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Pensions Leaving Workers Behind by Focusing on Messaging, Politics

"[The Council for Institutional Investors (CII)] describes itself as a 'leading voice for effective corporate governance practices for U.S. companies and strong shareowner rights and protections.' But what started off as promoting good governance has transformed into politically motivated environment and social governance, often referred to as ESG. Fiduciary responsibility has taken a back seat.... CII members are staring at an unfunded liability of nearly $4 trillion ... So why do they insist on devoting so much of their time and resources on initiatives that will do nothing to help close that gap?"

American Benefits Council Comment Letter to CMS on Advance Notice of Methodological Changes for Calendar Year 2014 for Medicare Advantage Capitation Rates (PDF)

2 pages "Our comments relate solely to the proposal that Part D sponsors should require their network retail and mail pharmacies to obtain patient consent to deliver new or refill prescriptions prior to each delivery.... An alternative approach that strengthens protections for both Medicare beneficiaries and the Part D program would be to develop balanced, workable guidelines that require affirmative written or electronic consent when patients opt in to an automatic refill program and the opportunity for beneficiaries to opt out of an automatic refill program entirely or for any particular medication."

Testimony on Behalf of American Benefits Council to Senate Subcommittee Hearing on Retirement Plan Options for Small Businesses (PDF)

"For workers without access to a workplace retirement plan, 57.8% work for companies with fewer than 100 employees.... [We] must expand access by encouraging more small businesses to establish workplace retirement plans and multiple employer plans (MEPs) should serve a key role.... [E]ffective incentives are needed to encourage small plan formation with particular emphasis on encouraging adoption of progressive automatic feature designs."

A Practitioner's Guide to the Five Essential Marks of Effective Capital Allocation (PDF)

10 pages. "How will tomorrow's investment professional meet the demands of their clients under these conditions? ... [F]iduciaries will need to work smarter and more creatively to deliver investor outcomes.... [T]he Portfolio for the Future™ will exhibit five distinct marks ... [1] Broadly diversified ... [2] Less liquid ... [3] Rooted in a fiduciary mindset ... [4] Actively engaged ... [5] Dependent on operational alpha."

FINRA's 1942 Failure: Effects on Trust, Capital Formation and the U.S. Economy

"In the year following the commencement of World War II, when all Americans had their attention diverted to the enormous threats from abroad, FINRA (formerly known as the National Association of Securities Dealers, or NASD) adopted rules of conduct for its [members]. Strangely missing from such rules was a fiduciary standard of conduct for brokers (i.e., registered representatives of broker-dealer firms) when providing personalized investment advice. Over seven decades have passed, and FINRA has yet to rectify its error."

Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation

"Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere.... [O]penness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points."

Text of Speech by SEC Commissioner to National Association of Public Pension Attorneys: 'Pension Funds as Owners and Investors: A Voice for Working Families'

"State and local government employee retirement funds had total financial assets of $2.8 trillion at the end of 2011. This immense pool of capital is funded by employee contributions, employer contributions, and investment earnings. A majority of such funds is invested in the stocks and bonds of U.S. corporate issuers, with substantial investments also made in venture capital and private equity funds and other asset classes. These investments make public pension funds a significant source of capital for American business. Importantly, another benefit of pension fund capital is that pension funds typically invest with a long-term perspective. This 'patient capital' is essential for true capital formation and an important contribution to stability in a capital markets environment that is often all too focused on quarterly returns."

Do Mandated Reporting Formats Unintentionally Raise Fiduciary Liability and Mislead Investors? Part 2

"On the face of it, the [standard 1, 5, and 10-year reporting format] appears to reflect a diverse data set (by using reporting periods with different durations). In reality, though, it produces a phenomenon known as the 'Snapshot-in-Time Anomaly.' ... A graph of rolling 5-year annualized performance returns offers a significant advantage for long-term investors, especially those who contribute regularly to their portfolios ... A fiduciary who only looks at the most recent reporting period stands to make an unfortunate -- and potentially damaging -- investment decision."

American Benefits Council Comment Letter to SEC on Proposed Regulation of Money Market Funds (PDF)

4 pages. "In 2010, the Commission enhanced the rules for money market funds to improve their liquidity and transparency. These reforms have generally been viewed as helpful and positive steps. We understand that the Commission is considering further, more significant, changes ... For example, concerns have been raised that the Commission may require either that a money market fund's NAV 'float' on a daily basis or that the fund would be required to hold back some percentage of an investor's shares as a 'liquidity fee' for 30 days when an investor redeems their shares. We believe these changes will alter the fundamental characteristics of money market funds, namely their stable pricing and full liquidity."

Do Mandated Reporting Formats Unintentionally Raise Fiduciary Liability and Mislead Investors? Part 1

"More than a decade ago, the SEC began requiring every mutual fund to prominently disclose investment returns using (then) AIMR (now CFA Institute)-endorsed formats. Fiduciaries -- and the investing public -- regularly use this information by obtaining it directly from a fund's prospectus or indirectly through various mutual fund rating organizations. However, a simple exercise, using easy-to-understand mathematics, reveals a potentially fatal flaw in these reporting standards. How do you, as a fiduciary, know when you've fallen victim to this defect? Better still, what represents a better way you can perform investment due diligence to avoid this terrible trap?"

Paid Sick Time Law Developments: State of California; Emeryville, California; Eugene, Oregon; and Bloomfield, New Jersey

"The wave of new sick leave legislation continues across the country. At the same time, state and local governments continue to refine existing laws to address new laws passed, as well as the complexities that surround providing for and administering paid sick leave benefits."

Daily Momentum and Contrarian Behavior of Index Fund Investors

"We use a two-year panel of individual accounts in an S&P 500 index mutual fund to examine the trading and investment behavior of more than 91 thousand investors who have chosen a low-cost, passively managed vehicle for savings.... We find that more frequent traders are typically contrarians, while infrequent traders are more typically momentum investors.... We find that the behavior of momentum investors is typically more correlated to changes in the S&P 500 and we trace its dynamics over time."

Text of Letter from American Benefits Council to Congressional Leadership/Committees Urging Action on DB Plan Funding Stabilization and Opposing PBGC Premium Increases (PDF)

3 pages. "As a result of the uncertainty of pension funding obligations, generally, and the prospect of inflated contributions, specifically, many critical business decisions are on hold. Hiring is delayed, layoffs are being announced, capital investments and other transactions vital to economic recovery are stymied. In the charitable sector, funds are being re-directed from meeting organizations' core philanthropic missions. In all these instances, well-intentioned policy that is deliberately keeping interest rates at historic low levels to assist economic recovery is, in part, hindering that very recovery by imposing costs that simply are not needed to ensure income security for current or future retirees, nor financial protection for the [PBGC]."

Commission on the Regulation of U.S. Capital Markets in the 21st Century: Report and Recommendations (PDF)

Excerpt: One year ago, the Commission set out to seriously reconsider some of the systems and institutions built over the past 70 years to protect investors and foster capital formation. The Commission started with the premise that its recommendations needed to strike the right balance between two statutory mandates: protecting investors and promoting capital formation.

Mark Iwry Is Dedicated to Helping All Americans Achieve Financial, Retirement, and Health Care Security

"A uniquely powerful Washington wonk. A hero of our retirement system. A pension rock star. One of the world's 30 top financial players. A legend. An inspiration. Mark Iwry has received plaudits like these from a variety of publications and people, along with awards for leadership, achievement, and innovation from organizations that typically don't agree on much: workers' rights groups, the payroll industry, the financial services industry, the IRS, the small business community, investment advisors, pension professionals, and others. To his acclamations, Harvard Kennedy School is adding its Alumni Public Service Award for Iwry's work to strengthen the economic security of working families."

Target Date Funds May Miss the Mark for Investors

"The most fundamental active decision, common to all target-date funds, is setting the 'glide path.' This refers to the degree and rate that the fund changes from aggressive to conservative as the target year approaches. It is usually depicted as a downward-sloping graph line measuring a diminishing allocation to stocks over time. Determining where to start and stop the stock allocation is the essence of active management.... [T]he choices are varied to say the least."

American Benefits Council Comments on Self-Insured Plan Reporting to State All Payer Claims Databases (APCDs) (PDF)

"[R]equiring employers to master the laws of 50 states and to submit different data sets, at different times, in different formats, for different populations would impose substantial burdens on self-insured plans. These significant costs would ultimately be borne in whole or in part by plan participants ... [We] ask that the Committee report and the subsequent DOL guidance to the states, state clearly and unequivocally that states cannot require self-insured plans to report to state APCDs."

Text of Amicus Brief of American Benefits Council and U.S. Chamber of Commerce to Fourth Circuit in Tatum v. RJR Pension Investment Committee (PDF)

30 pages. "In this case, Appellant and his amici propose a radical interpretation of the 'prudent man' rule under ERISA that cannot be derived from ERISA and, if ad opted, would threaten the creation and maintenance of employee benefit plans. In particular, their proposed new interpretation would create an unworkable standard for fiduciary responsibility, thus creating uncertainty for fiduciaries, inviting litigation even where the decisions of the fiduciaries have clearly been prudent, unnecessarily putting fiduciaries at risk of personal liability, raising the cost of administering employee benefit plans (including the insurance or indemnification needed to enable fiduciaries to serve), and thus discouraging the formation and continued maintenance of employee benefit plans." [Tatum v. RJR Pension Investment Committee et al., No. 13-1360, (4th Cir., filed Aug. 2, 2013]

American Benefits Council Comment Letter to Senators on W-2 Reporting of Employer-Provided Health Care Costs Proposal (PDF)

5 pages. "We believe that allowing employers to continue to choose the method of communication that works best for their workforce will ensure that employees receive health care cost information when it is most helpful to them and in a format that they are most likely to read and use."

American Benefits Council Says Pension Bill Deters Plan Sponsorship and Puts Plans Into Domestic Affairs (PDF)

Excerpt: S. 2707 would fundamentally change the way defined contribution plans (such as 401(k) plans) operate. It would impose on these plans the complicated spousal consent regime ... S. 2707 would upset the carefully developed QDRO regime by requiring employers to obey court orders that are (1) issued subsequent to divorce proceedings, (2) may not originate from the same court that considered the divorce and the original QDRO, and (3) do not follow the QDRO format.