This summary was prepared by the team at MillenniuM Investment & Retirement Advisors.

1. A Tale of Two Judges
Cases revolving around excessive fees, revenue sharing and who is and who is not a fiduciary abound. At
the beginning of August the judge for the District Court of New Jersey dismissed all plaintiff claims
against John Hancock including: the charge that John Hancock was acting as a fiduciary and that they
received excessive fees and improper revenue sharing. Effectively, the judge concluded that while John
Hancock offers a product that includes proprietary investments, revenue sharing and fees that could be
excessive; it is up to the plan sponsor to decide if that offering is appropriate for their plan.
On the 9th
of August, however, a Connecticut judge determined that the plaintiffs have a “triable” case
against ING (ILIAC) for: 1) selecting investments based on the revenue sharing, not plan appropriateness,
2) the receipt of revenue sharing by ILIAC is itself a prohibited transaction, 3) ILIAC’s compensation not
being meaningfully tied to the work performed, and 4) spread compensation on their GIC is both self-
dealing and excessive.
To summarize the two cases, one judge didn’t think that the service provider unduly influenced plan
investments and compensation whereas the other believes that there might very well be an argument
that they did. Bear in mind, in both cases the insurance companies vehemently deny that they are
fiduciaries. As we know, though, one is a fiduciary as much by action as by title. While the litigators have
not found the formula to demonstrate conclusively that insurance companies are indeed fiduciaries,
rest assured they will continue to try.
Regardless of whether these and future cases side with the service providers or the participants,
everyone agrees that the buck stops with the plan sponsor who has both choices and a fiduciary duty to
their participants. Doing the right thing is easy, allows you to get compensated fairly and gives you a
significant competitive advantage. Employ the following steps and you won’t be forced to change your
business model later:
1) Put the participant’s interests first
2) Use an Open Architecture Platform
3) To the extent possible use Institutional Share Classes
4) Monitor the quality of the investments quarterly
5) Ensure that all service providers are receiving flat dollar or flat/head fees – Accept no revenue
sharing and if revenue sharing paid out by some of the funds use an ERISA Budget Account to
capture them
Plan sponsors are often reluctant to entertain changes to their retirement plan; however, a time is
quickly coming where they will seek out the one advisor who told them the truth. Continue to be
vigilant.
Authored by: MillenniuM Investment & Retirement Advisors, LLC