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Any proposed redemption restriction would require significant operational changes and challenges for the recordkeeping of 401(k) plans. For example, participant distributions from money market investments could require two separate redemption checks (one for unrestricted shares, and a second for a restricted share balance following expiration of the holdback period), with attendant processing, mailing, and tax reporting associated with a plan distribution. Additionally, even if recordkeeping systems could be developed to implement redemption restrictions, the costs of doing so would be prohibitive. Alternatives to money market funds are limited, according to the groups’ statement. If these major regulatory changes are put in place, employers would have few alternatives that can meet the needs of the plan and its participants—particularly the need for low-cost cash management—as effectively as money market funds. Aside from easing retirement plan administration for both defined contribution (DC) and DB plans, the funds offer a conservative investment option for retirement savers, enable plan participants to diversify their investments and help retirement plans to meet liquidity needs. The groups signing the letter include the American Benefits Council, the American Society of Pension Professionals and Actuaries, the ERISA Industry Committee, Financial Services Institute Inc., Plan Sponsor Council of America, the Securities Industry and Financial Markets Association, the Spark Institute and the U.S. Chamber of Commerce. Jill Cornfield
Any proposed redemption restriction would require significant operational changes and challenges for the recordkeeping of 401(k) plans. For example, participant distributions from money market investments could require two separate redemption checks (one for unrestricted shares, and a second for a restricted share balance following expiration of the holdback period), with attendant processing, mailing, and tax reporting associated with a plan distribution. Additionally, even if recordkeeping systems could be developed to implement redemption restrictions, the costs of doing so would be prohibitive.
Alternatives to money market funds are limited, according to the groups’ statement. If these major regulatory changes are put in place, employers would have few alternatives that can meet the needs of the plan and its participants—particularly the need for low-cost cash management—as effectively as money market funds.
Aside from easing retirement plan administration for both defined contribution (DC) and DB plans, the funds offer a conservative investment option for retirement savers, enable plan participants to diversify their investments and help retirement plans to meet liquidity needs.
The groups signing the letter include the American Benefits Council, the American Society of Pension Professionals and Actuaries, the ERISA Industry Committee, Financial Services Institute Inc., Plan Sponsor Council of America, the Securities Industry and Financial Markets Association, the Spark Institute and the U.S. Chamber of Commerce.
Jill Cornfield
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