Retirement Plan Investments

The World's 300 Largest Pension Funds at Year End 2009 (PDF)
42 pages. (Towers Watson)

In Effort to Minimize Risk, Target-Date Funds Are Getting More Aggressive
Excerpt:"Be warned, retirement savers: Your target-date mutual fund might be acting more like a hedge fund."(The Wall Street Journal)

[Opinion] Advisor Groups Spar Over Fiduciary Solution
Excerpt:"Two advisor trade groups - the Securities Industry and Financial Markets Association and Financial Planning Coalition, which consists of the Certified Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors - finally sent in their comment letters to the Securities and Exchange Commission regarding Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or what the commission should do about enforcing a blanket fiduciary standard for all financial advisors."(Financial Planning)

General Growth Properties Reaches $5.75 Million Settlement Over 401(k) Plan Losses
Excerpt:"The agreement, which requires court approval, is in the'best interests'of General Growth and its creditors because the Chicago company will get a release of all claims in the lawsuit without having to pay for the settlement, it said."(Bloomberg L.P.)

Cash Balance Plans Have Risk Mitigation Challenges
Excerpt:"Plan sponsors who move to a cash balance plan from a traditional defined benefit (DB) program may not always realize they are trading interest rate risk for investment risk."(PLANSPONSOR.com)

The Fiduciary Reference: Selected Articles on Fiduciary Duties Applicable to Personalized Investment Advice (PDF)
30 pages. [The target page is a compilation of academic white papers] to aid the SEC as it studies whether to extend the fiduciary standard to brokers who provide advice to investors. (The Committee for the Fiduciary Standard)

[Guidance Overview] SEC's New Rules to Facilitate Rights of Shareholders to Nominate Directors
Excerpt:"Some companies may challenge the SEC regarding these rules. Other companies may want to follow these challenges as they proceed through the legal process to determine if they should consider making amendments to their bylaws or formation documents regarding director nominations by shareholders and shareholder proxy access."(Haynes and Boone, LLP)

State Pension Fund Faces Shortfall, Candidate for State Comptroller Says
Excerpt:"When the state takes its snapshot of the fund, he says, it makes several mistakes, including two big ones. First, it counts money that is not in the fund -- hoped-for investment gains that may or may not appear and future contributions from workers and taxpayers. Second, it does not take into account that the state pensions are worth more than other such promised money because they come with a constitutional guarantee."(The New York Times; free registration required)

Industry Groups Weigh In ? Heavily ? on Fiduciary Provision
Excerpt:"Monday marked the last day the public could offer comments on whether the SEC should adopt a universal fiduciary standard for both investment advisers and broker-dealers -- a highly controversial proposition for those in the financial advice business."(Investment News; free registration required)

What Matters Most? An Analysis of Investment Committee Hire/Fire Decisions
Excerpt:"Hiring investment managers is harder than firing them, according to Vanguard's second annual survey of investment committee members. At the same time, committees that find manager evaluation more difficult also have a significantly lower rate of manager turnover which, in turn, can reduce investment management costs."(The Vanguard Group, Inc.)

[Opinion] Cash Balance Plans Can Hold Hidden Risks for Plan Sponsors
Excerpt:"Plan sponsors who move to a cash balance plan from a traditional defined benefit (DB) plan may not always realize they are trading interest rate risk for investment risk, Vanguard's chief actuary maintains."(The Vanguard Group, Inc.)

A Blueprint for Monitoring and Managing Your Plan Investments
Excerpt:"The plan sponsor drafts the investment policy usually with the help of an attorney, a consultant, or a plan provider. There are no specific guidelines in place for what is required to be included in the policy. The recommended approach is to provide an investment strategy and practice understandable to a third party that is flexible enough that it can be implemented in a complex financial environment but not so detailed that it requires constant revisions and updates."(National Association of Government Defined Contribution Administrators)

[Guidance Overview] New SEC Rules Mandating Shareholder Access to Proxy Statements (PDF)
10 pages. (Alston&Bird LLP)

Pension Fund Investments Are Up, But Gaps Persist
Excerpt:"A review by Stateline of 20 public employee pension plans in 19 states shows preliminary returns ranging from 10.8 percent for the Nevada Public Employee Retirement System to 18.7 percent for the South Dakota Retirement System. Meanwhile, Wilshire Associates, a California-based investment adviser, reports a 13.09 percent median return among public plans with more than $1 billion in assets for fiscal 2010, compared to an 18.76 percent loss in fiscal 2009."(The Pew Charitable Trusts)

Judge Rules Lawsuit by Ohio Pension Systems Against Bank of America and Merrill Lynch Can Continue
Excerpt:"A federal judge yesterday allowed Ohio pension systems to proceed with their legal claims [alleging] that Bank of America paid billions of dollars in bonuses to executives of a firm it was absorbing without informing shareholders . . . ."(Columbus Dispatch)

[Guidance Overview] Landowner Had No Common Control Responsibility for Unpaid Withdrawal Liability
Excerpt:"A pension fund failed to show that a real estate partnership was a member of a controlled group responsible under ERISA for the withdrawal liability of a bankrupt slaughterhouse, the [Fourth Circuit] U.S. Court of Appeals . . . has ruled . . ."(Wolters Kluwer Law&Business)

[Opinion] Comments by SPARK Institute About Interim DOL Regs on Disclosure to Fiduciaries of Fees by Service-Providers (PDF)
13 pages. Excerpt:"[The interim regulation] appears to shift Investment Fund Information disclosure responsibility from investment fiduciary service providers with respect to investments they issue and manage to an unaffiliated, non-fiduciary record keeper. [Further,] we are concerned that record keepers will be obligated to provide record keeping services and, in turn, provide Investment Fund Information for investment options demanded by plan sponsors that do not have materials that are regulated by a State or federal agency."(The SPARK Institute, Inc.)

SEC's Target Date Fund Proposal Garners Little Response
Excerpt:"The low number of responses is interesting given the fact that target date funds'prominence in retirement portfolios continues to grow. Today, according to the SEC, assets of target date funds registered with the SEC total approximately $270 billion."(Investment Advisor)

[Guidance Overview] Impact on Registered Investment Advisers of DOL's 408(b)(2) Regulation (PDF)
5 pages. Excerpt:"This article focuses on the impact of the regulation on independent (not affiliated with a broker-dealer, mutual fund management complex or recordkeeper) registered investment advisers that provide nondiscretionary advisory services (as opposed to discretionary investment management services) to plan fiduciaries."(Reish&Reicher)

SEC Adopts Changes to Proxy Access Regs
Excerpt:"The new rules require companies to include the nominees of significant, long-term shareholders in their proxy materials, alongside the nominees of management, a change the SEC says is designed to facilitate the ability of shareholders to exercise their traditional rights under state laws to nominate and elect members to company boards of directors."(PLANSPONSOR.com)

Activist Pension Funds Drawing Up List of Corporate Boards
Excerpt:"The Securities and Exchange Commission will meet at 10:00 a.m. eastern time on Wednesday to decide whether to adopt a rule that would give shareholders an easier way to nominate corporate board directors."(The New York Times; free registration required)

Another Illinois Pension Plan Sells Investments to Cover Benefits
Excerpt:"Illinois Teachers'Retirement System . . . plans to sell $3 billion in investments, or about 10% of its $33.1 billion in assets, in the current fiscal year to pay pension benefits . . . . The system is the fifth Illinois statewide defined benefit plan to sell off investments this fiscal year to pay benefits."(Pensions&Investments; registration may be required)

Pension Fund Corporate Engagement: The Fifth Stage of Capitalism
Excerpt:"Pension fund capitalism is a new, albeit evolving, stage of Anglo-American capital market development. It is marked by the ability of pension funds to aggregate the widely disbursed ownership of beneficiaries and therefore act as single entities with a unified voice."(Social Science Research Network)

[Opinion] Common Trigger for 401(k) Plan Litigation Is Presence of Company Stock in Plan
Excerpt:"Indeed, one has only to look at the two-month period following the struggle to ?contain the current oil spill in the Gulf of Mexico and the number of litigants and potential litigants circling the BP 401(k) plans to appreciate just how much more aggressive the plaintiffs'bar has become in pursuing such actions"(PLANSPONSOR.com)

Employee Benefits Update, August 2010 (PDF)
The eight-page newsletter presents select compliance deadlines and reminders; retirement plan developments; health and welfare plan developments, and, general developments. (Reinhart Boerner Van Deuren s.c.)

Performance that Plan Sponsors Value Most
Excerpt:"Advisors would like to think that investment performance sells plans. This is not the case. While 77% of respondents were dissatisfied with returns from the investment options in their plans ? who wouldn't be, in this market? ? only 48% considered underperformance to be a'major concern.'Compare this to the 74% who were very worried about meeting their fiduciary obligations and the 87% who were struggling to keep up with ever-changing Department of Labor regulations."(Advisor Perspectives, Inc.)

[Guidance Overview] Court Dismisses Plan Sponsor Claims against State Street over Mortgage-Backed Investments
Excerpt:"[The court] ruled that State Street could be considered a fiduciary under [ERISA] because it provided investment advice to F.W. Webb Company for a fee, but State Street did not breach its fiduciary duties because at the time the Yield Plus Fund changed investment strategies its duties to the company's retirement plan had passed to CitiStreet."(PLANSPONSOR.com)

BB&T Offers FDIC-Insured Deposit Program for 401(k) Plans
Excerpt:"A press release said the offering is part of BB&T's effort to expand investment offerings to retirement plan sponsors, improve the selection of 401(k) investments for plan participants, and provide an attractive alternative to money market funds for participants whose retirement accounts are heavily weighted in cash."(PLANSPONSOR.com)

[Opinion] Comments and Recommendations on SEC Initiatives Required under Dodd-Frank Act of 2010 (PDF)
9 pages. (Frederic W. Cook&Co., Inc.)

Many Companies Not Using Liability-Driven Investment Strategies in Hopes of Taking Advantage of Current Market Conditions
Excerpt:"[Experts say they have seen companies becoming more reluctant to press forward with LDI strategies, for a variety of reasons. For one, the equity markets'relatively strong performance has created a siren call for plan sponsors that previously saw big losses."(CFO.com)

[Opinion] Investors Misled by Brokers Masquerading as Fiduciaries
Excerpt:"[B]rokers often subscribe to a more lax'suitability'standard--meaning they are free to promote products that benefit the broker, and brokerage, more than the client, as long as those products are not blatantly unsuitable."(Forbes.com)

The Proposed International Accounting Standard for Pension Plans (PDF)
4 pages. Excerpt:"If adopted as proposed, the new accounting rule would eliminate a significant incentive for defined benefit pension plan sponsors to hold stocks in the plan trust."(Towers Watson)

Target Date Funds Add Alternatives to Combat Inflation
Excerpt:"T. Rowe Price Group Inc., The Principal Financial Group and OppenheimerFunds Inc. all added new alternative strategies -- including investing in REITs and commodities -- to their target date lineups during the second quarter, according to new research from Morningstar Inc."(Investment News; free registration required)

[Guidance Overview] Most Plan Loans Now Exempt from Truth-in-Lending Act Disclosures
Excerpt:"On July 1, 2010, revised regulations issued by the Board of Governors of the Federal Reserve System became effective to exempt most plan loans from the Truth in Lending Act's (TILA) disclosure requirements."(Deloitte)

Proskauer Rose's ERISA Litigation Newsletter, August 2010
Excerpt:"[The Edison case, being the first'excessive fees'case to go to judgment following a trial,] illustrates that it may be worthwhile for plan sponsors to consider structuring their plans so that the plan's administrative costs are borne by the plan, not the plan sponsor. Such a structure can lessen or eliminate claims of conflicts when revenue sharing is used to effectively lower a plan's administrative expenses."(Proskauer Rose)

[Guidance Overview] SEC Proposes Reform of Mutual Fund Distribution Framework
Excerpt:"Under the proposals, any distribution related fee in excess of the marketing and service fee would be considered an asset-based sales charge and would be limited so that, over time, an investor would pay no more in asset-based sales charges than he/she would have paid if he/she had purchased a class of shares with a front-end sales load."(Paul Hastings)

Disclosing Retirement Plan Investment Fees
Excerpt:"HR leaders and plan fiduciaries should begin planning now for regulations that take effect next summer, which require more transparency from service providers of defined-contribution and defined-benefit plans. The unbundling of complex service fees may make it easier for HR leaders to determine whether the costs are reasonable."(Human Resource Executive Online)

Assessing Asset Allocation
Excerpt:"This review article describes recent literature on asset allocation, covering both static and dynamic models. The article focuses on the bond/stock decision and on the implications of return predictability."(National Bureau of Economic Research)

Extending Life Cycle Models of Optimal Portfolio Choice: Integrating Flexible Work, Endogenous Retirement, and Investment Decisions with Lifetime Payouts
Excerpt:"This paper derives optimal life cycle portfolio asset allocations as well as annuity purchases trajectories for a consumer who can select her hours of work and also her retirement age. . . . [I]ntroducing annuities leads to earlier retirement and higher participation by the elderly in financial markets."(University of Michigan Retirement Research Center)

SPARK Institute Seeks Input on Proposed Data Standards for In-Plan Income Options
Excerpt:"'The absence of standards for sharing necessary information among the insurance product providers and unaffiliated record keepers [is] an impediment to more widespread access to these products,'said SPARK attorney Larry Goldbrum."(Retirement Income Journal)

[Opinion] Opinion: Why New Rules for 401(k) Fee Disclosures Dont Go Nearly Far Enough
Excerpt:"Only in the perverse world of the securities industry would candid disclosure of fees paid to vendors be considered a victory. In all other areas of commerce, it's not an issue. How would you feel if your car dealer refused to give you the price he's charging for your car?"(Daily Finance)

[Opinion] Opinion: Nationwide Tosses Its 401(k) Clients Under The Bus
Excerpt:"The trustee plaintiffs seek to certify a class of all trustees of all 401(k) plans that had variable annuity agreements with Nationwide from the first date Nationwide began receiving payments from mutual funds based on a percentage of the assets invested in the funds by Nationwide."(Dan Solin in The Huffington Post)

Investment Company Institute's Retirement Snapshot, First Quarter 2010
Excerpt:"[I]n the first quarter of 2010, investors'commitment to 401(k) and similar plans continued, as evidenced by stronger contribution activity and declining levels of participant-initiated withdrawals and changes in asset allocations. . . . Americans held $16.5 trillion in retirement assets at the end of the first quarter of 2010, accounting for 36 percent of all household financial assets in the United States."(Investment Company Institute)

Should You Leave Your 401(k) Investments in Your Former Employer's Plan?
Excerpt:"[O]nly 3% of departing employees with accounts of less than $1,000 left their money in their former employers'plans, while nearly half of those with balances of $100,000 or more did so."(Wall Street Journal)

Tapping 401(k) Funds Can Open your Business to Tax Problems
Excerpt:"The IRS is starting to pay more attention to entrepreneurs who finance their businesses using money from their 401(k) funds. Here's how such moves typically work . . . ."(Small Business Trends)

[Guidance Overview] Brief of Successful Defendant Employer in Paychex Retirement Plans Fees Case
Excerpt:"On August 2, the United States District Court for the Western District of New York dismissed the complaint filed in Zang v. Paychex, Inc., one of several putative class actions challenging 401(k) fees, revenue sharing and float. As discussed in the attached memo, the court concluded that Paychex could not be considered an ERISA fiduciary, which was a prerequisite to plaintiff's ERISA-based claims against the company."(Groom Law Group)

[Guidance Overview] Paychex Cleared in Revenue Sharing Dispute Over Mutual Fund Choices Offered to Retirement Plan Participants
Excerpt:"[A federal district court judge] for the Western District of New York ruled that Paychex cannot be tagged with [ERISA] violations for accepting revenue sharing money from mutual funds Paychex chose for its [retirement] plans."(PLANSPONSOR.com)

Principal Unveils Web Site Addressing DOL Fee Disclosure Requirements
Excerpt:"The Principal Financial Group has launched a Web site to help educate advisers and sponsors about the [DOL's] new fee disclosure regulation."(PLANSPONSOR.com)

[Guidance Overview] Handout for Upcoming IRS Phone Forum: Abusive Tax Avoidance Transactions and Emerging Issues
Excerpt:"The Forum will focus on potential abusive schemes and new emerging issues including insurance funded plans, schemes involving defined benefit pension plans, S Corporation ESOP abuses, ROBS compliance issues, reversion and distribution schemes, management company promotions, abuses involving union plans and other issues of concern."(Internal Revenue Service)

[Guidance Overview] DOL Issues Requirements for Avoiding Prohibited Transactions Involving Fees Charged by Retirement Plan Service Providers
Excerpt:"Some consultants refer to these regulations as the long-awaited fee disclosure regulations. They are not. These regulations require fee disclosures to avoid prohibited transactions. The fee disclosure requirements that have been widely discussed in the press will be in addition to those required by these interim final regulations. They will come at a later time in the form of legislation or regulation, and will focus more on disclosures from plan fiduciaries (including plan sponsors) to participants. These regulations focus more on disclosures from plan service providers to plan fiduciaries (such as plan sponsors)."(Thorp Reed&Armstrong)

Active versus Passive Investment Management (PDF)
15 pages. This white paper evaluates active investing relative to passive investing from a broad perspective, identifying the reasons why active management provides an opportunity for investors to take advantage of the insight, knowledge, and skill of investment professionals and, in most cases, to better meet their investment objectives. (Arnerich Massena&Associates, Inc.)

[Opinion] Insurance Company General Account DC Investments and the 408(b)(2) Conundrum: Balancing Capital, Liquidity and Transparency
Excerpt:"These funds usually (except in an inverted yield environment) provide a much higher rate of return over money market funds, while providing a measure of security of which money market funds can only dream. if the insurance company properly balances liquidity with the rate of return, it is an invaluable offering."(Business of Benefits)

Report Says Focus on Pension'Earnings'Inhibits Risk Management
Excerpt:"The report describes how current U.S. pension accounting standards cloud true economics by including a'funny money'component in pension earnings, presenting a fundamental obstacle to CFOs in pursuing rational risk management."(PLANSPONSOR.com)

Mets Management Called Out by 401(k) Suit
Excerpt:"The suit, filed in the U.S. District Court in Manhattan, is seeking class-action status on behalf of other Sterling employees, hopes to'recover assets that were lost through imprudent investments made on its behalf.'It names Sterling executives Arthur Friedman and Michael Katz as co-defendants, as well as Mets Chief Executive Officer Fred Wilpon."(PLANSPONSOR.com)

Dodd-Frank Wall Street Reform and Consumer Protection Act Orders Study to Determine Whether Stable-Value Products Are Swaps (PDF)
2 pages. Excerpt:"Historically, a'swap'has been a type of derivative instrument that involves a privately negotiated contract between two parties to exchange cash flows at specified intervals during the life of the agreement. However, the Dodd-Frank Act defines'swap'very broadly to include almost any agreement where the value is determined by reference to an underlying asset."(Prudential Retirement)

Common Mistakes in Preparing Plan Committee Minutes
Excerpt:"In our experience, committees frequently fail to treat the preparation of minutes of their meetings with the importance they deserve. Listed . . . are a number of the items that should -- and a few that should not -- be included in committee minutes."(Reish&Reicher)

Five Aspects of Financial Reform That Could Affect You
Excerpt:"The full impact of the law may not be felt for years, given the creation of a number of new government entities that need to be established and staffed. Conservative estimates indicate that regulators have been tasked with conducting nearly 100 studies and writing more than 350 new rules implementing the changes."(The Vanguard Group, Inc.)

The Once-Maligned Annuity Is Bringing in a Bigger Share of Advisors'Revenues
Excerpt:"Media reports are increasingly highlighting the benefits of annuities, particularly their ability to help Americans convert retirement savings into guaranteed streams of income."(Financial Planning)

[Guidance Overview] Court Finds Directed Custodian not a Fiduciary under ERISA
Excerpt:"A custodian that transferred retirement plan assets at the direction of plan trustees is not liable under [ERISA] for plan losses."(PLANSPONSOR.com)

What Plan Sponsors Should Know About Stable Value Funds (PDF)
4 pages. Excerpt:"The purpose of this brochure is to provide plansponsors with a peek at the complexities and key issues surrounding SVFs while providing guidance for both monitoring and evaluating the funds and communicating these issues to participants."(National Association of Government Defined Contribution Administrators)