3 of 4 retirement plans don’t review compliance regularly:

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The retirement crisis will not go away by plan sposnors ignoring the plan. A periodic review by an independent fiduciary will minimize the plan sponsors fiduciary risk and provide an excellent plan for their employees. This small function will help employers attract and retain talented employees.

Although plan executives “have significant concerns about their retirement plans, relatively few are taking all the steps available to fully manage these risks,” said the report on a survey of 245 plan executives. “Additionally, organizations are tackling some issues reactively rather than proactively.”Sixty-two percent said they will conduct a review if they or one of their advisers “identifies events that suggest new risks,” the report said, while 49% will conduct a review if they receive notice of a pending audit from the Internal Revenue Service or Department of Labor.

Although sponsors “tend to spend a fair amount of time” on assessing investments, “they spend less time on compliance of plans and operations,” Robyn Credico, Towers Watson senior consultant and defined contribution practice leader for North America in Arlington, Va., said in an interview. Ms. Credico is one of the report’s authors.

The small to mid sized firms have a tendency to ignore the compliance issues of their company retirement plan. Most mistakenly believe their service provider is handling this for them. This mistake can cost them and their employees.

Please comment or call to discuss how this affect you and your company plan.

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Your employer’s stock: How much is too much?

The risk of employees owning company stock in their retirement plan is transferred to the business owner/manager. There are numerous casess where the employees were awarded damages in the event of company stock litigation.

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One growing concern among plan sponsors is the growing threat of litigation against companies with heavy concentrations of their own stock in retirement plans. So-called “stock drop” suits were filed against 211 companies from 1997 through 2010, according to Cornerstone Research, which tracks the litigation.

“A sure-fire way to get sued for ERISA violations is to have a big chunk of your plan in company stock, and then have the share price fall 25 percent,” says Ryan Alfred, Brightscope’s co-founder and president. “All of these companies [on Brightscope’s top ten list] will get sued when their stock falls.”

The plaintiffs don’t always win, of course, but Cornerstone reports that 99 of the cases it tracks have been settled, with the mean settlement amount of $20.8 million.


“If more than 20 percent of your account is in company stock, it’s likely to be too high,” says Marina Edwards, a senior retirement consultant at Towers Watson. Wohlner is more conservative, advising retirement savers to limit holdings in their employers’ shares to five to ten percent.

Your company stock may appear safer than the market in general until it’s not. This ‘all in’ strategy can make you rich or poor. When things go bad in a company you may not learn about it until it’s too late.

Please comment or call to discuss how this affects you and your plan.

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