make poor
performers try to perform better. Grading will drive demand for better DC plan
performance.
|
In answer to a question, Mr. Barry indicated that mandating certification or
education creates some problems, especially for smaller plans. A follow-up
question related to the concept of hiring an independent fiduciary where
knowledge or education doesn’t exist. Mr. Barry indicated that that was the
wrong answer, due to the problem of accountability. If you don’t solve the
accountability problem, then you have no way of knowing whether the independent
fiduciary is doing any better than the non-independent fiduciary.
|
Much discussion followed on the concept of ranking DC plans by cost and
performance. The discussion involved the usefulness of this information, the
probity of who does the rankings, and who would pay for it.
|
|
Testimony of Joyce Mader on September 19, 2002
|
The National Coordinating Council on Multi-Employer Plans is the only national organization devoted exclusively to
representing the interests of the approximately 10 million workers, retirees and
beneficiaries covered by multi-employer plans for health and other benefits. One
of NCCMP’s core missions is education. Two venues for education include an
annual conference and timely updates on significant issues through a “multi-e-alerts”
web-based system. Some ME plan members provide educational opportunities and
programs for trustees, and some do so in conjunction with employer
organizations. There is also a great deal of cross-fertilization, through NCCCMP
programs and participation in seminars and conferences arranged by other groups.
NCCMP believes that it is important to encourage a wide array of educational
opportunities for fiduciaries.
|
Ms. Mader discussed her experience with previous ERISA Advisory council
working groups, and particularly the 1996 working group on Guidance in Selecting
and Monitoring Service Providers. This group recommended that the DOL develop
and disseminate information to plan sponsors on the following issues:
-
a plain language description of the duties of a fiduciary.
-
an explanation of the legal effect of delegating authority to service
providers
-
an explanation of the requirements in selecting and monitoring service
providers.
|
Mr. Ray asked if would be helpful if the DOL issued an interpretive bulletin
addressing these issues, and Ms. Mader indicated that that is what they had
hoped would happen.
|
Ms. Mader indicated that the DOL’s emphasis should be on making information
available. The NCCMP does not support certification of trustees. Certification
would be expensive, plus it could impair people from volunteering to be
fiduciaries. The NCCMP would like to see more efforts by government agencies to
develop tools and to coordinate among themselves. The voluntary Correction
Program is useful. One-stop shopping links on a government Web site would be
helpful.
|
|
Testimony of Alan Lebowitz and Mark O'Donnell on September 19, 2002
|
Mr. Lebowitz: The first question is approaching the question about fiduciary education is,
to educate who, about what, and by whom? There has been a range of suggestions
from the witness about this question. A majority of DOL education and training
programs are focused on being part of someone else’s program. DOL
representatives appear at hundreds of meetings of different organizations,
including the Bar Association, practitioners, accountants, plan administrators,
and investment professionals. The DOL works with state insurance commissioners
in putting-on specific programs covering specific issues. These programs are
very successful, and may serve as a model for other efforts like fiduciary
educations.
|
The DOL Web site also has a Compliance Assistance page, and a Participant
Assistance page. The department gets over 170,000 inquiries, mostly from
participants and beneficiaries, and about 20,000 inquiries from employers, plan
sponsors and service providers.
|
Mr. O’Donnell: Mr. O’Donnell described his office, Customer Education and Outreach, as
being fairly new - set up two years ago, and described some of the tools
developed to help employers, especially small employers, understand pension
plans and life cycles of plans, and setting up plans. There are already 14,000
subscribers to their newsletter. The office also puts on tax forums, with both
IRS and DOL people in attendance. They’ve had a very positive response to
these efforts. A single forum will attract over 2,000 participants.
|
|
Testimony of Antoinette M. Pilzner on September 19, 2002
|
The Society for Human Resource Management (SHRM) is the world’s largest
association devoted to human resource management, representing more than 170,000
individual members. Founded in 1948, SHRM has more than 500 affiliated chapters
in the U.S. and members in more than 120 countries.
|
The 1.3 million HR professionals in the workforce today are challenged with
managing a variety of benefit plans, including ERISA plans. To handle the
complexities associated with ERISA, federal laws and state laws, most HR
professionals seek advice and counsel from attorneys, accountants and third
party administrators. However, deference to others does not relieve the HR
professional of a fiduciary duty. It is therefore, essential to educated HR
professionals on the scope of the fiduciary responsibility. It is equally
important the HR professionals know that they too are fiduciaries. Many HR
professionals are unaware that they are plan fiduciaries due to the role they
play in administering employee benefit plans.
|
The apparent disconnect of HR professionals regarding their potential
fiduciary position indicates a real need for clarification and education. The
recent failures of executives and plan managers at Enron and Worldcom, whether
intentional or unintentional, to act in the best interests of their plan
participants suggests a need to strengthen all components of compliance,
administration and management.
|
SHRM believes HR professionals need a one-stop program to cover all their
government compliance responsibilities with respect to employee benefit plans.
This program should comprise a five-pronged approach:
|
The program should be both initiated by and coordinated with the appropriate
government agencies in consultation with industry leaders and representatives.
The program should restrain from creating any additional employer requirements
or mandates. Program development should consider low- or no-cost development, be
easily accessible and epitomize flexibility.
|
A campaign, in the form of a public service announcement, should be
initiated. The announcement would encourage all individuals involved in the
administration of employee benefits plans to visit a Web site with further
information, including trading and education opportunities. The ultimate outcome
of any initiative should ensure that HR professionals understand the
responsibilities and parameters of fulfilling a fiduciary role.
|
In response to questions, Ms Pilzner indicated that:
-
Questions which come into her office from members regarding problems are
typically from small or medium size employers, and usually concern
administrative issues.
-
There is a hesitance at SHRM to endorse mandated education or
certification of fiduciaries.
-
Many employees may serve in a fiduciary role, and requiring each to “officially”
certify that they know they are a fiduciary raises many issues.
|
|
Testimony of Dennis Mahoney on October 17, 2002
|
Mr. Mahoney is responsible for course development and educational programming
for the Certified Employee Benefits Specialist Program, which is co-sponsored by
the International Foundation of Employee Benefit Plans and the University of
Pennsylvania. He is also the primary designer of the package of materials used
by the Department of Labor to train new EBSA employees.
|
The CEBS Program is a voluntary professional certification program. The
program is composed of 10 courses which individuals can take, either on a
self-study basis or through classroom instruction. The program has a network of
educational partners throughout the country who provide classroom instruction
for those desiring the classroom educational experience. Course proficiency is
tested with multiple-choice tests.
|
Upon successful completion of four courses in our curriculum, participants
can be qualified as either a Group Benefits Associate or a Retirement Plan
Associate. Currently, upon successful completion of 10 courses, participants
earn the Certified employee Benefits Specialist designation. CEBS candidates are
a diverse group representing all sectors of the employee benefit industry: plan
sponsors, consulting firms, managed care organizations, banks, hospitals, law
and accounting firms, investment managers, labor organizations and professional
associations. There have been almost 10,000 individuals who have earned the CEBS
designation. It is important to note that the CEBS designation is a voluntary
certification. CEBS candidates are a diverse group representing all sectors of
the employee benefit industry: plan sponsors, consulting firms, managed care
organizations, banks, hospitals, law and accounting firms, investment managers,
labor organizations and professional associations. To the extent that the market
place recognizes the certification as an indicator that certification holders
possess certain knowledge or skills, those possessing the certification will be
sought out to do client work or for employment opportunities.
|
The program includes not only technical information about employee plan
regulation, but also economic, law, accounting, finance, policy considerations,
and employee benefit history, to provide context and better understanding of the
regulatory requirements providing structure for employee benefit plans. The
courses build on each other, with learning objectives intensified as the
curriculum proceeds. The subject of fiduciary responsibility is not the title of
any particular course but is woven throughout the curriculum.
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The people who take the course are generally benefits professionals and not
the people who administer an employee benefits plan within a small employer. Mr.
Mahoney commented that “Oftentimes the administrator of benefit plans at a
small employer has multiple administrative responsibilities within the
organization and spends a minor portion of his or her time with benefit
programs. He or she may have so many other job responsibilities that he or she
is hardly aware of the fiduciary requirements of the law. At seminars on
fundamentals, I've often met individuals who are literally amazed to learn of
the attendant fiduciary responsibilities in administering a benefit plan. . . .
To the extent that the Council or the Department of Labor can effectively raise
awareness of the need for both an initial comprehensive overview of fiduciary
education and the ongoing need to update this knowledge and of the meaningful
educational programs in the market place that that will contribute to a stronger
and healthier employee benefits system that values voluntary compliance.”
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Mr. Mahoney also asked what should be in a program directed at small
employers. He answered that such a program should include an overview of ERISA
and both give the historical sort of development of ERISA, cover things like
fiduciary principles, go through the various titles and part of ERISA, show the
application to benefit plans. Also give some discussion of various types of plan
structures, differences between defined benefit, defined contribution plan, how
those various ERISA requirements relate to those different types of plans. I
think it is possible to design educational programs that in a seminar sort of
approach give an overview to plan administrators. I think there are some
products out there in the market place that are designed according to that sort
of structure.
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In terms of reaching small employers, Mr. Mahoney said “any initiative that
would encourage education could be very helpful. So the idea of providing seed
money to maybe tailor programs for the small employer could be useful. I think
that providing scholarships for small plan administrators to take advantage of
these programs again would raise the level of awareness and could be a very
helpful thing for the market place.
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Mr. Mahoney was asked about whether there should be mandatory licensing for
fiduciaries. He answered that for small employer fiduciaries this might not be
effective because it is a small part of someone’s job.
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Testimony of Lisa Winton on October 17, 2002
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Among Ms. Winton’s many responsibilities at the
American Institute of Certified Public Accountants is that she works
with the Conference Planning Task Force for the annual employee benefits
conference. She also works on programs co-sponsored by other groups, including
the ABA and the Department of Labor.
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The AICPA is the professional association of Certified Public Accountants
with more than 350,000 members. Many of its members observe the conduct of both
plan participants and plan sponsors through retirement planning. The AICPA
believes that education is the cornerstone to enhancing retirement security.
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The AICPA has worked to educate the effected populations in a number of ways.
For the past 12 years, the AICPA has sponsored an employee benefit plan
conference with the Department of Labor. Planned and run by recognized experts
in the audit and tax fields of employee benefits, this three day conference
includes discussions of recent and proposed employee benefit plan legislative
and regulatory initiatives and how these initiatives will affect firm, client
and company plans. Officials from the Treasury Department and Internal Revenue
Service also participate in panel discussions on enforcement initiatives.
Conference participants can receive 24 hours of CPE credit.
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In 2002, the AICPA and the DOL jointly sponsored an annual update conference
in Washington, D.C. A second update is planned for December 2003. This one-day
conference offering eight hours of CPE will cover recent proposed DOL
regulations affecting employee benefits. The conference will be held just before
auditors begin the planning stage of their annual audit process, allowing
auditors to be prepared when they start up their upcoming audits. In the past,
the AICPA's CPE course material and conferences have not stressed fiduciary
education. However, as a result of Enron-related pension reform developments,
new CPE group and self-study courses now cover the responsibilities of plan
fiduciaries and delineate best practices.
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AICPA conferences will also offer audit and tax panel discussions of
fiduciary responsibilities with Department of Labor members on the podium.
Fiduciary planning should be done at the inception of the plan. Disclosures
would be a good place to start. There is a widespread misunderstanding of the
role of the directed trustee and many plan sponsors are given incorrect
information by those who sell the investment that are used as funding vehicles.
Even if these investment providers do not intend to provide misinformation,
they're frequently not well informed themselves.
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Part of the educational challenge is to educate those who provide investment
services to plan sponsors before they can give advice or service to plans. If
handled properly, fiduciary education would not give rise to greater liability
risk. Plan fiduciaries could still hire experts. They would just need better
tools to identify who is a quality advisor and how to monitor those advisors to
ensure the advice given is prudent and the advisor remains qualified to give it.
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In terms of the small plan fiduciary being able to understand much of the
complexities of ERISA regulation, Ms. Winton was skeptical. She noted that
perhaps we to just focus on the professionals to begin with and make sure you're
communicating to them and leave it up to them to communicate to their clients
basically or to the nonprofessionals.
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Testimony of Ian Lanoff on October 17, 2002
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Mr. Lanoff is a lawyer at the Groom Law Group. He was the administrator of
EBSA in the Carter and the early Reagan administrations. He has represented
mostly defined benefit plans, both in the public and private sector.
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Mr. Lanoff indicated that in the early days of ERISA, the Department’s
policy reflect the belief that no one would really know or understand the
complexities of the law even though the law had been in effect since 1975. By
1977, no one really had learned much and the Labor Department hadn't really done
much in the way of providing guidance. There were very few regulations. There
were very few exemptions for -- transactions and very few cases that had been
brought in the courts.
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Thus, the Department basically took the position that it didn't have high
expectations. Now that thirty years have passed is there any reason to think
that expectation should be any different? Mr. Lanoff was not certain that the
answer would be yes, despite the fact that we now have all these years of
regulations, exemptions and law cases. It's difficult enough for lawyers to keep
up with what's going on in just the fiduciary area. That's where I practice,
Title I of ERISA. I'm in a law firm of about 40 lawyers. All of us devote all of
our time to employee benefits. About 10 of us are Title I lawyers, but the
remainder are tax lawyers, Title II lawyers, or Title IV lawyers, PBGC. We spend
a lot of time just talking amongst ourselves and brainstorming because we can't
keep up with what's going on and oftentimes we don't even agree as to what legal
requirements are. Should expectations be any different, I would say the answer
today is not much different than it was almost 30 years ago? Mr. Lanoff observed
that if anything, maybe it's more difficult to understand today what the law
should be. “I'll just talk about the fiduciary area because any time you bring
in court cases, you're going to have differences of opinion by judges.
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In the early days, we had the advantage of the Labor Department was the only
one really addressing these issues. Now you not only have the Labor Department
but you have courts all over the country agreeing or disagreeing with Labor
Department positions on many of these issues. So it's very difficult for us to
understand what the law requires so imagine how difficult it is for fiduciaries
of plans. Although I don't know much about smaller plans because that's really
not my practice, I wouldn't only focus on smaller plans. I don't think it's just
smaller plan fiduciaries who have difficulties understanding what the law
requires of them. I would say it's the larger plan fiduciaries who are as much
in the dark as well.”
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Mr. Lanoff commented on whether we should be hesitant about using
Departmental resources for education. He said that he did not and commented that
“I don't see that distinction between enforcement and education. I don't see
the Labor Department's role then in the early days or now as being one of
playing gotcha with plan fiduciaries where you come in and you say we gotcha
because you violated this requirement or that requirement. I see the role of the
Labor Department continuing to be one of providing education to fiduciaries, not
just enforcing the law and educating fiduciaries through bringing lawsuits or
even issuing regulations or letters on what the fiduciary requirements are.”
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Mr. Lanoff said that in the time period when he administered the EBSA the
field offices made a considerable effort at outreach, sponsoring local
conferences and doing other outreach to fiduciaries. He thought that this was
very effective and thinks the Department should do more of this in the future:
“that was very valuable and I think having the people who are enforcing the
law provide the education was extremely valuable and I think we nipped a lot of
potential violations in the bud in those days and I think we accomplished quite
a bit.”
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Mr. Lanoff also indicated that the Department could help educate fiduciaries
with more frequent written guidance.
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Mr. Lanoff was also a bit skeptical that more conferences would necessarily
help most fiduciaries. He noted that he had a Dilbert cartoon in his office,
showing what looks like a lawyer giving a fiduciary lecture to her client. She's
saying let's cut right to the point. What we have here is complete fiduciary
misconduct. I don't know if she's talking about the pension plan. And you see
the pointy-headed boss holding his hands over his ears and saying,
blah-blah-blah-blah. In other words, you can bring a fiduciary to a lecture but
you can’t make him think. But he does think the quality of lectures has
improved.
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He also testified that the best type of education may be the fiduciary audit:
When the people who perform it come in and go through what they've found, it
seems much more attention getting because they actually are going through the
particular situation at the fund and they almost always find some potential
problem and that seems to get the fiduciary's attention. But the issue there is
how many people can afford this? It really is only the largest. Some of my
public employee clients have over $100 billion in assets. They can afford it.
But can even the average Taft/Hartley fund or average public employee fund
afford it? So I don't know how useful. They're obviously useful for those who
can afford it but are they going to be useful for the medium size and smaller
plans?
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If Mr. Lanoff were to emphasize a particular type of education, it wouldn't
be legal, actuarial, at least for the typical fiduciary. It would be what he
called more mechanics or mechanical sort of education and that would be - “we
heard a little bit about this earlier -- just a little bit of information about
how investments work. It's amazing how little people know who are fiduciaries
about how the basic investments work. Maybe how benefits work, how
administration works. Just so they can at least be somewhat educated and can do
their due diligence.”
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Mr. Lanoff also addressed the idea of fiduciaries certifying that they
understand their status. He noted that some people “will scoff at that because
they'll say well, of course we're fiduciaries. But it might not be a bad idea. I
guess one question is who would sign it? For example, the Labor Department is
just waiting on the litigation against Enron. So who would sign it? Would a Ken
Lay have signed that at Enron or would he just have delegated it to somebody
down the line who's on the investment committee? I don't know. Maybe the
requirement should be that CEOs of corporations in the corporate area sign. I
don't know. I'm sure people would not be happy with that. But that might not be
a bad idea.
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Testimony of Paul Antsen on October 17, 2002
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Mr. Antsen described the training program used by EBSA for its own
professionals. The Department uses two books, which he described as follows:
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“One book deals with the industry and it's an introduction to employee
benefits from an industry perspective. It talks about the different types of
plans and how they're qualified and a little bit about how they operate. It uses
a college textbook or close to a college textbook called Pension Planning. It's
also used, I think, by the CEBS program, something that you may well be familiar
with or you've heard maybe some of the speakers talk about. It's a generic
industry text on the area of employee benefits. This is the current version of
it. It was just reissued this spring. That's why Mr. Mahoney has been involved
with us is that we've had to update this to reflect the most recent version of
that text that we've used for a number of years. We've used several iterations
of it. So the first volume of our course deals with the industry.
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“The second volume of our course deals with Title I of ERISA. That text is
put together in-house at EBSA. Initially, we had this also done by Jerry
Rosenbloom when we started but we have since brought this in-house and they both
together become the materials that are provided to our new employees, our new
technical employees that work in the employee benefits area with the expectation
that they will go through these materials -- and they are self-teaching in the
sense that there are questions and answers at the end that they're asked to work
their way through.”
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ERISA characterizes as fiduciaries individuals and entities, who have
meaningful authority over the assets or administration of employee benefit plans
or who offer investment advice to such plans. Some fiduciaries are large
investment companies, some are professional investment managers, and some are
human resource executives. At small firms, they might be the firm's president or
the lead doctor in a practice group. Some fiduciaries are paid for their
services, while others serve without compensation.
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ERISA imposes on all fiduciaries certain requirements for the protection of
the plan and its participants and beneficiaries. These requirements range from
broad prescriptions of prudence and loyalty to detailed rules relating to plan
structure and administration. The Department of Labor has interpreted and
developed these requirements through regulation, other administrative guidance,
and enforcement actions, and the federal courts through the resolution of
litigation.
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Plan fiduciaries must know and understand when and how ERISA's requirements
apply to their plan-related activities. The purpose of the Working Group is to
study how the Labor Department can promote and support the effective education
and training of plan fiduciaries regarding their responsibilities under ERISA.
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In furtherance of this purpose, the Working Group will consider various
questions including:
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How do plan fiduciaries acquire and update their knowledge about the
ERISA fiduciary standards?
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What types of errors do fiduciaries make? Do the types of errors, or the
frequency of errors, differ depending on the size or type of the plan or plan
sponsor? Are fiduciary errors common?
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What are the causes of fiduciary errors? To what extent do they occur
because a fiduciary is unaware of his or her fiduciary status or of particular
statutory requirements? To what extent do they occur because a fiduciary must
make difficult judgment calls in a complex and constantly evolving regulatory
scheme? To what extent do they occur because a fiduciary has made a cost-benefit
analysis comparing the cost of compliance to the cost of breach? To what extent
do they occur because the fiduciary lacks effective access to expert advisors?
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To what extent can fiduciary education and training improve fiduciary
performance under the statute? What are the limits of fiduciary education?
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What do we mean by fiduciary education and training? Do we mean a one-time
seminar? Periodic classes? A series of ongoing discussion groups? Resources for
self-education (books, online coursesor other resources, etc.)? Ongoing
arrangements where fiduciaries can get assistance with problems as they arise?
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What types of fiduciary training and education programs are currently
available? Who sponsors them? (Professional organizations, employee
organizations, employers, higher education, individual employers, large
multiemployer and single-employer plans)? How are programs structured, what do
they cost, and who bears that cost? To what extent do such programs aim at
different types of plans, fiduciaries, and/or plan sponsor markets? Are there
any gaps in the current array of programs (for example, are a sufficient number
of programs aimed at fiduciaries of plans at small firms)? To what extent do the
programs attempt to provide a comprehensive introduction to plan administrative
and management functions and to what extent are the programs more specialized?
How is the curricula for such programs developed and how is the faculty
selected? Which types of programs work? What criteria do we use to determine
whether a program is working? Are there any program accreditation organizations
or standards?
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Are there currently programs for accrediting fiduciaries? What benefits do
fiduciaries gain from such accreditation? What are the current and possible
future uses of such accreditation programs? (For example, should accredited
fiduciaries be subject to lower bonding requirements under ERISA?) Should
receiving some sort of accreditation (or minimum education) be required or
encouraged?
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Assuming that the additional fiduciary education and training programs are
desirable, why hasn't the market created them.
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What are potential sources of additional training and education for
fiduciaries? Are training programs for pension actuaries, attorneys,
accountants, and other professionals adaptable to training of fiduciaries
generally? Should third-party administrators and other service-providers (such
as sellers of investment services) be encouraged or required to provide
fiduciary education to those who contract with them? Is there a need for
different types of educational and training programs for different types of
firms and/or plans?
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Does fiduciary education create a risk of increased liability, by holding
fiduciaries who have been educated to a higher standard of care? Are there other
liability risks raised by fiduciary education? Are there any liability risks to
the party providing the education? If such risks exist, are there steps that
might be taken to eliminate or minimize them?
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What is the role of the government in the education and training of
fiduciaries? Should the government try to stimulate either demand for or supply
of educational programs through tax or other financial incentives? Does it have
a role in creating program or fiduciary accreditation standards, and if so, what
should that role be? Should the government play a role in developing
standardized curriculum for educational programs?
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2002 Index for the Working Group on Fiduciary Education and Training
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Advisory Council on Employee Benefit and Pension Plans
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Actual Transcripts/Executive Summaries for the Council's full meetings and
working group sessions are available - at a cost - through the Department of
Labor's contracted court reporting service, which is Neal R. Gross and Co., Inc.
1323 Rhode Island Avenue, NW, Washington, DC 20005-3701 at 202.234.4433 or
www.nealgross.com.
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July 17, 2002: Working Group on Fiduciary Education and Training
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Agenda
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Official Transcript
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Outline for group's study for the year
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“Mandating Fiduciary Education Because of High Profile Cases Misplaced,
Speaker Says” from the July 18, 2002 BNA Pension & Benefits Daily by
Michael Wyand.
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Written Testimony by Donald B. Trone, President of the Foundation for
Fiduciary Studies, plus the Center’s Year 2002 Course Offerings Brochure, the
Management of Investment Decisions Flowchart, Prudent Investment Practices (a
handbook for investment fiduciaries) and Legal Memorandums for Prudent
Investment Practices.
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Written Testimony of Edward Ferrigno, Vice President of the Profit
Sharing/401(k) Council of America
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Statement by Laurie P. Havanec on behalf of the ERISA Industry Committee
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My Perspective of DOL Promotion and Support of ERISA Plan Fiduciaries - the
Internet Angle by David Rhett Baker, BenefitsLink.com as well as samples of
various training programs he has discovered via the Internet
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Testimony of Marc I. Machiz
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Employer Fiduciary Liability for Pension Plans Written Testimony by Martha L.
Hutzelman, Bosley Hutzelman
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A packet of promotional materials from the Chubb Group of Insurance Companies
provided by John Bayley, Vice President and Claim Counsel, during his testimony
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“Prudent Man With a Plan - Most 401(k) reforms before Congress don’t
address a crucial source of risk: fiduciary duty” from CFO.com by Kris
Frieswick, June 18, 2002.
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September 19, 2002: Working Group on Fiduciary Education and Training
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Agenda
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Official Transcript
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News article “Recommendations of Working Group Important to Labor
Department, Official Says” in the September 20, 2002 edition of BNA’s
Pension & Benefits Reporter.
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Written testimony provided by Phyllis C. Borzi, O’Donoghue & O’Donoghue,
representing the educational activities of the Joint Committee on Employee
Benefits of the American Bar Association (ABA).
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Written testimony provided by Bruce Ashton, a partner of Reish Luftman
McDaniel and Reicher, representing the views of the American Society of Pension
Actuaries (ASPA) as well as “Your Ticket to Fiduciary Best Practices”, a
fiduciary handbook for participant-directed qualified retirement plans edited by
C. Frederick Reish, Esq..
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Written testimony of Michael P. Barry, President of the Plan Advisory
Services Group.
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Written testimony of Joyce A. Mader, O’Donoghue & O’Donoghue,
representing the National Coordinating Committee for Multiemployer Plans (NCCMP).
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“Fiduciary Liability of Employers Sponsoring Pension Plan,” a primer used
by Martha L. Hutzelman of Bosley Hutzelman, in preparing her clients for their
roles as fiduciaries.
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Written testimony of John Hotz, Deputy Director of the Pension Rights center,
on fiduciary education, and a brochure from the center.
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Written testimony of Antoinette M. Pilzner, CPA, representing the Society for
Human Resource Management (SHRM).
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The National Association of Securities Dealers NASD Institute for
Professional Development 2002 Programs, provided by Gary Tidwell, Vice President
of Education, NASD.
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A packet of material from the Fiduciary College sponsored by the Stanford
University Law School, presented by Richard H. Koppes, Business Practice Group,
Mergers and Acquisitions Practice of Counsel, Jones, Day, Reavis & Pogue,
and R. Scott Henderson, Of Counsel, Bingham Dana LLP, who are both instrumental
in the program. In addition, Mr. Henderson provided three hypothetical case
studies on fiduciaries under pressure.
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A packet of the many educational brochures/fact sheets available to
fiduciaries through an 866 telephone distribution center or via the agency’s
web, presented by Alan Lebowitz, Deputy Assistant Secretary, Pension and Welfare
Benefits Administration.
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Employee Plans News, a new quarterly publication of the Internal Revenue
Service’s Tax Exempt and Government Entities Division, provided by Mark O’Donnell,
Office of Outreach and Education, IRS.
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October 15, 2002: Working Group on Fiduciary Education and Training
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Agenda
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Official Transcript
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Possible Findings of the Working Group to discuss in preparation for its
final report.
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EBSA news release announcing a new compliance assistance tool on October 16,
2002.
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Written testimony of Lisa Winton, Technical Manager with the American
Institute of Certified Public Accountants (AICPA)
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Norman Stein, Chair of the Working
Group
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Robert Patrician, Vice Chair of the
Working Group
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James S. Ray, Council Chair and
ex-officio member of all working groups
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Ronnie Sue Thierman, Council Vice
Chair and ex-officio member of all working groups
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Evelyn F. Adams
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Carl T. Camden
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Catherine L. Heron
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Timothy J. Mahota
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Dana Muir
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John Szczur
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Judy Weiss
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Michelle Weldon
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David Wray
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One of our witnesses, Ian Lanoff,
observed that when he was Administrator of the EBSA, most interpretation
of the statute emanated from the EBSA. Today, in contrast, there
are literally thousands of judicial decisions, hundreds upon hundreds of
pages of substantive regulation and other guidance from the IRS,
guidance from the PBGC. In addition, the statute has been amended
virtually annually, with some of the amendments sweeping in scope.
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