Headlines about "Ret plan investments - misc"

Gathered from the web by the editors at BenefitsLink.com.
[Opinion] Public Employees' Pensions Are Budgetary Black Hole
"If anyone still believed public employee pensions weren't a budgetary cancer, then the court defeat New Orleans suffered last week with its firefighters' plan should convince them. Defined benefit plans are a menace.... The argument is not that public employees don't deserve a pension as much as the next guy. The economics, however, dictate theirs cannot be a generous package paid almost entirely with other peoples' money. What's more, it makes no sense to say public employees must have a cushion against market shocks not available to the general public." (The Times-Picayune)

Defined Contribution Plan Participants' Activities in 2013 (PDF)
"In 2013, 3.5 percent of DC plan participants took withdrawals, compared with 3.4 percent in 2012.... Only 1.7 percent of DC plan participants took hardship withdrawals during 2013, the same share as in 2012.... In 2013, 2.7 percent of DC plan participants stopped contributing, compared with 2.6 percent during 2012.... In 2013, 10.7 percent of DC plan participants changed the asset allocation of their account balances and 7.4 percent changed the asset allocation of their contributions.... At the end of December 2013, 18.2 percent of DC plan participants had loans outstanding, compared with 18.2 percent at year-end 2012, 18.5 percent at year-end 2011, and 15.3 percent at year-end 2008." (Investment Company Institute [ICI])

Mercer U.S. Pension Buyout Index, March 2014 (PDF)
"During March, as indicated by the Index, the average cost of purchasing annuities from an insurer increased slightly from 108.4% to 108.6% of the accounting liability. The economic cost of maintaining the liability remained level at 108.7% of the balance sheet liability." (Mercer)

North Carolina Employee Union Takes Pension Complaints to SEC
"The union representing tens of thousands of North Carolina state workers [has] filed a complaint with the [SEC] over how State Treasurer Janet Cowell is managing the $86 billion pension system.... One of the union's major objections is that Cowell has the authority to invest up to 35 percent of pension fund holdings into hedge funds, private-equity firms or other alternative investments ... State lawmakers last summer raised the maximum that could be directed to those investments. The pension fund's quarterly update in February reported about $19 billion in pension assets, about 21 percent, were in alternative investments." (WRAL.com)

Will a Boom in Retirees Lead to a Bust in Equity Returns?
"As baby boomers transition into retirement, many have speculated that a corresponding reversal of fortune could hit the stock market as retirees liquidate assets to support living expenses.... Five reasons the concern is overblown: [1] Boomers won't retire all at once ... [2] Boomers' share of stock market is similar to prior generations ... [3] Boomers' wealth is highly concentrated ... [4] Growth of foreign investors in U.S. stock market ... [5] No correlation between aging populations and long-term returns." (Vanguard)

Target-Date Funds: What Retirement Savers Should Know
"The irony of this distinction is not just that 'to' funds may require you to reassess your investments in retirement itself-as they're not really intended to take you through retirement at that point-but that 'to' funds may actually leave retirees better prepared for retirement, after all. The reason is that recent research is finding the traditional 'through' fund approach -- where exposure to stocks stays higher in earlier retirement and drifts downward over time -- may actually not be the optimal 'glide path' for equities." (Michael Kitces in The Wall Street Journal; subscription may be required)

No Portfolio Is an Island (PDF)
37 pages. Excerpt: "[I]ndustry-specific human capital, region-specific housing wealth, and pensions have statistically significant exposures to different asset classes and risk factors. Through a series of portfolio optimizations [the authors] determine that the optimal allocation for an investor's financial assets varies materially for different compositions of total wealth. These findings suggest that narrowly focused portfolio optimization routines that ignore human capital and outside wealth are insufficient, and that a holistic definition of wealth is necessary to build truly efficient portfolios." (Morningstar Investment Management)

Managing Risk and Opportunity: Trends and Challenges in Defined Benefit Plans (PDF)
19 pages. Excerpt: "[R]isk management strategies appear to encompass three distinct categories: plan design, funding and investment, and settlement activities. Almost 50 percent of companies with plan assets in excess of $5 billion plan to manage risk only through investment practices, and none expect to transfer all of their obligations to a third party. In contrast, most plans with fewer than $5 billion in assets are not planning to rely only on investment practices. They also plan to manage risk through settlement activities." (Millennium Trust Company)

[Guidance Overview] DOL Releases Proposed 408(b)(2) Fee Disclosure 'Guide' Regs (PDF)
"Underlying the proposed regulation is the DOL's assumption that providers have 'specialized' knowledge enabling them to more easily locate fee information... Also underlying the proposed regulation is the assumption that a provider's specialized knowledge will reside in a single 'financial ... or similar professional' through whom the provider may quickly construct the guide for any given service.... Since these guides can 'make or break' the use of the exemption, it is hard to imagine that the guide will not require several levels of review at the business, compliance and legal level, as well as a review by 'plain English' editorial staff.... Even if one assumes that a guide would take a business person and a lawyer working together three to four hours per plan, at perhaps $1000 per plan, the cost of such a requirement would be 684,000 times $1000 ($684,000,000), or more than 17 times the benefit ($40,300,000) described in the cost analysis." (Steptoe & Johnson LLP)

Why Asset Class Diversification Is Important (PDF)
"[S]tudies have shown that more than 90% of the variations in a portfolio's return can be attributed to the asset allocation decision.... [A table] illustrates that the major asset classes ... have experienced negative returns in approximately 25%-40% of the 120 calendar quarters covering the last 30 years. However, the table also shows that the historical probability of multiple asset classes experiencing negative returns at the same time is significantly lower." (Manning & Napier)

Can the SEC Fix Target-Date Funds?
"The Investment Advisory Committee (IAC), a group of regulators, consumer advocates, academics and others who advise the SEC on matters of concern to consumers, earlier this month recommended a number of changes to the proposed TDF regulations. And that has caused the SEC to go back to the drawing board." (MarketWatch)

The Cash Balance Capital Preservation Guarantee Quantitative Analysis
"For a generic 60/40 portfolio, employers have experienced one material floor risk in the past 63 years -- 1974, which cost 0.2% of total payroll for our 5% of pay plan. For more aggressive portfolios the cost can be somewhat higher -- the 'worst case' cost historically was 1.5% of total payroll in 2008 for a 100% stock portfolio. For more conservative (40/60 or less) portfolios, employers have not seen a material floor risk in any year since 1950. Interestingly, the 'least risky' portfolio is 20/80, not 100% bonds, which speaks to the benefit of asset diversification." (October Three Consulting)

Both Sides in Tussey vs. ABB Case File Requests to Appeal Court Ruling
"In its appeal of the $13.4 million judgment vs. ABB, the company said the appeals court took a 'myopic focus on a single component of the (total) fee,' arguing that it should have taken into account the aggregate fee for its plans. 'In other words, the net return is what matters to the investor,' said the appeal ... In appealing the reversal of the Fidelity float income decision, the plaintiffs said the appeals court panel majority 'disregarded ... settled law' in its ruling that float income wasn't a plan asset.... The ABB attorneys' objection to the mapping ruling centered on its claim that plaintiffs' waited too long to file a complaint[.]" (Pensions & Investments)

Millennials Eschew Retirement Plans for Online Brokerage Accounts
"74% of affluent millennials -- those with more than $100,000 in investable assets -- have assets in online brokerage accounts, while only 67% have assets in a defined contribution plan. This cohort is alone among working age segments to be more likely to invest assets in online brokerage accounts than retirement plans ... For example, only 30% of millennial investor assets are allocated to employer-sponsored retirement plans, in contrast to Generation X, the next age cohort, which has allocated 48% of their assets to such plans." (Financial Planning)

Helping Plan Participants to Choose Between Annuities and Lump Sums
"If his main retirement goal is to be happy, have him take the pension or a similar lifetime annuity. A 2012 report ... found that among retirees of similar wealth and health, those with annuitized incomes were happier than those without annuities. Any financial adviser worth her credentials would argue that this happiness is likely to be short-lived, though.... There's another angle. Pensions don't generate commissions or asset management fees; rollovers do. So how do you help clients make informed decisions and manage the inherent conflict of interest?" (Reuters)

Best Practices for Investment Menus in 401(k)/403(b) Plans
"[1] Offering 12 to 15 core fund options, which do not include managed fund choices; [2] A set of professionally managed investment options ... with the most common offering being target date funds; ... [3] At least 4 conservative fund choices ... Although the average number of investment options offered in 401(k) plans has risen to 15 ... the average number of investment funds used by participants has remained consistent over time at 3." (Lawton Retirement Plan Consultants)

Examining Perceptions and Expectations Among Target Date Investors and Non-Investors (PDF)
12 pages. Excerpt: "The gap in confidence levels between [target-date fund (TDF)] investors and non-TDF investors suggests that TDFs are doing what they are supposed to be doing: providing a diversified investment option for plan participants that reallocates over time to make investment planning easier to execute--- and retirement goals easier to reach.... TDF investors report contributing a full 2% more of their pay to their retirement plans than non-TDF investors. In fact, 42% of TDF investors report contributing over 10% of their income (vs. 23% of non-TDF investors)." (ING Retirement Research Institute)

BrightScope Goes on Hiring Spree to Capture Revenues from Hot New Market
"[T]he ultimate proof that BrightScope may finally have gotten on track to a bright future as a data company are late developments about who is seeking the better data that it sells -- the 401(k) providers and recordkeepers themselves. The firm has 25 enterprise clients described as recordkeepers and asset managers who want BrightScope, Inc. to clean up their fragmented data making it cleaner and easier to read. They also want BrightScope to help them use the data to increase sales. By the end of the year, BrightScope hopes to have 40 of these big clients[.]" (RIABiz)

[Opinion] Wall Street Journal is Wrong About Public Pensions
"[CalPERS] relied on IMPLAN, the most widely employed and accepted regional economic analysis software for predicting economic impacts.... [They input] total benefits paid in California (more than $12.7 billion) into IMPLAN to arrive at a 2.39 economic multiplier and the 113,664 jobs created.... CalPERS benefits (retirees spending their pensions) returned $10.85 in economic activity to California for each taxpayer dollar (public funds) contributed to the system. The total economic revenue generated by CalPERS benefits was more than $30.4 billion." (CalPERS)

2014 Survey of DC Plan Consulting Support and Trends (PDF)
"Fastest-growing DC areas reported by consultants include: Total plan cost/fee studies; DC investment design; Investment default asset allocation creation (e.g., target dates, balanced fund); DC recordkeeping searches; [and] Manager selection and monitoring... Consultants believe that the perceived mitigation of fiduciary risk (72%) and the ability to hand over reins on investments (66%) are the leading drivers of growth for outsourced CIO or discretionary oversight of assets.... The majority of consultants (59%) indicate that some or most of their plan sponsor clients prefer to retain retiree assets. Over a fifth (21%) indicate that some or a majority actively seek to retain these assets. Only two firms (4%) reported that the majority of their clients prefer that retirees move out of their plan." (PIMCO)

On Remand From Sixth Circuit, State Street Beats Stock-Drop Claim; Presumption Applies
"State Street Bank & Trust Co. is entitled to summary judgment on stock-drop claims by participants in General Motors Corp.'s Section 401(k) plans, because plan participants failed to present evidence sufficient to overcome the presumption of prudence shielding fiduciaries of employer stock plans, the U.S. District Court for the Eastern District of Michigan ruled... [This] most recent decision marks one of the few times a stock-drop case has progressed past the motion-to-dismiss stage of litigation." [Pfeil et al. v. State Street Bank and Trust Company, No. 09-CV-12229 (E.D. Mich. Apr. 11, 2014)] (Bloomberg BNA)

[Official Guidance] Text of IRS Notice 2014 28: Treatment of U.S. Persons Owning Stock of Passive Foreign Investment Companies Through Certain Tax-Exempt Organizations and Accounts (PDF)
"The Treasury Department and the IRS believe that the application of the [passive foreign investment company (PFIC)] rules to a U.S. person treated as owning stock of a PFIC through a tax exempt organization or account described in 1.129 8-1T(c)(1) would be inconsistent with the tax policies underlying the PFIC rules and the tax provisions applicable to tax exempt organizations and accounts. For example, applying the PFIC rules to a U.S. person that is treated as a shareholder of a PFIC through the U.S. person's ownership of an [IRA] ... that owns stock of a PFIC would be inconsistent with the principle of deferred taxation provided by IRAs. Accordingly, the Treasury Department and the IRS will amend the definition of shareholder in the section 1291 regulations to provide that a U.S. person that owns stock of a PFIC through a tax exempt organization or account (as described in 1.1298-1T(c)(1)) is not treated as a shareholder of the PFIC. This amendment will affect all regulations that cross-reference the 1.1291-1T(b)(7) and [8] definitions of shareholder and indirect shareholder, including 1.1298-1T(a)." (Internal Revenue Service [IRS])

[Guidance Overview] FINRA's 'Reminder' About Rollovers Is News to Many
"[R]egulators believe that industry practices encourage retirees to make rollovers without a full understanding of their options and the relative costs for each option.... Couched as a 'reminder,' FINRA's year-end Regulatory Notice 13-45 describes practices that many broker-dealers and their registered representatives will find difficult to implement.... The guidance lists ... factors that broker-dealers and their registered representatives must consider and evaluate to determine whether a recommendation to take a distribution and rollover is suitable. In practice, broker-dealer firms and their representatives will have a difficult time obtaining this information." (DrinkerBiddle)

The Importance of Tax-Efficient Investing
"Tax-smart investors hold tax-efficient investments in taxable accounts and less tax-efficient investments in tax-advantaged accounts.... Tax-advantaged accounts such as Roth IRAs and tax-deferred accounts including traditional IRAs, 401(k)s and deferred annuities are ideal for... Individual stocks you plan to hold one year or less; Actively managed funds that may generate significant short-term capital gains; Taxable bond funds, zero-coupon bonds, inflation-protected bonds or high-yield bond funds; [and] Real estate investment trusts (REITs)." (Lawton Retirement Plan Consultants)

Watch Out for the 'Risk' in Derisking!
"From a plan management standpoint, once a plan hits its 'peak liability' -- the inflection point where benefit payments will trump the interest cost and service cost going forward -- a plan sponsor has very little time.... Plan events such as lump-sum windows, group annuity purchases, and even full-scale terminations are quite popular these days as plan sponsors look to reduce the size of their pension plan liability. It's important to remember, though, that these derisking strategies are fiduciary events." (Vanguard)

ING Settles ERISA Class Action Lawsuit Over Revenue Sharing Practices
"In total, ILIAC agreed to pay $14,950,000 in damages and agreed to significant changes to its business practices regarding fees and revenue sharing.... The settlement of $14,950,000 represents just 2.33% of the original damages amount and with the plaintiffs' attorneys requesting $6,200,000 (about 42% of the settlement amount) in fees and $615,000 in expenses, this decreases to 1.3%." (FRA PlanTools, LLC)

[Opinion] Text of Comments by Several Trade Associations to DOL on Proposed 408(b)(2) Guide Requirement (PDF)
"DOL is using the issuance of the Proposed Rule as an opportunity to collect information from the public in order to make findings necessary to adequately demonstrate that the guide (i.e., the proposed data collection) contemplated by the Proposed Rule is (i) necessary for the proper performance of the functions of the agency, and (ii) will have practical utility. Accordingly, DOL has not completed the threshold steps of determining whether the guide is in fact needed or will be useful to plan sponsors, nor has it developed a realistic estimate of the total time required for [affected] service providers to prepare the guide." (The SPARK Institute, Investment Company Institute [ICI], SIFMA, ACLI and American Bankers Association)

CalPERS Seeks Fresh Faces to Manage Investments
"Public pension systems, with some prodding from legislation, are stepping up a drive to spread their investments to firms owned and operated by minorities and women, often with what were called 'mixed' returns so far.... The definition of 'emerging and diverse' is loose, usually meaning new and small (managing less than $2 billion) but often varying widely among different investments such as stocks, bonds, private equity, real estate, infrastructure and commodities. Under legislation requiring the California Public Employees Retirement System and CalSTRS to have a five-year plan for emerging manager participation in all asset classes, the definition of 'emerging investment manager' was left to the pension systems." (Calpensions)

Special and New Challenges for 403(b) Plans
"Once 403(b) plans were almost completely ignored by the IRS and the [DOL].... And now the agencies have taken clear aim at them.... Private educational institutions must now ... consider the negative impact of having multiple vendors, not rely exclusively on incumbent providers, and look closely at and compare available investments, based on fees, performance and services, to make sure they are providing appropriate 403(b) plan benefits. In other words, they must look to the plan as a whole and evaluate vendor candidates from the perspective of the considerable buying power their plans have." (Fiduciary Plan Governance, LLC)

Would an Expanded Fiduciary Definition Lead to Billions in Retirement Cash-Outs?
"If the [DOL] moves ahead with its proposal to impose a fiduciary responsibility on financial professionals offering retirement advice, waves of broker-dealers and company call centers would exit that market and further jeopardize the already precarious retirement situation for millions of workers ... Without that advice, more workers would be likely to cash out their plans upon leaving a job, rather than rolling them over to an IRA or staying with the employer's plan.... [T]hose cash-outs [c]ould add up to between $20 billion to $32 billion each year, which could translate into a net annual decline in retirement savings by 20% to 40% for the affected workers." (Financial Planning)

The Debate over ETFs in 401(k) Plans
"In contrast to mutual funds, a typical retirement savings vehicle, ETFs offer intraday pricing, no early redemption fees or minimum holding periods and lower management fees. Schwab asserts that its platform can slash retirement plan costs by 90 percent, compared with plans using actively managed mutual funds, and by 30 percent, compared with plans with index mutual funds.... Some industry insiders believe retirement plan providers have been slow to include exchange-traded funds in 401(k) plans because -- unlike mutual funds -- ETFs don't offer revenue sharing as do mutual funds." (Institutional Investor)

Moody's Finds Public Pension Plans Lag Corporate Plans in Managing Credit Risk
"While corporations have federal agencies, accounting rules and shareholders monitoring how well they fund their pension plans and manage the related credit risk, state and local governments do not.... The report notes the 50 largest corporations have a median pension liability as a percentage of total debt (including pensions) of 24%, while the government median is 73% for states and 49% for large local governments. The state data are for fiscal year 2012 and the local government number is based on fiscal 2011 data." (Pensions & Investments)

[Guidance Overview] Investment Advisers to Plans May Be Required to Deliver 'Disclosure Guide' Under ERISA
"[U]nless revised or clarified, the Proposed Amendment would presumably prohibit a covered service provider from including the guide as an exhibit or attachment to another document ... [It] is possible that a covered service provider would need to deliver a guide even in situations where it had already sent out 408(b)(2) disclosures in compliance with the Final Regulations. Further, even those covered service providers that have already delivered a form of guide might need to deliver a new one if the original delivery did not comply with the requirements of the Proposed Amendment ... [A] failure to deliver the guide in accordance with the requirements of the Proposed Amendment would be treated as a failure to comply with the requirements of the ERISA Section 408(b)(2) 'necessary services exemption', potentially resulting in a non-exempt prohibited transaction if no other exemption is available." (Proskauer Rose LLP)

Why Every Retirement Committee Needs a Custom Charter
"A well-written charter should advise the retirement committee of the sponsor's overall retirement planning philosophy, where the organization's retirement plan should be heading and what path it should take. It should also provide helpful review milestones and directions for handling situations where something may go wrong. Moreover, a charter can maximize the retirement plan's outcomes for both the organization and the plan participants by supporting the organization's workforce-planning objectives and helping the participants prepare for a financially secure retirement." (Sibson Consulting)

401(k) Index Observations, March 2014
"March was a light trading month for investors in their defined contribution plan ... Overall, the daily transfer volume in March averaged 0.021% of the total daily balances, slightly lower than February's value of 0.023%. In addition, there were zero days in March with above normal transfer activity levels, marking the first month of zero above normal trading days since August 2013." (Aon Hewitt)

Coming Soon (Thanks to the SEC): More Adviser Review Sites
"While the new guidance clarifies that advisers don't have to worry about whether third-party review sites will get them in trouble with regulators ... the notable aspect of the SEC's guidance is that it also clears the way for adviser review sites as well, effectively showing such sites exactly what advisers can and cannot control without running afoul of the rules. In other words, get ready for a whole lot more 'adviser review' websites to start springing forward." (InvestmentNews)

Critical Mass: Defined Contribution Can Transcend State of Crisis
"[J]ust a few key variables drive a DC plan participant's ability to achieve a comfortable retirement: the asset-allocation mix of the glide path, the savings rate before retirement, the spending rate after retirement, and age at retirement. When plan sponsors and participants make relatively small changes at the same time to the settings of these variables, retirement outcomes can improve dramatically. But under current capital-market conditions, without altering these variables, participants are losing ground -- fast." (Alliance Bernstein)

[Opinion] 'Unsafe' in Any Fund Line Up: Dominated Funds in 401(k) Plans
"It can always be argued that the losses from Dominated Funds are the result of participant investment decisions. It's an obvious truism that but for the participant's decision, there would be no losses. But, does that seem to be a reasonable application of ERISA's fiduciary standard of prudence in choosing to include/retain a fund in the line up that is ex ante a poor investment choice?" (ERISA Fiduciary Administrators)

Target-Date Funds Draw Assets in Retirement Plans
"Target date funds ... drew 14.6 percent of asset flows in retirement plans tracked by Northern Trust in 2013, the strongest flows of any investment category. It was the second year of strong flows into target date funds, which comprised 15.7 percent of all assets in the Northern Trust universe of DC plans, the second-largest share of any category." (Northern Trust)

Target-Date Funds: Looking Beyond the Glide Path
"A target-date fund's (TDF) glide path, or how its asset allocation changes over time, is critical to helping shape outcomes for TDF investors -- which in turn makes the TDF glide path an important aspect for plan sponsors to focus on in conducting due diligence.... [I]mportant factors include the sub-asset allocation of the funds-especially examining the component of government bonds, and how long-run average correlations of non-government bonds such as high-yield bonds or commodities can break down especially during periods of acute market stress. The paper also looks at the impact of costs particularly in the decision-making process of whether to add more costly asset classes, as well as the tactical flexibility that's permitted in some glide-path construction that could affect stability." (Vanguard)

Pension Finance Watch, March 2014
"Equities provided a small overall increase, while bond yields dropped slightly in March. These factors combined to nudge the Towers Watson Pension Index down 0.7% for the month, to 75.2." (Towers Watson)

Private Sector Pension De-Risking and Participant Protections
"One way to transfer a benefit liability is to transfer the benefit to the participant by paying out the benefit in a lump sum. The other way is to purchase an annuity from an insurance company.... [This de-risking] approach has a much greater impact on plan participants, as it may change who will pay their benefit and requires them to decide whether or not they want to receive a lump sum distribution. It is this ... approach which raises the most issues under ERISA." (Thompson Coburn LLP)

Reducing Volatility in DC Plans: Fiduciary Considerations of Incorporating Downside Risk Management (PDF)
"Although downside risk management strategies may be new to some fiduciaries, it is important to remember that ERISA's fiduciary standard requires adaptation to changing circumstances.... An asset class or investment product that was prudent several years ago could be imprudent today due to changing market conditions. Similarly, an investment option not available to plans in the past may be a prudent and desirable investment today." (F-Squared Retirement)

Boomer Expectations for Retirement 2014
"The number of Boomers who are confident in their efforts to prepare financially for retirement has dropped nine percentage points, from 44% in 2011 to 35% in 2014. The percentage of Boomers who are confident they will enough money to live comfortably throughout their retirement years has dropped from 37% in 2011 to 33% in 2014.... Boomers are beginning to show tempered optimism regarding their longer-term financial futures, with 42% expecting their financial outlook to improve in five years." (Insured Retirement Institute [IRI])

Investing for Retirement:The Defined Contribution Challenge
13 pages. Excerpt: "Target date funds are rapidly becoming the workhorse for DC plans.... While this satisfies the common-sense intuition that, all things being equal, weight in stocks should go down as a person ages, there are a number of problems with this approach.... First, the standard solution is inflexible: all things are rarely equal.... Second, the standard solutions do not recognize that expected returns vary over time." (GMO LLC)

Fiduciary Handbook for Understanding and Selecting Target Date Funds (PDF)
51 pages. Excerpt: "Target date funds are a good idea that could become a great idea. It wouldn't take much more to do what is best for beneficiaries. This handbook is normative. It explains what should be provided by target date funds. Each Chapter has 3 sections : Statement of facts ... Legal guidance... Ethical Perspective." (John Lohr, Mark Mensack and Ron Surz, for Target Date Solutions)

Supreme Court ERISA 'Stock Drop' Argument Features Debate Over Fiduciary Duties
"The justices surprised most observers by focusing much of the hour-long argument on what an ERISA fiduciary must do if it has inside information that employer stock held by an ESOP is overvalued. Except for a few brief references, the justices did not discuss the question presented of whether a presumption of reasonableness applies at the pleadings stage of a stock-drop lawsuit.... Some justices appear to appreciate the limited options that an ESOP fiduciary has in these circumstances and may understand why seven courts of appeal have adopted the presumption of prudence. However, the justices do not appear interested in providing ESOP fiduciaries with a lesser standard of diligence." [Fifth Third Bancorp v. Dudenhoeffer, petition for certiorari filed Dec. 2012] (McGuire Woods LLP)

EBSA's New Fee Disclosure Guidance: Questions as Much as Answers
"When would this separate guide be needed, and how detailed must it be? It is on these questions that the difficulty of complying will turn.... Such as, what is 'quick?' What is 'easy?' What is 'lengthy?' And a big one: 'who will decide?' There is legitimate concern that if a guide must have specificity down to the page number, or to the paragraph, it could be extremely costly for a [covered service provider] to create custom guides for the many plans it may serve." (Todd Berghuis, for Ascensus)

A Possible Alternative to the Moench-ies
"The approach has been to look for a presumption that emerges from the overall statutory scheme -- a la Moensch. Looking at the oral argument, it's not impossible to discern possible hostility on the part of the Court to a presumption that isn't expressly in the statutory language.... [T]he Moench presumption, which requires the uncovering of a presumption that is not expressly legislated, may not be the only way to get to a result that may indeed be the right one under ERISA." [Fifth Third Bancorp v. Dudenhoeffer, argued Apr. 2, 2014] (Andrew L. Oringer in Pension and Benefits Blog, by Bloomberg BNA)

SEC Reconsiders Target-Date Fund Glide Path Illustrations
"The rule amendments would ... require marketing materials for TDFs to include a table, chart or graph depicting the fund's asset allocation over time ... SEC officials hope the reopened comment period will generate additional input on the question of whether such illustrations would be helpful to new and inexperienced investors and how difficult they would be to deliver for service providers. SEC officials also hope to test the industry's response to a new question coming out of a 2013 proposal from the SEC's Investor Advisory Committee, which urges the full SEC to take the additional and more challenging step of requiring a standardized glide path illustration that factors in important risk considerations -- not just asset allocation over time." (planadviser)

Funded Ratio Lower in March for Corporate Pension Plans
"[T]he estimated funding levels of pension plans sponsored by S&P 1500 companies fell 2% in March to 85%. While flat equity markets and interest rates did not affect funded ratios during the month, Mercer made adjustments based upon actual funded status released in filings for the 2013 year end. The collective deficit of $332 billion as of March 31, 2014, is up $56 billion from the estimated deficit of $276 billion as of February 28, 2014,[.]" (Mercer)

Usage of Swaps by Pension Plans
"ERISA, including its prohibited transaction rules, governs 'plan assets.' Thus, it is critical to determine whether margin posted by a plan in connection with swaps clearing and the swap positions held in the plan's account are considered 'plan assets' for ERISA purposes. Among other things, Advisory Opinion 2013-01A gives comfort that (1) margin posted by the investor to the clearing agent generally will not be considered a plan asset for ERISA purposes and (2) clearing agents will be able to unilaterally exercise agreed-upon close-out rights on the plan's default without being deemed a fiduciary to the plan, notwithstanding that the positions are plan assets." (Pension Risk Matters)

[Official Guidance] Text of SEC Comment Request on Investment Company Advertising: Target Date Retirement Fund Names and Marketing (PDF)
"The [SEC] is reopening the period for public comment on rule amendments it proposed in 2010 ... Among other things, the proposed amendments would, if adopted, require marketing materials for target date retirement funds ... to include a table, chart, or graph depicting the fund's asset allocation over time, i.e., an illustration of the fund's so-called 'asset allocation glide path.' In 2013, the Commission's Investor Advisory Committee recommended that the Commission develop a glide path illustration for target date funds that is based on a standardized measure of fund risk as a replacement for, or supplement to, the proposed asset allocation glide path illustration. The Commission is reopening the comment period to seek public comment on this recommendation." [Includes extensive and specific questions on which the SEC is requesting comments.] (U.S. Securities and Exchange Commission)

[Official Guidance] Text of SEC Proposed Rule on Investment Company Advertising: Target Date Retirement Fund Names and Marketing (PDF)
"The [SEC] is proposing amendments to rule 482 under the Securities Act of 1933 and rule 34b-1 under the Investment Company Act of 1940 that, if adopted, would require a target date retirement fund that includes the target date in its name to disclose the fund's asset allocation at the target date immediately adjacent to the first use of the fund's name in marketing materials. The Commission is also proposing amendments to rule 482 and rule 34b-1 that, if adopted, would require marketing materials for target date retirement funds to include a table, chart, or graph depicting the fund's asset allocation over time, together with a statement that would highlight the fund's final asset allocation. In addition, the Commission is proposing to amend rule 482 and rule 34b-1 to require a statement in marketing materials to the effect that a target date retirement fund should not be selected based solely on age or retirement date, is not a guaranteed investment, and the stated asset allocations may be subject to change." (U.S. Securities and Exchange Commission)

Great-West Buys JPMorgan's Large-Market Recordkeeping Business
"The newly combined Great West will take its $220 billion retirement company and add a hefty $167 billion in assets from JP Morgan, which ranked ninth in terms of assets.... The newly combined firm, with its $387 billion is assets, is now second in terms of retirement assets -- next only to Fidelity ... The newly combined firm will have 6.8 million participants. The deal encompasses the majority of JP Morgan's retirement business -- including the company's own $16.4 billion retirement plan as well as the American Airlines, Bechtel and Cisco Systems retirement plans... [and] Proctor and Gamble's $14 billion retirement plans[.]" (RIABiz)

Perspectives on Custom Target-Date Fund Strategies in DC Plans
16 pages. Excerpt: "Implementing a custom TDF strategy entails a trade-off between benefits and costs. Benefits may include the fiduciaries' expected risk or return characteristics of the custom strategy or intangible benefits like glide path 'fit' or TDF 'control.' Costs will include the direct investment and administrative costs associated with a custom strategy, plus the time, resources, and skills needed to oversee a plan-specific offering ... One way to evaluate the merits of customization is to use a low-cost passive target-date strategy as a decision-making benchmark[.]" (Vanguard)

The 'Teflon Fiduciary': Could Your Investment Adviser Avoid Responsibility for Bad Advice?
"[The Fifth Circuit's recent decision in Tiblier v. Dlabal] deserves lots of attention because it provides a blueprint for investment advisers to avoid responsibility for self-dealing and bad advice. The decision also constitutes a persuasive argument why the U.S. Department of Labor needs to continue its controversial efforts to update its regulations on when giving investment advice makes a person a fiduciary." (Osler, Hoskin & Harcourt LLP)

Supreme Court Hears Oral Argument in Fifth Third Bank Case
"This was an argument that was dominated by practical questions -- and not just why have a duty of prudence, or what to do about inside information, but also how many ESOPs have inside trustees ... what the SEC thinks about the inside information argument ... and the scope of ESOPs ... [w]hich makes it very difficult to assess what sort of decision may emerge when many of the Justices appeared to be struggling with the practical implications of the arguments and issues presented." (James E. Arnold & Associates, LPA)

Justices Hear Arguments in First ERISA Stock-Drop Case to Reach High Court
"The issue of inside information dominated the back-and-forth between U.S. Supreme Court justices and attorneys debating the pro-fiduciary presumption of prudence during oral argument April 2 in the first [ERISA] stock-drop case to reach the high court. The justices' questions to counsel suggest that they see the central issue as how a prudent fiduciary of an employer stock plan should respond to inside information affecting the value of the stock price." (Bloomberg BNA)

Wells Fargo Wins Second Part of Securities Lending Case
"The pension plan for Blue Cross Blue Shield of Minnesota, along with other pension funds, has lost a legal battle with Wells Fargo & Co. over tens of millions of dollars the funds lost in the bank's former securities lending program. The San Francisco-based bank did not breach its fiduciary duties to the pension funds, U.S. District Judge Donovan Frank said ... However, he explained in the 12-page order that he was 'constrained' by law to adopt the decision a jury reached last August in the case ... 'Significantly, however, the court notes that if it were not so bound, the court would find, based on the evidence presented at trial, that defendant breached its fiduciary duties to the ERISA plaintiffs,' Frank wrote in a footnote." (StarTribune)


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