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Ret plan investments - misc


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University of Chicago Latest College Hit with Retirement Plan Suit
"The lawsuit alleges the university selected and retained investment funds and insurance company annuities that caused the plans to incur far higher administrative fees and expenses relative to the size of the plans, causing participants millions of dollars in economic loss. The university selected numerous underperforming investment options when lower-cost alternatives were available, according to the complaint filed May 18 in federal court in Illinois." (Bloomberg BNA)
[Official Guidance] Text of DOL FAQs: Application of Fiduciary Rule Starting June 9 (PDF)
15 questions and answers, including: "When do firms and their advisers have to comply with the conditions of the new Best Interest Contract (BIC) Exemption and the [Principal Transactions Exemption]? ... When do parties have to comply with the new conditions in PTE 84-24, which was amended in connection with the Fiduciary Rule? ... When do firms and their advisers have to comply with the new conditions in other pre-existing exemptions that were amended in connection with the Fiduciary Rule? ... Will the Department make additional changes to the Fiduciary Rule or exemptions? ... Does the Department's decision to have the Fiduciary Rule and impartial conduct standards become applicable on June 9, 2017 mean it has effectively concluded its review under the President's Memorandum?.... How does the delay in the applicability dates affect the grandfathering relief in Section VII of the BIC Exemption ... Does PTE 84-24 apply to transactions involving IRAs during the transition period? ... The Department postponed the relevant applicability dates of the Fiduciary Rule and exemptions until Friday, June 9, 2017. Does this mean that advisers and financial institutions must be in full compliance before the close of business on June 9, 2017?" (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] Acosta on Fiduciary Rule's June 9 Implementation: 'Deregulators' Must Follow the Law, So Regulators Will Too
"The [DOL] has concluded that it is necessary to seek additional public input on the entire Fiduciary Rule, and we will do so. We recognize that the rule goes into partial effect on June 9, with full implementation on Jan. 1, 2018.... We have carefully considered the record in this case, and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input. Respect for the rule of law leads us to the conclusion that this date cannot be postponed. Trust in Americans' ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule. Under the Obama administration, the [SEC] declined to move forward in rule-making. Yet the SEC has critical expertise in this area. I hope in this administration the SEC will be a full participant." (Secretary of Labor Alexander Acosta, via The Wall Street Journal; subscription may be required)
[Official Guidance] Text of DOL FAB 2017-02: Temporary Enforcement Policy on Fiduciary Rule
"The Department is actively engaging in a careful analysis of the issues raised in the President's Memorandum. It is possible, based on the results of the examination, that additional changes will be proposed to the fiduciary duty rule and PTEs. The Department also intends to issue a Request for Information (RFI) in the near future seeking additional public input on specific ideas for possible new exemptions or regulatory changes ... The Department has repeatedly said that its general approach to implementation will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions, and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions.... Accordingly, during the phased implementation period ending on January 1, 2018, the Department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Borzi: Fiduciary Rule Will Prevail Even If Repeal Is Attempted
"If the rule is repealed, consumer groups will challenge the action in court, [according to] Phyllis Borzi, the former assistant Secretary of Labor of [EBSA] ... Borzi maintained that the regulation's opponents 'have no new evidence' ... and won't be able to meet the court's high standards for repeal.... 'We were extremely meticulous in the way we approached the evidence,' she said ... '[The rule's opponents] need to create a record that is as strong as the record we created over six years.' " (Financial Planning)
[Discussion] Can a Retirement Plan Invest in Bitcoin?
"I have had a client ask if they can invest in Bitcoin. My initial reaction was 'no way.' However, there is a Bitcoin Investment Trust on the OTC market." (BenefitsLink Message Boards)
Target Date Fund Design and Decision Drivers
"[D]esigning a glide path based on a representative participant profile is rather like creating one average size shoe to fit an entire population. In most cases, it won't be a good fit. Instead of focusing on a representative participant, ... glide paths should be designed to suit most investors in a plan based on two key principles: [1] Appropriately balancing capital appreciation and principal preservation objectives as a function of time to the target date; [2] Maximizing the sustainability of a participant's retirement investments in the event of market shocks." (MFS Institutional Advisors, Inc.)
[Official Guidance] Text of SEC Risk Alert to Broker-Dealers, Advisers and Investment Companies on Cybersecurity: Ransomware Alert (PDF)
"Five percent of broker-dealers and 26 percent of advisers and funds ... examined did not conduct periodic risk assessments of critical systems to identify cybersecurity threats, vulnerabilities, and the potential business consequences.... [T]en percent of the broker-dealers and four percent of investment management firms examined had a significant number of critical and high-risk security patches that were missing important updates. The Division of Investment Management and OCIE have provided [an IM Guidance Update] and information that firms may wish to consider when addressing cybersecurity risks and response capabilities.... [FINRA] has created a webpage with links to cybersecurity-related resources, including a cybersecurity checklist for small firms and a report on cybersecurity practices that highlights effective practices for strengthening cybersecurity programs." (U.S. Securities and Exchange Commission [SEC])
Solving for Data Transparency in the Retirement World
"The migration to super omnibus accounts and the increasingly complex and interdependent retirement marketplace has led to a demand for more transparency, because robust reporting can help the firms involved provide services more effectively.... [ICI's Retirement Plan Reporting(RPR)] solution ... is based on the records of service providers (such as a plan recordkeepers or administrators). RPR contains two main plan-level data sets: plan information and plan investments." (Investment Company Institute [ICI])
DOL Could See Lawsuit by Fiduciary Rule Supporters
"The department 'should expect to be challenged vigorously in court' if the two provisions of its fiduciary rule that are set to go into effect June 9 -- the revised definition of the term fiduciary and the impartial conduct standard -- are delayed again, Stephen Hall, legal director of the advocacy group Better Markets [said] ... A legal challenge from rule supporters would likely be brought under the Administrative Procedure Act[.]" (Bloomberg BNA)
The Effect of Rising Interest Rates on Stable Value Accounts
"In this environment, stable value products could provide a smoother ride than traditional bond funds. These lower-risk accounts can be a smart choice for the conservative fixed income portion of a portfolio, as they avoid the losses likely to hit bond funds, while delivering higher returns than money market funds. These accounts are specifically designed to protect principal in defined contribution (DC) plans, regardless of interest rate fluctuation." (Cammack Retirement Group)
First Quarter 2017 Annuity Sales Decline
"U.S. annuity sales were $52.0 billion, a slight uptick from [the] fourth quarter, but a 12 percent decline from the first quarter 2016 ... In the first quarter, variable annuity (VA) sales totaled $24.4 billion, down eight percent. There has only been one quarter of growth when compared to prior years since 2012." (LIMRA)
Interesting Angles on the DOL's Fiduciary Rule, Part 47
"[M]ost of the objections are to the Best Interest Contract Exemption and not to the rule.... [T]he main issue is the prohibited transaction rules, which are statutory, rather than regulatory. Neither the SEC, nor FINRA nor the DOL, can issue regulations that conflict with a statute. As a result, even if the standard of care is changed, the prohibited transaction exemptions will continue to be written by the [DOL]. In other words, the SEC does not have the statutory authority to create exemptions from the prohibited transaction rules." (FredReish.com)
Managed Account Use Poised to Jump in 401(k) Plans
"Mergers of 401(k) record keepers ... are part of the equation that's driving an increase in the number of employers offering managed accounts in their plans.... These mergers have increased the choice of managed account providers on plan platforms ... Technology innovations that allow managed accounts to automatically incorporate individual investors' data in constructing advice are also a driving force behind renewed interest in managed accounts[.]" (Bloomberg BNA)
Trends in the Expenses and Fees of Funds, 2016 (PDF)
32 pages. "The average expense ratios for money market funds rose 5 basis points in 2016 to 0.18 percent.... Expense ratios of target date mutual funds averaged 0.51 percent in 2016.... Average expense ratios for both actively managed and index equity mutual funds have fallen since 1996.... Economies of scale and intense competition are putting downward pressure on expense ratios of exchange-traded funds (ETFs)." [Also available: Supplemental Tables (XLS)] (Investment Company Institute [ICI])
Court Decisions on Investment Fees Provide Hope for Plan Sponsors
"[I]t is important for plan sponsors to understand that it is not their responsibility to include only the lowest cost investments in each asset category within their retirement plan. It is not required, and it should not be the case, that plan fees are the sole determining factor when selecting investments.... Each investment must be evaluated in the context of its overall performance, cost, and the value received through its role in the plan portfolio. Plan sponsors using cost as the only factor are potentially failing to fulfill their responsibility to finding investments that are reasonable and competitive." (Cammack Retirement Group)
[Opinion] The Incredible Shrinking DOL Fiduciary Rule
"For [DC] plans like 401ks, the DOL rule punctuated a movement already under way where more and more advisors were willing to act as fiduciaries.... The real impact ... is on IRAs over which the DOL has no enforcement jurisdiction -- the undermining of private rights of actions in the recent delay of the DOL rule may have disenfranchised lawyers ready to take up enforcement. But changes by many broker-dealers and RIAs eliminating potential conflicts of interest in IRAs and restricting activities of inexperienced advisors for DC plans will, in effect, bring about changes the DOL intended by the rule now under assault by the White House and possibly the new DOL secretary." (Fred Barstein, via 401kTV)
Perspective on Annuities for Accumulation in Defined Contribution Plans
12 pages. "The case for using annuities as savings vehicles in defined contribution plans in the accumulation phase rests on assumptions that they will provide income streams after retirement, yet few participants actually convert them into income streams.... Because it is challenging to predict whether or how much annuity income will be needed, it may be best to delay decisions about annuitizing wealth until closer to retirement." (Vanguard)
Active Management Ideas for DC Plan Sponsors
"[In] the context of net-of-fee returns, passive bond strategies may be the most expensive fixed income option.... [P]lan sponsors [should] review their TDFs to ensure they have adequate exposure to diversifying assets ... [P]lan sponsors [should] review their stable value manager and confirm their ability to provide value even during volatile market periods.... Multi-real asset solutions may offer a convenient way to seek diversification across inflation fighting assets, protect purchasing power and limit volatility relative to stand-alone options such as commodities." (PIMCO)
Fee Litigation 2016 Round-Up: Mitigating Risk in the Face of Expanding Targets and Theories of Fiduciary Liability (PDF)
17 pages. "Employees, not employers, bear the risk of investment performance in defined contribution plans, and they also pay the cost of investment management and administrative fees for the plans. The enhanced role of 401(k) plans has thus put increased pressure on plan performance and, since 2006, has led to multiple waves of [ERISA] litigation challenging the fees and the selection of mutual fund and other investments offered in the plans. The latest wave of litigation began in late 2015 and continued throughout 2016 and also introduced the first large wave of cases challenging the fees and investment offerings in 403(b) plans." (Robert Rachal, Myron D. Rumeld, and Tulio Chirinos, via Benefits Law Journal)
Principal Life Must Defend Class Action Over 401(k) Funds
"In certifying a proposed class of about 41,000 investors, a federal judge ... [held] that the lawsuit involved common issues related to Principal's conduct and potential status as a fiduciary under [ERISA].... The lawsuit attacks Principal's guaranteed interest funds ... The investors say that Principal reaps unreasonable profits from these investments by paying investors too small a portion of the returns Principal receives from the underlying investments." [Rozo v. Principal Life Ins. Co., No. 14-0463 (S.D. Ia. May 12, 2017] (Bloomberg BNA)
How 401(k) Plan Design Can Increase Retirement Savings
"[1] More is not better. Have a limited number of high-quality investment choices.... [2] Have a good default investment for participants who don't choose their own.... [3] Monitor fees.... [4] Add managed accounts as a choice.... [5] Implement auto-enrollment and auto-escalation.... [6] Offer lifetime income options.... [7] Limit in-service withdrawals and loans.... [8] Seek professional advice." (PenChecks)
Listen to Your Participants: Don't White Label 401(k) Investment Funds
"The process of white labeling obscures the identity of the fund(s) being used.... [It] leads to participant confusion and lack of trust.... Hiding the identity of funds and fund companies would seem to be a stumbling block to achieving better participant understanding.... It hides complex investment strategies ... It obscures fund changes ... It's hard to obtain objective information ... It hides the impact of superstar managers[.]" (Lawton Retirement Plan Consultants)
Fidelity's Approach to DOL Fiduciary Rule Rankles Some Investment Advisers
"For some smaller DC plans with less than $50 million, Fidelity is amending client contracts through negative consent ... This is done via an addendum to existing service agreements authorizing Fidelity to provide ERISA fiduciary investment advice to participants once the DOL rule comes into force ... For larger plans, Fidelity is being more explicit in terms of plan sponsors' ability to opt out of participant-level fiduciary services by presenting employers with a communication that seeks their active confirmation[.]" (InvestmentNews)
Duke Is Second School to Lose Round in Retirement Plan Lawsuits
"The judge May 11 refused to dismiss allegations that Duke's retirement plan charged excessive record-keeping and investment fees and favored the investment products offered by the school's record keepers over lower-cost alternatives. Other claims were subject to dismissal for being filed too late or for being insufficiently supported by facts, the judge ruled." [Clark v. Duke Univ., No. 16-1044 (M.D.N.C. May 11, 2017] (Bloomberg BNA)
Defined Benefit Plan Considerations for M&As
"Transactions occur regularly and come in a multitude of structures and players.... Properly and quickly assessing the deal landscape under a current lens, as well as a forward-looking post-deal lens, can be crucial for the deal to be successful for all involved.... [A chart describes] a few elements to consider from the buyer's perspective and some examples of the impact they can have on the deal[.]" (Milliman Retirement Town Hall)
[Discussion] Can Owner-Trustee Cause Plan to Purchase Stock from His Brother?
"John Doe and his spouse own 100% of Corporation A. No employees. The corporation sponsors Plan A. John and his spouse own 40% of Corporation B. There is no other attributed ownership in corporation B, which sponsors Plan B. There is no CG/ASG. John's brother owns most of the other (60%) stock in Corporation B. Can Plan A purchase some of the Corporation B stock currently owned by John's brother, without causing a prohibited transaction?" (BenefitsLink Message Boards)
Breach of Fiduciary Duty Case Against University Retirement Plan Fiduciaries Survives Motion to Dismiss
"[T]he court ruled that, for most of the claims asserted, the plaintiffs had properly stated a claim that survives the defendants' motion to dismiss.... [However,] the court granted the defendant fiduciaries' motion to dismiss the claim that it was imprudent for the plan to offer 111 investment options. The court ... explained that having too many investment options does not hurt participants, but rather provides them with additional opportunities to choose investments they prefer." [Henderson v. Emory Univ., No. 16-2920 (N.D. Ga. May 10, 2017)] (Ballard Spahr LLP)
Lawyer's Role in Challenged ESOP Transaction May Have Caused Him to be an ERISA Fiduciary
"Evolve Bank & Trust was hired as an independent transaction trustee when the Plan purchased stock from Vinoskey at an allegedly significantly inflated price.... [It] appears that [attorney Michael New] was not acting in his capacity as an attorney or as counsel for Evolve or Sentry, but rather only as an employee employed as a fiduciary. Therefore, it is likely that New's status as attorney was not the critical factor; had a non-attorney filled New's role for Evolve and taken the same action, the court likely would have still found him to be a fiduciary." [Hugler v. Vinoskey, No. 16-0062 (W.D. Va. May 2, 2017] (Robinson & Cole LLP)
Your Retirement Plan: Set It, But Don't Forget It
"When it comes to planning for retirement, there are three commonly automated arrangements that warrant a one-off, stop-and-think review from time to time: beneficiary designations, plan participation and investment allocation." (Certified Financial Planner [CFP] Board of Standards, Inc.)
TIAA to Pay $5 Million in 401(k) Excessive-Fee Lawsuit
"As part of the settlement [with the class of employees and former employees who have participated in the TIAA retirement plan or the TIAA 401(k) plan], TIAA also agreed to make design changes in the plans, including adding non-proprietary and cheaper investment options. The plans should save more than $2 million a year in fees with the adjustments[.]" [Richards-Donald v. Teachers Ins. & Annuity Ass'n of Am. (TIAA), No. 15-8040 (S.D.N.Y., settlement agreement filed May 10, 2017)] (Pensions & Investments)
All Eyes on Acosta as DOL Rule Clock Winds Down
"The main thrust of the rule -- that anyone working with retirement dollars adhere to a fiduciary standard -- is scheduled to take effect June 9. Industry representatives are furiously lobbying the DOL for another delay. Opponents are pinning their hopes for an 11th hour reprieve from new Labor Secretary Alexander Acosta ... While he hasn't spoken publicly on the fiduciary rule, Acosta wants to freeze the rule permanently, according to an email a Senate aide sent to rule opponents[.]" (InsuranceNewsNet.com)
Emory Is First College to Lose in Retirement Plan Lawsuits
"The May 10 decision refusing to dismiss most claims against Emory is the first substantive ruling in the series of proposed class actions filed in August 2016 against the retirement plans of 12 prominent American universities ... Each school is accused of including too many investment options in its retirement plan -- Emory is said to have 111 -- and charging participants excessive fees for record keeping and administrative services, often because of the school's decision to use multiple record keepers." [Henderson v. Emory Univ., No. 16-2920 (N.D. Ga. May 10, 2017)] (Bloomberg BNA)
Three Questions for Assessing a Target Date Fund's Fixed Income Allocation (PDF)
"[W]hen selecting the best TDF for their participants, plan sponsors may want to focus on the contribution of the fixed income component -- to ensure that it is structured and managed to deliver the strong risk-adjusted returns participants will need for a secure retirement. Is it appropriately diversified? Does the manager have sufficient flexibility to effectively allocate within and across fixed income sectors? And does the approach represent a reasonable compromise between cost and participants' retirement outcomes?" (J.P. Morgan Asset Management)
Managed Accounts: Today's Service May Not Be Tomorrow's Solution
"[W]hile managed accounts had been moving in the right direction, more progress [is] needed ... for managed accounts to make the leap from opt-in services (their most prominent role in DC structures today) to qualified default investment alternatives (QDIAs), a space now dominated by target date funds.... [This paper] examine[s] the managed account value proposition, concerns with the current model, disruptive forces in the industry and the potential for managed accounts to become attractive QDIAs." (Willis Towers Watson)
Fourth Circuit Agrees: Fiduciaries' Faulty Process for Eliminating Stock Funds Did Not Cause Plan's Losses
"This case demonstrates that the 'would have' standard for showing that a plan fiduciary's breach did not cause a loss is difficult, but not impossible, to satisfy.... Process is also crucial when adopting plan amendments, a point highlighted by the dissent, which ... faults the trial court for its handling of the fiduciaries' failure to properly adopt an amendment to eliminate the stock funds. The court majority overlooks that obstacle ... but there seems little doubt that proper adoption of the amendment requiring divestment would have helped the fiduciaries' case." [Tatum v. RJR Pension Inv. Comm., No. 16-1293 (4th Cir. Apr. 28, 2017)] (Thomson Reuters / EBIA)
Preparing DC Investment Menus for the Next Evolution
20 pages. "[T]he next evolution of investment menus needs to be driven through four steps: [1] Consider supplementing low cost, broad index positions with additional sources of diversification and return with white label, factor and rules-based smart beta strategies; [2] Expand the fixed income opportunity set to target the potential for stronger returns and income; [3] Reexamine the target date fund as part of the full menu review; [4] Unlock and realign legacy default assets through reenrollment." (BlackRock, via Pensions & Investments)
Global Investor Study 2016: Plan Sponsors
"The average period for which pension fund investors expect to hold their investments is 4.7 years. This is much closer to the widely championed five-year period than private investors, for whom the average expectation is 3.2 years. This longer time horizon means considerations such as liquidity and immediate income -- which are often high priorities for consumers -- are relatively lowly valued by pension fund investors as reasons to choose an investment.... There is an increasing focus on investment outcomes over and above benchmarked returns." (Schroders, via Pensions & Investments)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 46
"How does an adviser know how to satisfy the Best Interest standard? ... [B]roker-dealers and others should look to training and education materials based on ERISA's provisions, DOL regulations and guidance, and ERISA litigation. Those materials should cover the broad concepts and principles, but should also provide detailed education about the information to be reviewed and the processes to be followed, on a step-by-step basis." (FredReish.com)
Factoring Investment Costs Into the Prudence/Suitability Equation
"Investors cannot control the performance of the markets. Investment fiduciaries are not held liable for the eventual performance of the markets. However, investors and investment fiduciaries can control certain elements of investing that play a significant role in determining an investor's and/or pension plan participant's success." (The Prudent Investment Adviser Rules)
The Evolution of Managed Accounts
"As managed account assets climb, these solutions are seeing major shifts in product development, and they can be especially efficient for certain participant demographics." (PLANSPONSOR)
DOL's Fiduciary Rule Countdown
"Advisers and financial institutions need to answer any lingering questions about whether their services include providing investment 'recommendations' for direct or indirect compensation.... Advisers and financial institutions who will be providing services as fiduciaries must implement programs to ensure that they: Offer advice that is in the investor's best interest (i.e., prudent based on the investment objectives, risk tolerance, financial circumstances, and needs of the investor); Charge no more than reasonable compensation; and Make no misleading statements." (Spencer Fane)
The Basics of Target Date Funds
"Target-date funds can help retirement investors solve a few problems. With so many options on a retirement savings plan menu, it is hard to know what to choose. But selecting good investments is only one part: Investors must also pay attention to overall portfolio diversification and not take on too much risk by being concentrated too heavily in any one area.... That's where target-date funds come in." (Morningstar)
The June 9 Fiduciary Deadline and Key Issues for Broker-Dealers
"[B]roker-dealers need to develop internal policies, procedures, training and supervision as quickly as possible in order to be in compliance by June 9. The areas of focus should be: [1] Fiduciary education for home office management, supervisory, and sales and marketing personnel.... [2] Fiduciary training for advisors.... [3] Reasonable compensation for broker-dealers and for advisors.... [4] Selection of investments." (Fred Reish, for fi360)
Fourth Circuit's 'Would Have' Standard Exonerates Fiduciaries' Decision to Divest Company Stock After Corporate Spin-Off
"Elaborating somewhat on how the 'would have' standard should be applied, the Fourth Circuit stated that the fiduciaries' burden was to show 'by a preponderance of the evidence that a prudent fiduciary would have acted' as they did.... Plan fiduciaries hoping that the Fourth Circuit would further define how to gauge whether a prudent fiduciary 'would have' taken a particular action or the relationship between establishing a breach and loss causation will be left unsatisfied." [Tatum v. RJR Pension Inv. Comm., No. 16-1293 (4th Cir. Apr. 28, 2017)] (Miller & Chevalier)
401(k) Fiduciaries: Is it Time to Hone Your Processes? (Part Two)
"Advisors can help [plan fiduciaries] [1] Establish and run processes that demonstrate they have leveraged the lowest cost fees based on their plan size and servicing needs.... [2] Be market aware and have a basic understanding of industry fees and practices. [3] Articulate why one investment was chosen over the other. [4] Dig down deeper in understanding whether actual fund plan investments align with investment objectives." (Fiduciary Plan Governance, LLC)
How Will Larger Retiree Populations Affect Investment Returns?
"Economic theory suggests that retirees draw down their assets, so a higher retiree-worker ratio reduces the supply of saving, thereby increasing investment returns. However, research generally shows that retirees draw down their wealth much more slowly than expected, particularly the wealthy who hold most of the assets. Therefore, retirees still hold substantial assets, leading to a greater supply of savings and a decrease in investment returns. To the extent that investment returns decrease, workers will need to save more to maintain their standard of living in retirement." (Center for Retirement Research at Boston College)
NAFA Launches Campaign to Stop DOL Fiduciary Rule
"The National Association for Fixed Annuities has launched a grassroots campaign to appeal directly to the Trump administration as well as to Labor Secretary R. Alexander Acosta to stop the [DOL's] fiduciary rule from taking effect on June 9." (ThinkAdvisor)
Outsourced Chief Investment Officers: Challenging Five Common Myths
"For plans that do not have in-house investment capabilities, the outsourced chief investment officer (OCIO) model is a means of filling the gap between the resources required to run efficient investment strategies and the typically constrained governance budget of a pension plan. The OCIO (also known as a fiduciary manager) implements an investment strategy within boundaries set by the investment committee, allowing high-level decision makers more time to focus on key strategic issues and long-term plan goals. The concept is fairly simple, but the implementation can be less easy to visualize." (Willis Towers Watson)
Equities Drive First-Quarter Gains for Plan Sponsors
"Institutional plan sponsors netted investment gains of 4.2 percent at the median in the first quarter of 2017... While Corporate ERISA plans had the largest allocation to fixed income, they also had the largest allocation to high yield, emerging market debt and longer duration investment grade bonds, all of which returned noticeably more than traditional core bonds." (Northern Trust)
Annuity and Life Insurance Product Update, Q1 2017
"This slide deck examines new product releases from annuity carriers and life insurers ... [It provides] a rundown of the new products introduced on the firms' websites in the first quarter of 2017 and highlight[s] their key features." (Corporate Insight)
[Opinion] Is the Thrift Savings Plan Shortchanging U.S. Government Workers?
"While literally hundreds of factors have been discovered, only a handful have both withstood academic scrutiny and are 'investable' at a fairly low cost.... Yet, the Thrift Savings Plan has no funds that take advantage of these factors and this academic research. The result? Underperformance of a portfolio that uses only the TSP funds, relative to what could be achieved, is likely to occur by 1% to 2% a year (or greater) over most 10-20 year periods of time." (Ron A. Rhoades, JD, CFP)
Millennials Most Likely to React to Market Volatility and Least Likely to Rely on Professional Financial Advice
"[D]espite the recent ups and downs of the market, fully 60 percent of adult Americans say they are standing pat on their retirement savings strategy ... Yet only 23 percent of Millennials are maintaining their current strategy compared to 59 percent for those ages 34-49, 74 percent for ages 50-64 and 82 percent for ages 65 and older." (MassMutual)
CHOICE Act Targets Fiduciary Rule, Dodd-Frank Rollback
"Passage of the CHOICE Act by the House Financial Services Committee could signal a further blow to conflict of interest regulations adopted by the Obama administration.... The legislation is sweeping and would undo or replace much of the Dodd-Frank Wall Street reforms adopted by Democrats when they held significant majorities in the wake of the 2008-09 financial crisis." (planadviser)
The Tiered Investment Menu: A Behavior-Based Approach to Menu Design (PDF)
"Prior to [the DOL's 403(b)] regulations, multi-vendor arrangements with expansive fund menus were common.... [F]urther redesign of the investment menu ... is being done through investment menu segmentation into behavior-based levels or tiers. Many plan sponsors and financial educators are finding this new tiered menu approach easier to communicate and simpler for employees to understand how to select investment options that may be most suitable for them." (Fiduciary Investment Advisors)
House Financial Services Committee Approves Bill to Replace Dodd-Frank, Repeal DOL Fiduciary Rule
"The Financial CHOICE Act ... makes substantial changes at many financial regulators, including the [SEC] ... The bill would also repeal the [DOL's] new fiduciary rule until 60 days after the SEC issues its own standard, which is not underway ... The DOL fiduciary rule would have to be 'substantially similar' to the SEC's rule." (Pensions & Investments)
Fiduciaries -- Look to the Law of Trusts as Your Guide
"The legislative history of ERISA explains that the law governing qualified retirement plans is tied closely to trust investment law.... Because the trust law standard underlies ERISA, the assets held in the account of participants in, say, a 401(k) plan aren't the participants' in a legal sense; rather, they actually belong to the trust. The assets are held in trust and managed by the plan trustee (whose conduct is governed by the laws of ERISA fiduciary responsibility) on behalf of the participants (and their beneficiaries) who are beneficiaries of the trust." (Morningstar Advisor)
Fiduciary Rule Delay Provides Excellent Opportunity to Negotiate Stronger Indemnities
"This delay, and the confusion swirling around if and when the DOL fiduciary rule will become applicable, is giving plan sponsors a window of time to renegotiate their contractual arrangements with their 401(k) service providers relating to investment advice. This renegotiation should include a review, and a strengthening, of the service provider's indemnification for its fiduciary investment advice." (Orrick)
Are Your Target Date Funds Making You a Target?
"[A]ll too many TDFs are selected by fiduciaries simply because it is convenient, or there is some incentive, to offer their provider's funds. This makes them an easy target for class action lawyers.... These funds may be a ticking time bomb for plan fiduciaries who haven't prudently investigated and compared their plan's TDFs to other options available in the market. There are lots of differences between TDFs.... Here is a short checklist for company fiduciaries[.]" (Cohen & Buckmann, P.C.)
Starwood Hotels Can't Escape ERISA Lawsuit Over 401(k) Fees
"The participants have sufficiently alleged that Starwood used a flawed process for selecting record-keeping and administrative services for its employees' retirement plan ... The hotel chain, however, successfully argued that the participants were time-barred from pursuing their claim that the hotel breached its duties by failing to exclude from the plan a BlackRock Inc. mutual fund that carried [allegedly] excessive fees." [Creamer v. Starwood Hotels & Resorts Worldwide, Inc., No. 16-9321 (C.D. Cal. May 1, 2017)] (Bloomberg BNA)

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