Benefits April 22, 2008

403(b) Summit: Getting Your Mind Right for New Reg Compliance

April 22, 2008 (PLANSPONSOR.com) - Amelia Island, FL - A panel of industry experts at PLANSPONSOR's 403(b) Summit in Amelia Island, Florida, gave attendees advice on how to avoid common mistakes in thinking when getting in compliance with new IRS regulations and during ongoing program administration.
Reported by

Panel members stressed that plan sponsors and advisers should have already started or should start soon the task of getting in compliance. Scott Dauenhauer, President, Meridian Wealth Management, warned sponsors will pay a lot more for adviser services if they start the process late. Tom Blanchar, 403(b) and 457 Product Manager, StanCorp Equities, Inc. (The Standard), pointed out that Request for Proposal response times will get longer as more plans get into the search process, and sponsors must also count in time for participant education and enrollment.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Sponsors should not underestimate the value of evaluating and improving their 403(b) program. Brent Bentrim, Managing Director, Carolopolis Fiduciary Counsel, said sponsors should look at the process as a good thing that will benefit participants and lower program costs. Dauenhauer added that sponsors should reevaluate their program every few years to look for ways to make it more simple and valuable to participants.

Panel members also told attendees not to be afraid to use Employee Retirement Income Security Act (ERISA) standards to run their program. Blanchar pointed out that many ERISA rules are best practices, and sponsors should operate under best practices.

During vendor selection, the panel warned that sponsors should not use providers with long, high, or rolling surrender charges. However, vendors should not be selected solely on the basis of price either.

Sponsors should not exclude current vendors in their search process. Bentrim suggested sponsors and advisers get feedback from participants and union representative about the current vendors’ services. Blanchar pointed out that current vendors may already have systems in place that are needed for compliance with the new regulations.

Ongoing, the panel noted that sponsors should not forget to monitor providers. As Bentrim said, sponsors are not just responsible for getting the new program in place, but must perform ongoing reviews.

Finally, sponsors should be prepared to be audited. Blanchar warned that the new regulations came out of the results of sweeping audits by the IRS, and they are likely to do a second run to see the results of the new guidelines.

Administration April 21, 2008

AMR Unloads American Beacon Money Management Unit

April 21, 2008 (PLANSPONSOR.com) - Saying it felt the need to concentrate on its core air carrier business, the parent company of American Airlines has hammered out a $480-million deal to sell its asset management subsidiary to two private equity firms.
Reported by

A news release from the Fort Worth-based AMR said its deal to offload American Beacon Advisors, Inc., is with Lighthouse Holdings, Inc., which it said is owned by   investment funds affiliated with Pharos Capital Group, LLC and TPG Capital. According to the announcement American Beacon will continue to handle AMR’s pension plan, 401(k), and other health and welfare plans as part of its continuing relationship with the money manager.

“However, to ensure that continuing relationships between American Beacon and American’s pension, 401(k), and other health and welfare plans after closing satisfy the fiduciary duties and other rules that apply to these plans, an independent third party has been engaged to review and approve any such continuing relationships,” AMR said in the news release.

Get more!  Sign up for PLANSPONSOR newsletters.

American Beacon currently provides a number of services for AMR and its affiliates, including cash management for AMR and investment advisory services and investment management services for American’s pension, 401(k), and other health and welfare plans. 

AMR said by selling the asset manager, it can reap the biggest value from American Beacon and focus on its airline. According to the announcement, Monday’s deal is mostly cash, but will involve AMR keeping a 10% equity stake in American Beacon.

American Beacon currently serves as the investment manager of the American Beacon Funds, a mutual funds family with both institutional and retail shareholders, and provides customized fixed income portfolio management services. American Beacon Advisors has grown average assets under management to $65 billion in 2007.  For 2007, on a separate company basis, American Beacon’s gross revenue was $101 million and income before taxes was approximately $48 million, both of which increased approximately 40% over 2006.

“What started out more than 20 years ago as a smart way to manage AMR’s benefit plans and cash has evolved and grown significantly into a successful financial management and advisory firm that is fully capable of standing on its own and is well positioned to pursue further growth opportunities outside of AMR.” said AMR Chairman and CEO Gerard Arpey, in the announcement. 

AMR expects to close the sale this summer subject to satisfactory completion of customary closing conditions as well as the approval of the Board of Trustees of the American Beacon family of mutual funds, shareholders of the American Beacon family of mutual funds, and consents from other American Beacon clients.

«