Pension Protection Act 2006

Pension Protection Act 2006 Highlights

401k Plan sponsors must effective December 31, 2006:

1. Broker of record / investment advisers to the plan and the new fiduciary advisers, if any, who provide investment advice to participants will have to acknowledge their fiduciary status in writing

2. All conflicts of interest held by the above and or affiliates must be disclosed in writing

3. All forms of compensation, revenue, economic benefit of the above and or affiliates must be disclosed in writing

4. Annual audit of investment adviser, fiduciary adviser and computer model, if any, is required

Added Safe harbor protection is available for those plans already compliant with the 9 (8 old plus 1 new) requirements of 404-c and who prudently select and monitor the new fiduciary adviser, whose advice is appropriate for the plan and whose fees are fair and reasonable in addition to required disclosures 1 – 4 noted above. The new Eligible investment advice arrangement (EIAA)must include fee-neutral compensation of the fiduciary adviser and or use a certified computer model to provide such advice. Computer model must be audited annually.

A new second available Safe Harbor may be elected Plan sponsors may choose to offer a Qualified Default Investment Alternative (QDIA). Some important limitations and participant notice requirements are available for any of 5 buckets acceptable by the US Department of Labor (DOL).

ERISA plan fiduciaries and co-fiduciaries are responsible for the acts and omissions of each other with certain exceptions for the investment advice provider.

An example cited by the Center for Fiduciary Studies www.fi360.com states that the “best participant advice in the world will still fall short if the plan itself is not being properly managed and administered. Therefore a fiduciary adviser should begin an engagement with a 401k plan sponsor by assessing whether the plan is appropriately carrying out its roles and responsibilities. Specific to this topic 22 practices have been identified to define the procedural prudence of a plan sponsor. Each of the practices has been fully substantiated by ERISA, relevant case law and or regulatory opinion letter.”

ERISA 401k and Defined Benefit and other pension plan sponsors wishing to be recognized for achieving the highest level of fiduciary excellence may be assisted by an Accredited Investment Fiduciary Analyst™ to apply for certification as a “Prudent Investment Steward” which is based on ISO - 19011 auditing standards and is issued and registered with the Centre for Fiduciary Excellence (CEFEX) www.cefex.org