Headlines about "Ret plan investments - costs"
Gathered from the web by the editors at BenefitsLink.com.
Target Date Retirement Funds: Lack of Clarity Among Structures and Fees Raises Concerns (PDF)
21 pages, dated October 2009; summary of the committee's research. (U.S. Senate Special Committee on Aging:)
[Opinion] Some Thoughts on Jones v. Harris And Mutual Fund Fees
Excerpt: "This is how it is supposed to happen in financial markets -- smart investors bring the price of a financial instrument to its 'true' value, making a tidy profit, and then regular people can buy it at the correct value, increasing value for all. The disturbing implication is we have a situation where there are multiple equilibria; one for savvy insiders, and a worse one for people who aren't finance professionals. Why aren't these converging at mutual funds?" (The Atlantic)
[Guidance Overview] Chart and Outline of 401(k) Fee Litigation, Updated October 2009
Excerpt: "Over the past several years, more than two dozen lawsuits have been filed relating to 401(k) plan fees and, more specifically, 'revenue sharing' arrangements with plan service providers. Initially, the lawsuits were brought by plan participants against plan sponsors and alleged that, by allowing plan service providers to receive revenue sharing payments, the plan sponsors caused the participants to pay excessive fees, in breach of the sponsors' fiduciary duties to the participants. The focus of these lawsuits against the plan sponsors has evolved over time . . . ." (Groom Law Group)
Critics Call Mutual Funds Option Too Risky for Federal Thrift Savings Plan Participants
Excerpt: "The 2009 Family Smoking Prevention and Tobacco Control Act includes a provision that could enable federal employees to invest their retirement money into mutual funds of their choice, in addition to the broad offerings currently available through the plan. Congress allowed, but did not mandate, that the TSP board create such an option; TSP administrators have said they haven't decided yet whether to implement it, and likely will wait until other upgrades are completed." (GovernmentExecutive.com)
[Guidance Overview] Fiduciary Debate Lands at Supreme Court
Excerpt: "The debate over investment advisors' fiduciary duty has made it all the way to the Supreme Court. On Monday, November 2, Supreme Court Justices heard oral arguments from lawyers for three investors who claimed that Harris Associates of Chicago, the investment advisor for the Oakmark family of mutual funds, charged them higher fees for similar services than it did to independent institutional investors such as pension funds." (Investment Advisor)
[Guidance Overview] Justices Tackle Case on Investment Fees
Excerpt: "Several Supreme Court justices on Monday seemed reluctant to make the courts arbiters of whether mutual fund investment advisers are charging excessive fees for their work on what has become an essential investment tool for Americans." (Washington Post; free registration required)
Supreme Court Indicates Reluctance to Set Investment Fees
Excerpt: "During an oral argument on Monday, November 2, several Supreme Court justices seemed to be wary of having courts determine the fees that investment funds can charge participants." (Workforce Management)
In Mutual Fund Case Arguments, Supreme Court Justices Seem Reluctant for Courts to Intervene
Two justices suggested that purchasers simply can change to a different mutual fund if they are dissatisfied with the fund's fee structure. (Associated Press)
Mutual Fund Case Hinges on Fee Comparison
Excerpt: "Must mutual fund investors pay significantly higher fees than institutional investors such as pension funds? That was the issue . . . at the U.S. Supreme Court as the justices heard oral arguments in a case accusing a mutual fund manager of charging excessive fees." (Los Angeles Times)
Will The Supreme Court Protect Your Money from Excessie Mutual Fund Fees?
Excerpt: "Jones v. Harris Associates concerns the management fees mutual fund advisers charge the funds. If you have any mutual fund investments, whether in investment accounts or your 401(k), a percentage of your money is siphoned off every year by the company managing those funds." (Washington Post; free registration required)
[Opinion] Supreme Court Ought to Reverse Wrong Decision by 7th Circuit Interpreting Securities Relief Law Too Narrowly
Excerpt: "Congress addressed the problem of high fees in 1970 by adding Section 36(b) to the Investment Company Act of 1940. It imposes on mutual fund investment advisers 'a fiduciary duty with respect to the receipt of compensation for services.'" (New York Times; free registration required)
[Opinion] Supreme Court Should Restore Fiduciary Responsibility to Mutual Fund Advisers' Fees and Remove Roadblocks Barring Investors From Statutory Remedy
Excerpt: "This problem can be so severe that former SEC chairman Arthur Levitt has described mutual fund advisory fees as a 'tyranny of compounding high costs' that are imposed upon shareholders." (National Association of Shareholder and Consumer Attorneys)
John Bogle Takes on Mutual Fund Industry as Top Court Considers Fees
Excerpt: "John Bogle helped create a mutual fund industry that has grown to $10 trillion in assets. Now the Vanguard Group Inc. founder is backing investors asking the U.S. Supreme Court to limit the fees charged by fund managers." (Bloomberg)
Supreme Court Considers Mutual Fund Fees
Excerpt: "In an era of rebellion against Wall Street pay, the Supreme Court on Monday hears arguments in a case testing whether some mutual funds are charging excessive fees. Ninety million Americans invest in retail mutual funds. The fees charged by these funds, while they may sound small percentage-wise, add up to big money." (National Public Radio)
State Retirement Plan Administrators Reaffirm Strong Opposition to Pay-to-Play
Excerpt: "In response to heightened media attention to isolated but high profile cases of so-called 'pay-to-play' in the public sector, the Executive Committee of the National Association of State Retirement Administrators (NASRA) unanimously voted at its fall meeting to reaffirm the Association`s long-held resolutions promoting ethics policies and disclosure requirements for those entrusted with the investment and management of public pension funds." (Reuters)
Litigation Against Advisers Is Increasing
Excerpt: "We are seeing an increasing number of claims filed against advisers . . . both as civil lawsuits and FINRA arbitrations. While the increase in claims undoubtedly reflects the recent stock market losses, it is also the result of at least three other factors. Those are: an increasing awareness of the fiduciary standard; the growing focus on retirement savings, including rollovers to IRAs; and heightened expectations about the performance of advisers. Of course, there is always that fourth category . . . crooks who steal money." (Reish & Reicher)
[Guidance Overview] Effects of the 401(k) Fair Disclosure and Pension Security Act (PDF)
3 pages. Excerpt: "This article discusses how employers providing 401(k) plans to their employees will be affected by the 401(k) Fair Disclosure and Pension Security Act of 2009 in the realm of fee disclosure under legislation currently pending in the U.S. House of Representatives. There are other provisions of the proposed legislation, including the provision of investment advice, which are not discussed here." (New York Law Journal via Patterson Belknap Webb & Tyler LLP)
[Guidance Overview] EBSA's Additional Guidance on Form 5500 Schedule C
Excerpt: "The Department of Labor's Employee Benefits Security Administration (EBSA) has issued additional guidance in response to questions from plans and service providers on the requirements for reporting service provider fees and other compensation on Schedule C of Form 5500. The EBSA noted that the expanded requirements apply to reporting for plan years beginning on or after January 1, 2009. The guidance is provided in the form of 25 frequently-asked questions (FAQs), and topics covered include: Gifts, entertainment, and other non-monetary compensation; Compensation to hedge fund investment managers; 'Look-through' investment funds; Mutual fund redemption fees; and ERISA fee recapture accounts." (PLANSPONSOR.com; free registration required)
[Official Guidance] Text of New Guidance from EBSA on Reporting of Service Provider Compensation on 2009 Schedule C of Form 5500
Excerpt: "On November 16, 2007, the Department of Labor's Employee Benefits Security Administration (EBSA) published final form revisions and a final regulation, generally effective for plan years beginning on or after January 1, 2009, providing new requirements for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return/Report of Employee Benefit Plan. The purpose of these FAQs is to provide guidance to plan administrators and service providers on complying with the requirements of the 2009 Form 5500 Schedule C." (Employee Benefits Security Administration, U.S. Department of Labor)
401(k) Fee Litigation Report as of September 2009
Excerpt: "In addition to the lawsuits against plan sponsors, lawsuits have been brought against 401(k) plan service providers. These cases typically are based on allegations that the service providers are 'functional fiduciaries' under ERISA. The plaintiffs claim that, in negotiating for and receiving revenue sharing, the service providers breached fiduciary duties and engaged in 'prohibited transactions' under ERISA. Some of the lawsuits similarly challenge the use of actively managed mutual funds as investment options." (Groom Law Group)
SEC Starts Pension Fund Working Group to Prosecute for 'Pay to Play'
Excerpt: "On October 15, 2009, at the American Bar Association's Fourth Annual National Institute on Securities Fraud, David Rosenfeld, associate regional director for the Northeast Regional Office of the U.S. Securities and Exchange Commission (SEC), revealed that the SEC has established a nationwide Pension Fund Working Group to civilly and criminally prosecute pension fund managers, advisors, administrators and 'the like' where 'pay to play' contributions occur. The SEC determined that the activities emanating from New York state and municipal pension fund investments were 'very widespread' with 'common players nationwide.'" (Duane Morris LLP)
[Opinion] A Response on 403(b) Plan Fees As Addressed in Recent GAO Report
Excerpt: "On October 5, the U.S. Government Accountability Office (GAO) released a report to Congressman Charles Rangel, Chair of the House Ways and Means Committee, providing some important general discussion of plan fees, though any assessment of the report must focus on the actual scope of the analysis. The report, 'Retirement Savings: Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants,' . . . reflects primarily qualitative information, rather than quantitative information, obtained in a series of interviews of a selected group of market participants (in which this author participated) and federal and state regulators. As such, it does not quantify the actual levels of fees charged in different types of plans, for different types and sizes of employers, whether paid from participant accounts or otherwise. Nor does the report attempt to analyze the reasonability and different types or levels of fees and corresponding services." (PLANSPONSOR.com; free registration required)
California to Sue Bank for Overcharging Two State Pension Funds
Excerpt: "California's attorney general said he will sue a 'major institutional bank' in an attempt to recover almost $200 million in illegal overcharges and penalties charged to the state's two largest pension funds. California Attorney General Jerry Brown will announce the lawsuit filing and name the bank at a news conference in Oakland today, he said in an e-mailed statement. Brown's spokesman, Scott Gerber, declined to name the bank before the announcement. The unidentified bank assessed the overcharges and penalties against the California Public Employees' Retirement System, the largest U.S. defined-benefit public pension fund, and the California State Teachers' Retirement System, according to the statement." (Bloomberg L.P.)
[Guidance Overview] California Acts to Regulate Placement Agent Influence
Excerpt: "This edition of . . . Private Equity Alert discusses the newly-adopted California law that aims to ensure transparency and accountability in the activities of placement agents that provide services to all state and local public pension funds in California." (Nixon Peabody LLP)
[Guidance Overview] Retirement and Savings Initiatives' Review as of October 2009 (PDF)
3 pages. Excerpt: "In a recent flurry of activity, the Internal Revenue Service has issued a series of notices and revenue rulings designed to promote retirement savings and address technical issues related to certain plan distributions. These initiatives are intended to: (i) encourage employers to add automatic enrollment features to their 401(k) plans; (ii) enable employees to convert unused vacation into additional retirement savings; and (iii) assist both employers and employees to better understand the available options for distributions from tax-favored retirement savings. A brief summary of the various pronouncements is set forth . . . ." (Dechert LLP)
[Guidance Overview] Reporting 12b-1 Fees: New Reporting Requirement for Indirect Fees Paid by a Mutual Fund to a Broker-Dealer
Excerpt: "Beginning this year, covered plans will need to report certain information about 'indirect' payments, which include 12b-1 fees. (Indirect payments are those which are made by anyone other than the plan or the plan sponsor. Since 12b-1 fees are paid from a mutual fund to a broker-dealer, they are 'indirect.') Indirect fees are divided into two subcategories." (Reish & Reicher)
[Guidance Overview] ERISA Plan Sponsors Should Get Ready Now for New Form 5500 Requirement to Disclose Compensation Paid to Plan Service Providers
Excerpt: "Action Items for Plan Sponsors: Identify all plan service providers, including investment managers, record keepers, trustees, actuaries, brokers, claims administrators, etc. Contact all service providers to determine when and how they will provide the requireddisclosure. For example, some disclosure may be 'embedded' in other documents (e.g., prospectuses) rather than provided as a stand-alone disclosure in a single document. Work with ERISA counsel to ensure that the information received is sufficient to satisfy the Schedule C disclosure requirement and forward the information to the person or entitywho will prepare the Schedule C. Follow up promptly with service providers who fail to provide information or provide information that is incomplete. For service providers who assert that they are not required to provide separate reporting, the plan sponsor should receive written statements to that effect along with the service provider's reasoning or support. Incorporate the information received and reported on Schedule C as part of the plan sponsor's periodical review of the service provider's performance and compensation levels to determine whether the compensation arrangement continues to be reasonable." (Paul, Hastings, Janofsky & Walker LLP)
California's Governor Signs Law on Placement Agents Doing Business with Public Pension Funds
Excerpt: "California Governor Arnold Schwarzenegger has signed a bill clamping down on placement agents, the marketing middlemen hired by private equity groups and other investment firms to secure business from public pension funds. The Sacramento Bee reports that Assembly Bill 1584 requires disclosure of fees paid by investment firms to placement agents. It also requires agents to notify pension system governing boards of any campaign contributions or gifts they've made to system board members. The new rules are in response to a multi-state probe into whether placement agents improperly influence pension fund boards that began in New York, where a number of individuals have been indicted . . . ." (PLANSPONSOR.com; free registration required)
CalPERS Begins 'Special Review' of Fees Paid to Agents
Excerpt: "The nation's largest public pension fund, the California Public Employees Retirement System, has begun a 'special review' of fees paid by its external investment managers to so-called placement agents. The agents help outside funds to win big investment management contracts with the $200-billion pension system, known as CalPERS. The review was ordered after CalPERS received information it had requested from fund managers about the fees paid to placement agents and their lobbying and sales activities with the giant pension." (Los Angeles Times)
Current Wave of 401(k) Fee Lawsuits May Be a Harbinger of Things to Come
Excerpt: "The complaint's accusations include charging excessive fees, SJP and VLP effectively setting their own compensation by disbursing plan assets to themselves via Charles Schwab Trust Co. without the sponsor's knowledge, and failing to adequately disclose the revenue-sharing they received. Because the providers effectively exercised fiduciary control over the plan for the purposes of enriching themselves, the complaint says, they violated ERISA. The complaint compares the recordkeeping fees it says were charged by VLP with those of its replacement, Allen, Gibbs & Houlik, L.C. (AGH). If the plan 'had engaged AGH in 2007 instead of VLP to provide recordkeeping services, compensation paid to the recordkeeper for the Plan would have been $2,425 instead of $15,106,' the complaint says, adding that the services provided were 'virtually identical.'" (PLANSPONSOR.com; free registration required)
[Opinion] Investing in an Era of Irrelevant Regulation
Speech by Edward Siedle at Sage Advisory Services 'Perspectives on the Future' conference, Austin, Texas, September 2009. Excerpt: "For decades, the advice investors got from Wall Street was hardly independent and the products marketed were generally high cost, as well as poor performing. This massive transfer of assets to brokers and money managers was good for them; not so good for investors. The investigations my firm has undertaken on behalf of institutional investors over the years reveal that when you scrutinize financial products and services and identify conflicts of interest and hidden financial dealings, you can predict poor performance. We've investigated investment consultants; 401k, 403b and 457 defined contribution plans; variable annuities; hedge funds and funds of funds and funds of funds of funds." (Benchmark Financial Services, Inc.)
[Opinion] Is It Important for 401(k) Fees to Be Equitable?
Excerpt: "Increased fee disclosure to plan participants that may result from pending regulatory and legislative initiatives has the potential to bring the issue of fair fee payment to the forefront. Uneven administrative fees can leave plan sponsors open to uncomfortable questions by participants, or may even bias participants against funds that carry the lion's share of the administrative burden. However, creating an investment menu with equitable administrative fees can be challenging. As we just saw, revenue-sharing arrangements -- which are negotiated between the record keeper and the investment managers -- are usually not consistent, and plan sponsors may have no control over share classes that are available to them." (Workforce Management; free registration required)
Retirement Savings: Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants
58 pages. Excerpt: "[GAO recommends that] Congress should consider (1) amending ERISA to require sponsors to disclose fee information to facilitate comparisons, and (2) giving the Department of Labor (Labor) specific authority over certain plans. Also, GAO recommends that the Internal Revenue Service (IRS) develop guidance on sponsor involvement, collect additional data on 457(b) plans, and share more information with financial regulators. Labor and IRS agreed with our recommendations, although IRS stated that it will continue sharing information with regulators using its current methods." (U.S. Government Accountability Office)
Investment Manager Allowed More Time in Pension Probe
Excerpt: "Elliott Broidy, founder of Markstone Capital Partners, won at least a brief reprieve in a federal investigation into how public pension systems allocate funds to outside managers. According to Bloomberg News, U.S. District Judge Stephen Wilson, at a September 30 hearing in Los Angeles, denied the SEC's request to force Broidy to comply with its subpoenas and gave him until October 12 to produce the documents and until October 22 to testify, the dates suggested by his lawyers, according to a minute order posted today on the court's Web site. Regulators had accused Broidy of failing to give documents or testimony in an investigation of how public pension systems allocate funds to outside managers. Broidy, who hasn't been accused of wrongdoing, has given 'specious excuses' in the past four months to avoid producing all documents sought in subpoenas, and he failed to appear for testimony last week, the Securities and Exchange Commission wrote in its court filing, according to Bloomberg." (PLANSPONSOR.com; free registration required)
[Guidance Overview] New Form 5500, Schedule C Reporting Requirements for 2009
Excerpt: "Plan sponsors, plan administrators, and service providers should review the DOL's guidance and the disclosure requirements listed on the Form 5500 and establish procedures necessary to comply with these new requirements for the 2009 reporting year that is currently underway for most plans. For example, plans subject to ERISA are encouraged to develop and implement policies and procedures to track payments made to service providers." (Winston & Strawn)
Recent Policy Actions And The Outlook for U.S. Inflation
Excerpt: "The prospect of high inflation has some investors worried, given the aggressive monetary and fiscal steps taken to combat the financial crisis. What is reasonable to expect? Our simulations indicate that inflation could trend near 3%. But important risks exist." (Vanguard)
The Major Categories of 401(k) Expenses and Tips for Evaluating Them
Excerpt: "The first step for a plan sponsor is to know the total annual fees. The second step is to benchmark -- to obtain information on the costs for similar plans (i.e., plans with similar assets and numbers of participants); the competitive marketplace does a good job of establishing reasonable prices. However, even where the total expenses are reasonable, the costs for one of the categories may be too expensive. As a result, fiduciaries need to identify, quantify, and evaluate each major type of expense." (PLANSPONSOR.com; free registration required)
[Opinion] 403(b) Theft: How Employees and Employers Get Bilked
Excerpt: "Quite simply, participants in expensive plans are losing A LOT of money. How much? How about $875,000 in some cases? Consider? If a participant invested $10,000 per year (inflation adjusted) for 40 years, earned a 9 percent return (before fees), he or she would accumulate approximately $2.4 million. If fees were along the lines of the plan I just described (2.08 percent + additional advisor fee of 1 percent), this investor would pay more than $875,000 in fees." (403bwise.com)
Congress Eyes Compromise in 401(k) Independent Investment Advisor-Advice Rule
Excerpt: "Now that the Department of Labor is scrapping a rule proposal that would have allowed brokers affiliated with financial-services firms to provide advice to 401(k) participants, Congress will move forward with legislation that would require that such advice be given by independent advisers, according to a key congressman. The rule proposal was one of several Labor regulations put forth by the Bush administration during its final days. Labor Secretary Hilda Solis 'will work with Congress to find ways to further develop the existing market of qualified independent advice,' said Rep. Robert Andrews, (D-New Jersey), chairman of the House Education and Labor Committee's Health, Employment, Labor and Pensions Subcommittee. His recent comments came after Assistant Labor Secretary Phyllis Borzi, head of the Employee Benefits Security Administration, told a conference of 401(k) administrators that new regulations will be issued for investment advice to participants in the $2.3 trillion 401(k) market. She gave no timetable for issuing a new proposal." (Workforce Management; free registration required)
Congress to Tackle Rule on Retirement Advice
Excerpt: "Now that the Department of Labor is scrapping a rule proposal that would have allowed brokers affiliated with financial-services firms to provide advice to 401(k) participants, Congress will move forward with legislation that would require that such advice be given by independent advisers, according to a key congressman. . . . The Pension Protection Act of 2006 would have to be changed in order for the Labor Department to issue the kind of investment advice rules Congress would support, [Rep. Robert] Andrews indicated. 'It will take statutory and regulatory change to create the goal of qualified independent investment advice affordable to every investor,' he said." (Investment News; free registration required)
Four Firms Agree to Settlement in New York Pension Fund Inquiry
Excerpt: "Four investment firms agreed to pay $4.5 million to settle an investigation by New York's attorney general, Andrew M. Cuomo, into the state's pension fund, Mr. Cuomo said Thursday. The money paid by the four firms -- HM Capital, Levine Leichtman Capital Partners, Access Capital Partners and Falconhead Capital -- will be returned to the state pension fund. They also agreed to halt their use of outside intermediaries, known as placement agents, often politically connected people hired to help investment firms gain access to the pension fund officials. At stake were highly lucrative management fees." (The New York Times; free registration required)
[Guidance Overview] Early Returns in 401(k) Fee Cases Favor Defendants
Excerpt: "The fact that defendants are thus far winning these cases does not mean that fiduciaries need not be concerned with fees under 401(k) plans. What the courts seem to be saying thus far is that they will not micromanage 401(k) plans or second-guess fiduciary decisions that appear reasonable, even if not perfect. The best evidence for a fiduciary in these cases and future cases, however, is a well-documented record showing that the fiduciaries understood the basic factors affecting fees, were aware of the alternatives they could choose, and made rational decisions that were in the interests of the plans and their participants." (O'Melveny & Myers LLP)
Experts Pin Hopes on Labor Department for Retirement Plan Fee Disclosure Regulations
Excerpt: "In June, the House Education and Labor Committee approved the 401(k) Fair Disclosure and Pension Security Act, which among other things requires 401(k) plans to disclose how much plan participants are paying in fees; mandates that plan administrators offer at least one low-cost index fund in their plans; and requires that companies offer investment advice to plan participants. Industry experts welcome the widespread interest but worry that many of the legislative proposals are mired in politics. 'The legislative approach has gotten off track from the central theme of the bill and instead has resulted in a turf war between bundled and unbundled providers,' says Ed Ferrigno, vice president, Washington affairs, for the Profit Sharing/401k Council of America. 'You have service providers dominating the debate.'" (Workforce Management; free registration required)
[Guidance Overview] Current Legislative and Regulatory Outlook on DC Plan Initiatives
Excerpt: " In this article we cover defined contribution plan issues ? where initiatives on 401(k) fee disclosure and investment advice remain a priority ? and broader issues relevant to both DB and DC plans." (JPMorgan Chase & Co.)
6 Ways for Small Employers to Ease Retirement Plan Costs
Excerpt: "[M]anaging a retirement plan is costly, and because plan assets shrank when the market plunged, it could get costlier. . . . Here are six ways to help you mitigate rising retirement costs without bailing on benefits . . . ." (The Wall Street Journal)
[Guidance Overview] Plan Fees: Fiduciaries Must Focus on Float
Excerpt: "During this period of heated debate on economic instability and health care reform, retirement plan fiduciaries should not forget that plan fee reform is on the horizon. Legislation regarding plan fees is moving through Congress, and the Department of Labor (DOL) is finalizing regulations regarding fee disclosure under ERISA. These efforts will focus on: Revenue sharing (the process by which one service provider collects fees from plan assets and distributes them among other providers), and Disclosure of plan fees to plan participants and the government. This WorkCite article focuses on 'float' ? a form of service provider compensation that continues to be in the plan fee spotlight." (McGuireWoods LLP)
U.S. Supreme Court to Hear Case Regarding Excessive Mutual-Fund Fees This Fall
Excerpt: "[The U.S. Supreme Court] is scheduled to hear the case of Jones vs. Harris Associates this fall. The case concerns allegedly excessive fees paid by mutual funds to their investment advisers. Last summer, a three-judge panel in the U.S. 7th Circuit Court of Appeals in Chicago rejected the lawsuit brought by investors, who charged that three Oakmark mutual funds had overpaid their investment adviser. Chief Judge Frank H. Easterbrook wrote in the opinion that the marketplace should determine whether such fees were excessive. In his dissent opinion, however, Judge Richard A. Posner said the marketplace can't always be trusted to regulate such fees. Further, he said, executive compensation is spinning out of control and is not adequately regulated. That Posner and Easterbrook should disagree to such an extent practically guaranteed that the case would be brought before the Supreme Court, says Robert C. Christenson, a partner in the Atlanta office of Fisher & Phillips." (Human Resource Executive Online)
New Retirement Rules: What Small Businesses Need to Know
Excerpt: "Socking away retirement funds is becoming more expensive for small-business owners and employees. When the stock market plunged roughly 40% last year, retirement plan assets also took a dive. . . . Compounding the blow to retirement savings, the decline in plan assets is spurring higher management fees and greater expenses at some mutual fund companies and 401(k) providers. And although such changes will likely affect employer-sponsored plans across the board, small plans, which often have fewer employees and fewer assets, may get hit the hardest." (The Wall Street Journal)
[Guidance Overview] 401(k) Fee Litigation September 2009 Update
Links to both an outline and a chart are available from the target page. Excerpt: "The focus of these lawsuits against the plan sponsors has evolved over time to include broader challenges to, among other things, the plan sponsors' selection of actively managed mutual funds as plan investment options. In addition to the lawsuits against plan sponsors, lawsuits have been brought against 401(k) plan service providers. These cases typically are based on allegations that the service providers are 'functional fiduciaries' under ERISA." (Groom Law Group)
[Guidance Overview] Judge Rejects 403(b) 'Kickback' Suit
Excerpt: "A federal judge has dismissed a lawsuit alleging a New York state teachers group breached its fiduciary duty by paying 'kickbacks' to ING Life Insurance and Annuity Co. U.S. District Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York said she had no jurisdiction over the dispute because the plan involved is a 403(b) program set up by a New York school district. As such, she said, the plan is not covered by the Employee Retirement Income Security Act (ERISA)." (PLANSPONSOR.com; free registration required)
Fund Industry Fires Back in Supreme Court Fund Fee Case
Excerpt: "Harris Associates, the Investment Company Institute, the Mutual Fund Directors Forum and the U.S. Chamber of Commerce fired their first salvos in the Supreme Court fee case through separate briefs, claiming that market forces and diligent fund trustees keep fees low and negotiated at 'arm's length' bargaining between the investment advisor and the board. They also argue that due to the greater service afforded to retail investors, institutional fees are understandably lower. The case that the Supreme Court is scheduled to hear in November, Jerry N. Jones et al. v. Harris Associates LP, claims that the Oakmark Funds charge individual investor excessive fees. District and federal courts ruled in favor of Harris, but a judge for the Appeals Court for the Seventh Circuit kicked the case over to the Supreme Court, saying that only in cases of fraud have investors ever won. Harris Associates wrote, 'The growth of the mutual fund industry has created a powerful check on fees: Investors are free to transfer their dollars elsewhere.'" (Financial Planning)
Investment Company Institute Sets up Jones v. Harris Resource Center
Excerpt: "On November 2, 2009, the United States Supreme Court will hear arguments in Jones v. Harris Associates L.P., on appeal from the U.S. Court of Appeals for the Seventh Circuit. At issue in the case is the standard a federal court would use to review a claim by a fund shareholder alleging that a fund adviser received excessive fees under Section 36(b) of the Investment Company Act of 1940. The Seventh Circuit's decision departed from the standard established in 1982 by the U.S. Court of Appeals for the Second Circuit in Gartenberg v. Merrill Lynch Asset Management Inc., which held that a fund adviser breaches its fiduciary duty to shareholders if it charges a fee 'so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's-length bargaining.' On September 3, 2009, ICI and the Independent Directors Council filed friend-of-the-court briefs in support of Harris Associates. ICI will keep this page updated as events unfold." (Investment Company Institute)
Congress Wants to Shed Light on 401(k) Fees: It's About Time
Excerpt: "Unfortunately for the millions of Americans who are counting on such accounts to fund their retirements, 401(k) plan fees are often absurdly high and next to impossible to uncover. Buried in plan literature are kickback schemes (in which fund firms pass on a portion of fees collected to the plan administrator in exchange for shelf space), custodial, advisory and record-keeping fees, transaction costs and innumerable other charges that few participants have any clue they're shouldering--or, in many cases, any ability to uncover." (Forbes.com)
Alabama Attorney General Takes Over 457 Plan Fee Probe
Excerpt: "Alabama Attorney General Troy King has taken over a probe into at least $10 million in fees paid [to] the Alabama State Employees Association from the 457 Plan accounts of current and retired state workers. Forbes reported that King has already asked Alabama Securities Commission (ASC) Executive Director Joe Borg to delay any further work on the commission's ongoing investigation of Nationwide's involvement with the state's 457 program, but Borg then opted to pull the ASC out of the picture in favor of King's broader investigative authority." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Disclosures Required in DOL Settlement with Service Provider (PDF)
Page 2 of 7 pages. Excerpt: "We are seeing heightened enforcement activity by the DOL against service providers ? often in tandem with the SEC where the service provider is a broker-dealer or registered investment adviser ? and we anticipate that the DOL will continue to use its investigations as a vehicle for ensuring that the disclosures it deems appropriate are being made by service providers ? at least until a regulation mandating disclosure becomes final." (Reish & Reicher)
Summary of New ERISA Section 111(a) in HR 2989, The 401(k) Fair Disclosure and Pension Security Act of 2009 (PDF)
As Reported by the House Committee on Education and Labor on June 24, 2009. 12 pages. DISCLOSURES TO PLAN SPONSORS. (Profit Sharing / 401k Council of America)
Fees Can Drain Your 401(k) Retirement Savings
Excerpt: "How much are 401(k) fees removing from your retirement nest egg each year? If you are either unaware of such fees or don't know their amounts, don't worry: Nearly 83% of Americans don't know, either, according to AARP." (USA TODAY)
Public Pensions are Increasingly the Focus of SEC Activitiy
Excerpt: "Several recent actions taken by the Securities and Exchange Commission SEC) indicate that there is increasing attention being paid to public pensions ? and not just in their role as institutional investors. While the SEC's proposed restrictions on so-called 'pay to play' activities of investment advisors was not a surprise, an 'informal inquiry' into certain public pension fund activities initiated by the SEC's Division of Enforcement, and the recent announcement of the creation of a new 'Municipal Securities/Public Pension Unit' to look into unfunded and underfunded pension liabilities, among other things, are sounding alarm bells. Even the SEC's acting chief accountant has gotten into the act, expressing concerns with pension plan smoothing activities." (National Council on Teacher Retirement)
[Guidance Overview] SEC's Proposed Pay-to-Play Rules That Would Significantly Restrict Political Contributions by Investment Advisers (PDF)
4 pages. Excerpt: "The proposed prohibition on investment advisers compensating placement agents and other third-party solicitors who market private funds (and investment advisory services) to public pension plans and other governmental entities would apply not only to investment advisers that are registered with the SEC, but also to investment advisers that are exempt from registration because they have fewer than 15 clients (collectively, 'Covered Investment Advisers'). The proposed rule would prohibit Covered Investment Advisers from paying a third party to solicit or communicate, directly or indirectly, with a Government Entity for the purpose of obtaining the Government Entity as a client for the Covered Investment Adviser or having the Government Entity become an investor in a Covered Investment Pool managed by the Covered Investment Adviser. This proposed rule is expressly intended by the SEC to apply to finders, solicitors, placement agents or pension consultants who are compensated by investment advisers to market to public pension plans and other Government Entities." (Paul, Hastings, Janofsky & Walker LLP)
Supreme Court to Hear Case on Executive Pay
Excerpt: "The Supreme Court will hear the case this fall, as anger over huge bonuses paid to the executives of failing companies continues to grow. The case, Jones v. Harris Associates, may turn out to be the court's first significant statement on the corporate culture that helped lead to the Great Recession. The case arose from the enormous fees mutual funds pay to their investment advisers." (The New York Times; free registration required)
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