Myths

The Pension Protection Act of 2006 (PPA) has unleashed the panoply of conflicting reactions from the various retirement plan experts. These reactions vary widely, ranging from PPA being the most significant pension legislation ever, to the skeptical view that PPA will change nothing. There are others that advise a "wait and see" approach to be sure of the effects before taking action. There are arguments to be made for all points of view as well as the infinite possibilities between these extremes.

Unfortunately, some of the views about PPA are based on mere myths and not on provisions in the act. Many have been incorrectly ascribed to PPA or reflect an individual view of the practices that will emerge from this law. Most of this confusion relates to the newly defined "Fiduciary Adviser". The links below allow you to view some of the questionable beliefs, and relates them to what was enacted in PPA and offers opposing views of likely future practices.

Myth #1:

Status Quo Is OK:  Advisers that currently advise and provide services to plan sponsors are Fiduciary Advisers.

Myth #2:

Fiduciary Adviser is Plan Adviser:  Fiduciary Advisers must accept fiduciary responsibility for the entire plan as well as the actions of other plan fiduciaries.

Myth #3:

All or None:  Fiduciary Advisers are paid a single fee to serve all participants and have fiduciary responsibility for all the participants in the plan.

Myth #4:

No Extra Compensation:  Fiduciary Adviser compensation is limited to fees charged to the plan and the adviser may not receive additional compensation for services provided outside the plan.

Myth #5:

Keep Educating:  Participant education requirements under 404(c) remain in a PPA compliant plan.

Myth #6:

Outlawed Payments:  Fiduciary Advisers or affiliates may not receive other plan related compensation such as record keeping, TPA or 12b-1 fees.

Myth #7:

No Mix of Plans:  Advisers and affiliates are required to adopt level compensation for all plans to qualify as a Fiduciary Adviser for any one plan.

Myth #8:

Hands Off Rollovers:  Fiduciary Advisers may not capture rollovers or in-service distribution assets.

Myth #9:

Either Man or Machine :  Plans may not use both a computer model and an in-person advice.

Myth #10:

Must Be Machine:  All Fiduciary Advisers must use a computer model.

Myth #11:

Fiduciary Adviser Is Liable for Entire Plan:  When a Fiduciary Adviser signs an Eligible Investment Advice Arrangement he/she assumes fiduciary responsibility for all the participants in the plan.

Myth #12:

Just Say Yes:  Willingness to accept fiduciary responsibility qualifies an adviser to be a Fiduciary Adviser.

Myth #13:

Household is Out of Bounds:  Fiduciary Advisers have no access to participant’s household assets that are outside of plan.

Myth #14:

Package Payment Preferred:  Fiduciary Adviser is best served by compensation at the plan level and not for each participant that is advised.

Myth #15:

PPA Is Cost Neutral:  Financial advice will not increase plan costs.

Myth #16:

PPA Does Not Prohibit Current Practices:  Existing plans need not change unless plan sponsor so chooses.

Myth #17:

General Audits Are PPA Compliant:  Annual audit requirements prescribed by PPA can be met by extending current auditing practices.