An Edwardsville financial firm hosts free monthly seminars to educate retirement plan trustees and fiduciaries after the Department of Labor's recent demand that these retirement plan managers are aware of all federal requirements.
Larry Lexow, president of Lexow Financial Group and BCL Retirement Services in Edwardsville, held his first seminar last month because he said many fiduciaries are not aware of everything they are required to do.
"Many of them are saying 'Really? We should have been doing this?,'" Lexow said. "They just don't know. Nobody is out there training them or telling them what they need to be doing and where that responsibility lies."
Lexow said his and other third-party administration and investment companies need to be helping those trustees recognize and understand their duties as fiduciaries and then helping them with compliance. He said the labor department is seeking more education after announcing last summer at a meeting of the American Society of Pension Professionals & Actuaries that these trustees should pursue training.
"Basically they said they're tired of playing around and they're getting serious about the way plans are being run because they think there are a lot of operational issues, which there are," Lexow said. "They have hired a lot of new agents to go do plan audits."
This affects all companies that invest retirement money on a tax-advantage basis, such as a 401(k). These minimum standards for pension plans in private industry were established in Employee Retirement Income Security Act of 1974.
This year, all qualified retirement plans will have to be restated. Lexow said this means is every plan will have to take a look at the trust document that all retirement plans must have and that must be restated onto a new approved trust document that the IRS has provided.
This was last done in 2008. Since then, a number of lawsuits had been filed on behalf of employees from companies such as Anheuser-Busch InBev, John Deere and Caterpillar over their 401(k) plan. Employees of Cigna reached a settlement over their 401(k) plan last summer. Lexow said that in each case, participants claimed fiduciaries weren't fulfilling their obligation, and most of those were based around fees and proper selection of funds.
In most cases, participants are paying fees. John Graney Jr., a retirement and fiduciary specialist at Lexow Financial Group, said that if the total fee is 2 percent or 3 percent, the participant has to earn as much to break even. He also said that if inflation is factored, participants then have to earn two times or more so their retirement money will have the same purchasing power.
"That's a big hurdle," Graney said. "People are starting to realize we're paying a lot in fees."
On the investment side, Graney said he has found many business owners lack an investment policy statement, which is the document that states how funds are chosen, how they are replaced and other criteria.
Lexow said companies not in compliance could face tens of thousands of dollars in fines.
"It's a very complex issue," Lexow said. "There are very few people, probably three or four, who do what we do. Unfortunately, companies just don't know what they don't know. In this case, it be very expensive and timely, not to mention the fact that they are hurting their participants."
Lexow Financial Group will hold its next seminar from 11:30 a.m. to 1 p.m. Jan. 14 with a luncheon at its office on Illinois 157 in Edwardsville. Another it planned at the Edwardsville office from 7:30 to 9 a.m. Feb. 11, and a breakfast will be served.
The Edwardsville company is offering these seminars free to all fiduciaries. Graney said Lexow Financial Group plans to hold them on a monthly basis. He also said other companies like Lexow Financial Group provide this service, but for a fee. He heard that one law firm was charging $2,000 for the same instruction.
"The way we look at it is this is something that people need to know," Graney said. "We don't think that they should be charging people to come in for something that they should be doing."
Said Lexow, "Just getting the word out and making them aware that they have these duties and responsibilities and helping them understand what they are and how they can fulfill them is really the goal of what we're trying to do. We want to educate and help them tweak their process. The last thing you want to do is wish you had done some of these things, but you didn't until you got the audit letter, because then it's really too late."
For more information, call Lexow Financial Group at 692-9999 extension 10.
Contact reporter Will Buss at firstname.lastname@example.org or 239-2526.