Benefits April 22, 2008

403(b) Summit: New Form 5500 Regs Mean "Scary" 2009 Plan Year for 403(b) Sponsors

April 22, 2008 (PLANSPONSOR.com) - Amelia Island, FL - The "scary" time for 403(b) sponsors starts with the 2009 plan year, attendees at a PLANSPONSOR 403(b) Summit discussion group were told.
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The reason: new Pension Protection Act (PPA) regulations mandating more comprehensive Form 5500 reporting (See Regulators Unveil PPA Changes to Form 5500 ) and a demand that the annual report for Employee Retirement Income Security Act (ERISA) plans be posted on an employer’s Intranet within 90 days of it being filed.

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Phyllis E. Klein, Managing Director, CAPTRUST Financial Advisors, and Bob J. Toth, a partner at Baker & Daniels, LLP, did not mince words about what lay ahead – particularly since so many 403(b) plans are operating in a multi-vendor environment. “This time next year, we’re going to have a lot of scariness going on” when it comes to data collection, declared Toth. “This is going to be one of the most serious challenges you have to face.”

“It’s worth taking a look at because you are going to have to deal with things you’d never thought you’d have to deal with,” Klein added.

On a less daunting note, Klein and Toth told Summit attendees a 403(b) plan sponsor who wants to choose a Fiduciary Adviser under the PPA will have lots of potential candidates, including registered investment advisers, banks or insurance company representatives, or broker/dealers or certain affiliates. “It’s a pretty wide net they’ve cast about who can do this,” Klein said.

Panel attendees were reminded by Toth and Klein that the PPA requires that:

  • the advice dispensed is based on a computer model,
  • the adviser and his/her supervisor have level compensation – not dependent on the specific investment vehicles suggested,
  • the adviser disclose all fees and affiliations, and
  • the adviser is audited annually.

Finally, Klein and Toth pointed out, a plan fiduciary must authorize the Fiduciary Adviser’s appointment and be responsible for ongoing monitoring and evaluation of that person’s performance.

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.
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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.

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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.

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