SOURCE: Professional Capital Services, LLC

Professional Capital Services, LLC

July 31, 2012 14:56 ET

Participant Disclosure Compliance Should Not Spell Doom for Model Portfolios in 401(k) Plans

PHILADELPHIA, PA--(Marketwire - Jul 31, 2012) - On August 30th, 2012 the new ERISA 404(a)(5) guidelines will go into effect, changing the legal requirements for disclosures to 401(k) participants. The intent is to give plan sponsors and participants greater disclosure and detailed information as they choose among their 401k investment alternatives. But even after recent DOL guidance, the burden of providing the newly-required information has some financial advisors concerned they won't be able to offer model portfolios to 401(k) participants. To solve this problem Professional Capital Services, LLC (PCS) has enhanced its industry-leading retirement plan model management tools to meet all of the requirements for designated investment alternatives ("DIAs") contained in the DOL's participant disclosure regulations. 

Previously, advisors were able to use risk assessment profiles to generate model portfolios for participants, allowing them to more accurately select investment alternatives to meet their risk tolerance and retirement goals. Now, based on the new regulations' performance and benchmarking criteria, some advisors are wondering how to offer models and remain in compliance. 

According to Reno Regalbuto, Director of Institutional Sales at PCS, "Whether or not the Model is a DIA, the new legal standard is causing many advisors concern about offering model portfolios to the plans they serve. While creating prudent model portfolios is within the abilities of an experienced advisor," says Regalbuto, "maintaining those models to be compliant with the regulation and its enhanced best practices becomes a real concern."

"If your models are deemed to be DIAs and you can't meet the new disclosure requirements, offering them to plans after August 30th could put the plan sponsor or other responsible fiduciary at risk," says CEO and Founder of PCS, Mark Klein. "But given the overwhelming evidence about how participants get better results using professionally managed model portfolios, it would be a shame to abandon Models and go back to requiring participants to choose among individual funds simply because the recordkeeping system cannot meet the demands of the regulation," the former ERISA Attorney continues. "We've been catering to advisors offering custom model portfolio management in 401k for over a decade, so building the new compliance-based enhancements was a natural marriage with our core competencies."

The latest model management enhancements are part of a web-based tool suite available through the PCS AdvisorPlan Program. They offer advisors a single access point to rebalance, realign or transfer funds within customized mutual fund and ETF-based asset allocation portfolios across multiple 401(k) plans. The PCS Model Maintenance interface solves the complexity of meeting the new disclosure demands by consolidating and simplifying the Building, Rebalancing, Benchmarking, Performance Reporting and Fee Disclosure functions via an intuitive Web portal. 

Advisors maintaining models have the choice of using their own performance figures or actual performance calculations for each model since inception on the PCS record keeping system. They can also design custom benchmarks, risk profile rankings and model descriptions for inclusion on the PCS annual participant disclosure and "evergreen" [live linked] enrollment booklet. Advisors looking for more information can go to: or call 877-272-4015. 

Founded by tax and ERISA attorneys at Dilworth Paxson, LLP in 2001, PCS is an open architecture retirement plan record-keeper providing services to over 70,000 participants with over $2 billion in assets under administration. PCS's platform provides efficiency, fee transparency and conflict-free choices to independent advisors serving the corporate, professional and governmental markets.

Contact Information

  • Contact Info:
    Jordan Migneault
    National Sales Director
    Professional Capital Services, LLC
    Phone: 267-675-6566
    Email: Email Contact