What We Are Reading

Here are some of the things that BrightScope is reading:

  • The House Education and Labor Committee is marking up H.R.2989 this morning.  The 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989) is new legislation that combines provisions from the recently approved fee disclosure and investment advice bills (H.R. 1984 and H.R. 1988). The bill also includes modest adjustments to pension funding rules in order to ensure plans can weather the economic crisis without being forced to choose between cutting jobs or freezing plans.
  • The most recent piece of ERISA litigation that is worthy of discussion is Lingis et. al. v. Motorola.  Janell Grenier provides a great synopsis here. I anticipate that we will provide our own insight into this case in the very near future.

    Click to read the full text of Lingis et. al. v. Motorola.

  • Just in case anyone needed additional confirmation that transaction costs are significant and should be considered by fiduciaries when making investment menu design decisions, roughly a week after we announced the release of our “Transaction Cost Algorithm” Morningstar announced that they too will begin publishing estimated transactions costs on the fund level.  We believe that this is where the most important work is being done to truly understand mutual fund performance.
  • Transamerica recently released a study about 401k expenses that was designed to illuminate “participant preferences for 401k fee disclosure.”  Unfortunately when less than a third of the participants in the study even understood their own expenses I find it extremely unlikely that those same participants can be relied upon to know how they would like to receive the information.  That said this is just more proof that participants are flat out not getting the information they need.
  • Are board members fiduciaries?  B. Janell Grenier blog post helps clarify this issue. This is not an issue that board members should take lightly, for as Janell points out “plaintiffs lawyers now view ERISA as a fertile ground for recovery.”
  • BrightScope advisory board member Matt Hutcheson discusses his work over on the FI360 Blog, which is a must read for plan sponsors thinking about hiring an independent 3(21) fiduciary to manage their plan. Matt believes that there may be less than 25 fully independent 3(21) fiduciaries in the country.
  • Do you believe in government transparency?  This is your chance to get involved and help draft the language of the recommendations for government transparency.  The government is using a really cool collaborative document creation site called MixedInk to power the collaboration.  I encourage you to check it out.
  • Rep. John Kline is now the ranking member of the House Education and Labor Committee, taking over for Rep. Howard “Buck” McKeon.  Read more here.
  • There is a lot of support for the 401(k) Fair Disclosure for Retirement Security Act.  You can read a few of the support letters here.
  • Very interesting thoughts from Nevin Adams and the Design Conference, including:
  1. 92% of participants defaulted in at a 6% deferral do nothing. 4% actually increase that deferral rate.”
  2. Disclosure isn’t the same thing as clarity.”
  3. Nobody knows how much “reasonable” is.”
  4. “Hiring a co-fiduciary doesn’t make you an ex-fiduciary.”
  • Sorry Chicago, Harvard is still on top.
  • BrightScope is based in California where the unemployment rate has reached 11%.  Read more here.  BrightScope has brought on 10 new people in the last month, but it doesn’t look like we can prop up employment on our own!

If there is anything else that we should be reading that you would like to share with us please send me and email!