Pension Systems Corporation ERISA 408 (b)(2) Disclosure
For Employer-Plan Sponsor

This report describes the fees currently paid for administrative and recordkeeping services provided by Pension Systems Corporation. We've tried to make the report as comprehensive and easy to understand as possible. As you review it, keep in mind that the information it contains is a snapshot gathered from various sources and databases, and is subject to change over time.

The information in this report is provided by Pension Systems Corporation to satisfy the service provider fee disclosure requirements under ERISA 408(b)(2). This information will assist you, as plan sponsor and fiduciary, in making informed cost-benefit decisions with respect to the plan.

The custodian(s) holding your company's 401k plan assets will also be providing you, as plan sponsor and fiduciary, with their service and fee disclosure information. Under ERISA 404(a)(5) plan sponsors are required to provide plan participants with all fee disclosure information.

1. Services Disclosure

  • IRS-approved 401k prototype plan and related documents.
  • Summary Plan Description and Adoption Agreement, customized to Company's specifications.
  • 401k plan enrollment documents and materials.
  • Maintaining secure websites used by employee-participants to manage and monitor their 401k accounts.
  • Maintaining secure websites used by the Company's plan sponsor to upload contribution information and facilitate management of the Company's plan.
  • Maintaining an investment platform that supports a line-up of investments and/or self-directed brokerage accounts selected by the Company for the benefit of its employee-participants.
  • Maintaining record-keeping databases that hold details of all participant and employer transactions in and out of the 401k plan, and the ownership and value of all plan assets and their disposition.
  • Services to facilitate participant-initiated 401k loans, hardship withdrawals, post-employment distributions, rollovers and other similar transactions.
  • Statements for employee-participants and auditing reports for plan sponsor.

2. Recordkeeper Disclosure

The only compensations earned by Recordkeeper are fees for materials and services; the fees are invoiced directly to the company. At the company's discretion, a portion of the Recordkeeper fee may be paid by deductions from employee-participant accounts on a fully-disclosed basis. Recordkeeper collects NO indirect compensation, commissions, revenue-sharing fees, 12-B I mutual fund fees, etc. from any third-party sources.

3. Plan Investments Disclosure

All investments in the 401k plan have been selected by the Company, and are publically-traded mutual funds and/or self-directed brokerage accounts. In the case of mutual funds, all fees and hypothetical performance projections are provided by the mutual fund distributor. In the case of self-directed brokerage accounts, the brokerage will provide the Company with service and fee disclosures similar in format to this notice.

Recordkeeper makes available to plan participants through its websites comprehensive fee and performance disclosure information for mutual funds available on its platform. This disclosure information, plus online prospectus, are viewable from the websites, and can be downloaded and printed.

4. SDBA Brokerage Window Disclosure

The U.S. Department of Labor (DOL) has issued guidance on fee disclosures for brokerage windows, self-directed brokerage accounts (SDBA) and similar arrangements. Essentially, fee disclosures with respect to particular investment options that participants select within an SDBA are not required. The fiduciary does not have the burden of monitoring the number of participants invested in a particular option through the SDBA, and of making fee disclosures with respect to certain SDBA investment options.

Facts the Employer Needs to Know About ERISA Responsibilities

FACT - The employer is the named plan sponsor. 401(k) service providers (i.e. Pension Systems Corporation, TD Ameritrade, Schwab, Fidelity, Principal Insurance, John Hancock, Paychex, etc) are specifically not considered to be plan sponsors; they are considered to be plan providers.

FACT - As the plan sponsor, the employer is also the named plan fiduciary. The service providers are specifically NOT considered plan fiduciaries.

FACT - Any employee or corporate board member who has discretion over the selection, administration, or management of the plan's service provider(s) or plan investments is a plan fiduciary.

FACT - The Employee Retirement Income Securities Act (ERISA) holds plan fiduciaries to a high legal standard. The responsibilities of fiduciaries have been described as "the highest known to the law." [Donovan v. Bierwirth, 680 F.2d 263, 272 (2d Cit. 1982)]. Consequently, plan sponsors have a solemn responsibility to protect the interests of the workers and retirees in their benefit plans. With this responsibility comes liability.

FACT - ERISA imposes personal financial liability on fiduciaries that breach, knowingly or unknowingly, their duties. In the Worldcom settlement, the CEO, CFO, and HR Director were held personally liable by the courts. In the Enron case, named fiduciaries contributed to the settlement from their personal assets. In both cases the courts ruled that the plan service providers were NOT fiduciaries.

FACT- Identifying who's a fiduciary isn't always easy. A fiduciary is committed 100% of the time to his client's best interests. In the financial-services world, there are three job titles that automatically connote a fiduciary standard:

  • Attorney
  • Certified public accountant (CPA)
  • Registered investment advisor (RIA)

FACT - Fiduciary responsibilities are subject to such high standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:

  • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  • Carrying out their duties prudently;
  • Following the plan documents (unless inconsistent with ERISA);
  • Diversifying plan investments; and
  • Paying only reasonable plan expenses.

Broker-dealers and insurance companies are not fiduciaries. A broker-dealer and its registered representatives follow the "suitability" standard (rather than the fiduciary standard). This standard doesn't require a broker-dealer or insurance agent to place the interests of its clients ahead of its own. In fact state insurance laws make no mention of any kind of fiduciary standard.

FACT - The term "co-fiduciary" is a marketing term. Nowhere in the text of ERISA is there mention of "co-fiduciary". The term, then, has no legal significance at all. As such, it has no applicability to actually providing legal protection to plan sponsors.

FACT - ERISA permits the plan sponsor to appoint a professional investment manager to assist the company in selecting and monitoring investments for the 401k plan. ERISA Section 402(c)(3) expressly authorizes named fiduciaries such as the plan sponsor to appoint investment manager(s) known as independent fiduciaries.

FACT - Without exception, an independent fiduciary:

  • Does not receive commissions, referral fees or other financial incentives that could influence their recommendations.
  • Is willing to disclose any relationship, compensation, incentive or other factors or fees that potentially could interfere with their ability to act in a client's best interests.

Broker-dealers and insurance companies are compensated via commissions and other financial incentives. A fee-based Registered Investment Advisor is not.

401k Fee Disclosure: What Plan Sponsors Need to Know

How often are 401k fee disclosures provided by Pension Systems Corporation- annual, quarterly, monthly?

We provide an annual plan sponsor fee disclosure. In addition, if the fees change, we will provide an update within 60 days of the change.

When, and how often, must fee disclosure information be provided to employee-participants?

The employee-participant disclosure regulations went into effect on August 30, 2012. These regulations dovetail with plan sponsor disclosure regulations. The employee-participants must receive an annual disclosure of general information, plan expenses, and investment information. In addition, employees must receive a quarterly disclosure describing fees and expenses withdrawn from their 401k accounts.

If we offer the option of a self-directed brokerage account (i.e. Schwab, TD Ameritrade, etc.) does the brokerage provide fee disclosures to employee-participants?

Yes, fees and expenses for all participant-directed brokerage account need to be provided to participants. There is no requirement for the plan sponsor to "look through" the brokerage account, or provide disclosures for the each investment held in an account. Though disclosure to employee-participants is the responsibility of the plan sponsor, the brokerage will in most cases provide the fee information to employee-participants.

Is storing plan disclosure documents a responsibility of Pension Systems Corporation?

Pension Systems Corporation provides all of the disclosures related to our services. The plan sponsor needs to document the receipt and evaluation of the disclosures for their own files, because the sponsor is solely responsible for the determination of the reasonableness of the fees.

How does a responsible plan fiduciary verify the completeness and accuracy of investment disclosure information provided?

The responsible plan fiduciary is entitled to rely on the information provided by service providers as long as the fiduciary reasonably believes that the appropriate disclosures were made. If the responsible plan fiduciary discovers that the disclosures were not made or were incorrect, action needs to be taken in a timely manner by the fiduciary in order to be comply with the regulations.

401k Recordkeeping Disclosure