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Exclusive Interview: Omnipresent Marcia Wagner on All Things ERISA

December 17
00:02 2013

Nary a day goes by when you don’t see her in the news, speaking at a conference or, if you’re smart, even in your email box. Like Ray Stevens’ Santa Claus, “she’s everywhere, she’s everywhere.” Marcia S. Wagner is the principal of The Wagner MarciaWagner_300Law Group, one of the nation’s largest boutique law firms, specializing in ERISA, employee benefits and executive compensation. A summa cum laude graduate of Cornell University and a graduate of Harvard Law School, she has practiced law for over 28 years. Ms. Wagner was appointed to the IRS Tax Exempt & Government Entities Advisory Committee. For the past five years, 401k Wire has listed Ms. Wagner as one of its 100 Most Influential Persons in the 401k industry. Ms. Wagner has written hundreds of articles and 14 books, is widely quoted in business publications, as well as being a frequent guest on televised media outlets.

FN: So, here’s what a lot of people wonder – even if they don’t know it – what prompts a lawyer to decide to specialize in ERISA matters? I mean, you don’t ever see those TV lawyers taking on ERISA cases. What inspired you to enter this particular field? Was there a specific case you took on that made the light bulb in your head go off?
Wagner: I started practicing law in 1987, and, because of my background in economics, decided that tax law would be best suited for me. ERISA is very Internal Revenue Code based (Title II), so it seemed a natural fit! It is crazy that I have been a practicing ERISA lawyer for the past 28 years…time does fly….especially when you are having ERISA fun!

FN: Before we get too much into ERISA, let’s first talk about your business. You’re very active in promoting your service. How did you learn what you needed to undertake such a very successful promotional campaign? Did you have someone help teach you? Is there a social media specialist in your firm?
Wagner: The Wagner Law Group employees close to forty people, and I personally feel a real fiduciary responsibility to keep all employed! Necessity is the mother of invention, and I learned one needs to be promotional and “out there” in promoting services, in other words selling! Being a substantively excellent ERISA law firm is a necessary but not sufficient condition to being successful…. the sufficient condition is good old fashioned sales and marketing! I learned much on my own, but we do now employ a marketing specialist, who knows about social media.

FN: Many believe that those who own their own business have a special advantage when selling to other businesses, mainly because they have to go through a similar decision making process that their clients do. How does running your own business instruct you on helping clients when it comes to retirement plans?
Wagner: Running this law firm, with our three offices, close to forty employees and myriad diverse business, professional and personnel issues that arise, has made me a much better lawyer than I ever could have been without this experience and responsibility. One learns the value of one’s and others’ time, humility, how to listen and hear, respect for those that chose to create and those that chose to run businesses or business units and the importance of staying on time and on budget!

FN: OK, enough of this business school case study stuff, let’s turn to All Things ERISA. In the last few years, a lot has happened (and will happen) regarding the DOL. Let’s go over them chronologically (or as close to chronological as possible). First, there’s the individual advice rule for 401k participants. What are some of the tricks, traps and tribulations you see when it comes to offering individual advice? For example, is there any way a plan fiduciary can offer individual advice? What are some actions that might trigger a determination from the DOL that a plan fiduciary is offering individual advice? Can you suggest any rules a plan fiduciary can follow that will help keep education general and not specific? What’s a plan fiduciary to do if a participant insists on receiving individual advice?
Wagner: A financial advisor will be considered to be rendering investment advice, if, in general, he or she renders investment advice, for a fee, on a regular basis, pursuant to a mutual agreement or understanding that the advice will be a primary basis on which people will rely and the advice is particularized to the plan participant or the plan demographic. Although this definition of investment advice fiduciary may change in 2014 to be more broad and encompassing, this is the current rule. If one does not want to be an investment advice fiduciary, he or she should make sure to not satisfy the conditions of the definition of an investment advice fiduciary, not act as a fiduciary, clearly inform the plan sponsor or plan participant (as applicable) that the advisor is not a fiduciary, and be sure to provide only investment education (as defined in DOL Interpretive Bulletin 96-1). Investment education is the providing of general information about the plan and its terms, general investment information, and general not particularized asset allocation information.
The big trap I see in the proffering investment advice is when financial advisors do so, but receive variable compensation (for example, revenue sharing, 12b-1 fees, or commissions). A fiduciary cannot receive variable compensation; to do so, results in a prohibited transaction and the applicable Draconian excise taxes and sanctions.
Financial advisors who wish to be fiduciary should make sure their compensation is flat or level (a fixed dollar amount or percentage of assets under management), or if the advice is being provided to the plan participant directly, the advisor might also explore using a computer model, which, if compliant with the Pension Protection Act of 2006 and the regulations promulgated thereunder, would enable the financial advisor to receive variable compensation.

FN: Hmm, that was actually a pretty long question (mainly because it was five questions in one). We’ll try to keep this one more succinct. It’s about fees and fee disclosure. There’s been a lot of talk about the plan level implications of the Fee Disclosure Rule, but let’s focus on the participant level reporting, in part because it may be relevant to the previous question. As you know, fees are now required to be broken down by service on the participant statements, but some record-keepers only have very generic categories. For example, there’s the difference between a plan-level 3(38) adviser and an individual adviser. Both may be registered investment advisers, but one is providing true co-fiduciary services to the plan sponsor while the other is providing what is all likelihood non-discretionary advice to plan participants. Yet the record-keeper only has one “investment adviser” bucket on the participant statement. Putting the 3(38) co-fiduciary under the “investment adviser” bucket can confuse the participant to thinking those fees are for individual advice (this is especially problematic if the plan has no individual participant adviser). Given the choice between “investment adviser,” “trustee” or “other,” where should the 3(38) co-fiduciary fees be placed in the participant statements? This is only one example (albeit one that may be most relevant to our readers). What other fee issues can arise regarding participant statements? What have you seen as the greatest liability for plan sponsors when it comes to the 401k Fee Disclosure Rule in general?
Wagner: I see the greatest exposure in not being clear as to what the fees are and what they are for. Therefore, I always advise my clients to be very clear in the disclosure statements. In your example, I would push the record keeper to have the disclosure line read “Investment Manager” fees (or “Other – Investment Manager fees”). Clarity is the best protection for all concerned: the plan sponsor, the vendors, the fiduciaries and, ultimately, the most important of all, the plan participants.

FN: This next one will be a lot easier. All it involves is a crystal ball. We’re talking about that favorite of all subjects – the Fiduciary Rule/Fiduciary Standard. Where do you see the DOL and the SEC going on this? Will we end up with a watered down definition of fiduciary (as many fear) or will we end up with (at least) two different types of fiduciaries – one that is allowed to self-deal and one that must abide by the prohibited transaction rule?
Wagner: It is hard to read the tea leaves on this….we will know a lot more in 2014.

FN: I’ve already asked far beyond my usual questions since I’ve grouped them by topic, so for my final question, let me invite you to add any other comments or thoughts that weren’t covered but may be of interest to our readers. What have we missed?
Wagner: We have covered some significant ground today. You asked what you missed….Well, you missed the most important salutation which I heartily wish to all:  Have a wonderful Holiday Season and Happy New Year!

FN: Marcia, that’s an absolutely wonderful way to end this interview. Thank you for taking the time to share with our readers some of your thoughts and specific practical suggestions on these important and timely ERISA issues. Above all, we wish you, your staff and all those around you a joyous snow-filled Holiday and the Hap-Hap-Happiest of New Years!

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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