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What is Compass Investors' fiduciary position?

Compass Investors qualifies for the Publisher's Exemption as per SEC and ERISA regulations.

A subscriber is free to either adopt or ignore the published information and the subscriber is fully responsible for whatever reallocations they do, or do not choose to make.

CI does not believe that it serves as a Fiduciary under ERISA because under the Department of Labor regulation section 2510.3-21(c)(1) and Interpretive Bulletin 96-1, a person will be considered to provide investment advice if, among other things, such person renders individualized advice based on the particular needs of the Participant. The advice CI provides to Horizon™ subscribers is not customized for the particular needs of any one subscriber.

Please contact us for a copy of the legal memorandum discussing Compass Investors Fiduciary Statement. This memorandum was issued by Chapman and Cutler LLP, a major law firm and respected authority regarding fiduciary liability issues as they relate to retirement planning.

Is it safer, from a fiduciary perspective, not to provide access to investment analysis?

Not really. We think that providing advice and/or portfolio management can actually reduce your risk as a plan sponsor.

Employees who make uninformed decisions about savings and investing are less likely to be prepared for their retirements. By making advice and/or portfolio management available, you ensure that your employees have access to the help and information they need to plan for their futures, decreasing the chances of dissatisfaction and possible litigation.

Furthermore, if you know that the participants in your plan need help with investing for retirement, you should provide the needed help, whether it is education, advice, professional management, or all three.

This is supported by ERISA section 404(a)(1)(B), which requires that all plan fiduciaries exercise their responsibilities "with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims."

Is providing investment education sufficient to fulfill our role as a fiduciary?

Informed policymakers caution that relying on education alone is no longer enough.

According to DOL, "[m]eaningful comprehensive investment advice is more important now than it has ever been" and "[i]nvestment education, while important, is simply not enough." Assistant Secretary Ann L. Combs delivered this message to Congress on July 17, 2001 in connection with testimony on the subject of "Retirement Security Advice Legislation" to the Subcommittee on Employer-Employee Relations of the House Committee on Education and the Workforce.

Can we waive/transfer our fiduciary responsibility by facilitating access to investment analysis/advice?

Despite the fiduciary responsibility "relief" that some companies promise plan sponsors, the fact remains that any lawsuit will name the plan sponsor, TPA and any other involved party in any case questioning fiduciary responsibility.

The only real protection any plan sponsor has is to take every available precaution to protect, educate and offer viable investment options—both in the choice of funds and investment strategies—to their participants.

CI offers a completely new level of comfort to the plan sponsor. Our increased frequency of review has your participants being updated far more often. Then with a minimal amount of effort, they can review our analysis and keep their retirement plan aligned with the market.

Plan sponsors who offer Horizon™ will see us working in conjunction with their chosen TPA, thereby adding additional objectivity, providing educational opportunities, and promoting involvement and participation in their benefits program.

Simply put, offering our services demonstrates and enhances a plan sponsor's willingness to take every precaution to help their plan participants.

Offering access to Horizon™ as an additional benefit does not increase fiduciary liability. Plan sponsors can enable their plan participants to have access to or create awareness of the existence of the Horizon™ service, can subsidize in full or in part the subscription fee, etc.,—all without incurring any additional fiduciary liability.

If we decide to provide advice, what should we consider when selecting a service provider?

The selection and retention of an advisor is a fiduciary function. As with the selection and retention of any service provider to the plan, the plan sponsor is required to make a prudent selection that is in the best interest of participants and beneficiaries.

The DOL pronouncements and court decisions establish a general framework for the prudent selection of plan service providers. These authorities indicate that a plan fiduciary retaining an advice provider generally has an obligation to take steps similar to the following:

  • Determine the needs of the plan's participants
  • Assess the qualifications of service providers
  • Review the services provided and fees charged by different providers
  • Select the provider whose service level, quality, and fees that best match the plan's needs and financial situation
  • Review the selected provider's performance at reasonable intervals so as to ensure that the provider is complying with the terms of the plan and statutory standards and is satisfying the needs of the plan.

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