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Hand Benefits & Trust Inc. has had its finger on the pulse of employer-sponsored benefit plans and investment management for more than 60 years — ever since its founder Thomas Hand formed the company in 1939 on the premise that retirement plans increasingly would be administered by independent trustees rather than by insurance companies. The company championed pretax contribution plans more than 30 years ago — nearly a decade before 401(k) plans became popular — invested in an IBM mainframe computer ahead of the pack and has continually looked for ways to enhance the design and implementation of its product. Today, Houston-based HBT, which employs close to 90, offers benefit plan administration, consulting, investment management and trust services through its four subsidiaries to more than 500 companies nationwide, ranging from 100 to 20,000 employees. “Technology has revolutionized the industry,” says president and CEO W. David Hand, grandson of the founder, who, with his brother Stephen, assumed leadership of the company from his father in 1991. Constant upgrading of the firm’s computer system and updating of its Web site — which contains legal and regulatory updates and a varied menu of options — enables HBT to respond to clients’ needs efficiently and economically. “Over the years, we’ve changed from serving individual corporations to directly servicing the employees,” says Hand. “We were early in automated voice response — employees could call in and get statement balances and things of that nature — and we were early in the Web delivery” — enabling employees to check the status of medical claims and account balances online. What’s next? HBT’s general counsel and lone in-house lawyer since 1975, Stephen Mueller, says that the company is looking to roll out debit cards for electronic reimbursement for medical care, dependent care and qualified transportation plans. “There are some technical rules that have to be followed but we’re in the process of looking at those now,” says Mueller. In the wake of Enron, where numerous employees lost their life savings by having invested too heavily in company stock, Hand and Mueller predict greater emphasis on fiduciary duties and trust services for employers regarding 401(k) and retirement plans. “One of our strong suits is that we have always attempted to educate our clients that they need to be diversified,” says Mueller. Hand agrees, noting that in 1997, before the market downturn, the company pioneered a registered trademarked fund called SMART Fund, which stands for Strategically Managed Allocated Retirement Trust, that automatically diversifies and re-balances participant 401(k) accounts. “It’s an investment option, which automatically puts you in all the right funds,” says Hand. Given the legally intensive nature of their business, Hand and Mueller recently shared their insights with Texas Lawyer regarding their working relationship. The discussion follows, edited for length and style: Texas Lawyer: What qualities are essential for a general counsel of a company like HBT? David Hand: I think it’s essential that a general counsel at a company like ours has a broad background in all areas of the businesses we deal in, has an understanding of urgency, and can respond quickly on a variety of different issues. It’s also important that they have leadership and management skills to enable them to lead their legal team and instill the elements of teamwork to work productively with other departments on critical issues. TL: Given the four subsidiaries, how is HBT’s legal department structured? Stephen Mueller: First, let me explain that HBT with its subsidiary companies provides clients throughout the country with a broad range of services for their employee benefit plans including consulting, administration, trust and investment services. So I wear a number of hats within the companies. First, as the sole in-house counsel, I’m responsible for providing legal guidance and handling corporate legal matters for our “internal” clients which are the corporate entities themselves, the officers and directors, as well as provide legal expertise for our consulting, administration, marketing and trust services teams. We’re fortunate to have on my legal staff highly trained professionals with certifications in their own specialties in employee benefit administration. Through identification, organization and delegation of projects and issues as they arise on internal legal matters, we have effectively managed the in-house legal functions with a relatively small staff while retaining outside counsel when the need arises in specialty areas. Secondly, I have consulting responsibility for our external clients in all facets of their employee benefit plans and through a structured team approach we are able to deliver effective consulting and administration to virtually any size employer offering any type of employee qualified benefit plan as well as nonqualified executive deferred compensation arrangements. I frequently work with our clients’ outside counsel when the need arises in specific legal areas pertaining to their plans. TL: What kinds of issues do you handle? Mueller: From an in-house counsel perspective, the issues run the gamut of traditional corporate legal life. From labor and employment law-related issues interfacing with our human resource department, to vendor contracts, trusts, fiduciary responsibility, intellectual property protection, state banking, TPA [third-party administrator] certification and general corporate legal activity, we experience probably what most in-house legal departments experience on an ongoing basis … . From an outside consulting perspective, I’m involved with all of our clients and their legal/accounting representatives in the issues that surround all qualified plans we administer. These plans encompass traditional defined benefit plans to the high-tech world of participant-directed, daily valued 401(k) plans and the next “evolution” of 401(k) plans to include self-directed brokerage accounts … . ERISA … governs most of these arrangements, and we continually deal with our clients on design and compliance issues including interfacing with governmental entities on operational issues … . TL: How much autonomy does Mueller have? Hand: I believe that it’s vitally important that you give your general counsel complete autonomy in almost every aspect of the transactions in our business center. The general counsel should have the ability to hire outside counsel that he believes is competent in areas necessary to bring resolution to situations. Giving Mueller that autonomy has made the company effective and successful over the years. TL: Is he a member of the board? Hand: Yes, I think it’s essential that the general counsel is a member of the board, actively advising and participating in business matters. TL: Given all that you do, how much autonomy do you feel you have? Mueller: In purely the context of running the legal department, its staff and providing in-house expertise to our board, its officers and committees, as well as communicating legal and regulatory changes to our employees, there is complete flexibility on my part to accomplish these legal department goals. On matters of business planning, setting and monitoring corporate goals, strategic planning, market analysis and development, I’m a member of a senior management team, which meets frequently to develop a consensus on major corporate decisions. TL: How do you attract and motivate your legal staff? Hand: [G]ranting the legal department autonomy in what they’re doing helps … develop a sense of pride and respect not achieved in some positions. They’re on the cutting edge of developing all types of products and services for our customers such as 401(k) plans, defined benefit plans and ESOPs. Part of the continuing education program at HBT has enabled many of those on our legal staff or associated with our legal department to take leadership roles in training and educating our employees. TL: What’s the attraction of an in-house position? Mueller: Probably the variety of issues presented on a daily basis. Obviously you cannot develop an expertise in every facet of the law, but the exposure as in-house counsel to the variety of corporate matters is appealing coupled with the HBT unique situation in having to replace your in-house counsel hat on a moment’s notice becoming a consultant, marketer, administrator or trust adviser to address the myriad issues our external clients have day to day in the administration of their employee benefit plans. TL: What are your short- and long-term goals with regard to the legal department? Mueller: Since 1996 there have been major changes in the laws and regulations affecting virtually all employers’ benefit plans. Culminating with the passage of EGTRRA [Economic Growth & Tax Relief Reconciliation Act] last year, which greatly expanded plan benefits and liberalized many restrictive provisions, our short-term goals include the internal education through our staff to maintain our own employees’ proficiency in understanding and applying these changes to our clients’ plans, as well as assisting our clients and their own legal counsel in the plan amendment and compliance process. Longer term, we’re looking at how to integrate the latest technology in document production and retention with online access by clientele to employee benefit plan documentation, summary plan descriptions and benefit plan parameters. We’re continuously evaluating methods to ensure the most cost-effective way of delivering benefits, especially in the cafeteria plan, medical and dependent care service areas, in an increasingly paperless environment while complying with applicable laws and regulations pertinent to employee benefit arrangements and communications … . TL: What has been the biggest legal challenge in the past three years? Mueller: The analysis and review of the massive changes … in employee benefit law over the last several years … requiring a great concentration of time and resources on documentation and implementation of processes and procedures to ensure compliance. Additionally, as we see more and more employers going from the traditionally benevolent benefit plan (e.g. defined benefit and profit-sharing) to shared employee involvement in retirement benefit security — e.g. 401(k) and higher deductible medical plans — significant communication issues with employees and assisting clients with transition to modern-day benefit plan delivery vehicles has became an everyday issue and concern for our clients, and we are constantly evaluating how we can best serve our clients in delivering benefits for their employees. TL: What is the greatest legal challenge facing the company today? Hand: I think the greatest legal challenge facing the company today is the fiduciary responsibility that will be demanded for all qualified retirement plans, especially 401(k) plans. There will certainly be a reform in this area as a result of the downfall of Enron and Arthur Andersen. I believe that there will be more scrutiny in our business with regard to these fiduciary issues. The legal team at our firm will lead the way and take the responsibility for sound legal documents and support … to ensure compliance.

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