Thought Leadership

Behavioral Governance

Published In October 2016 | Sponsored by MainStay Investments

PS1016-TL-MainStay-ImageJonathan Blaze, National Sales DirectorThe plaintiffs’ bar has been targeting defined contribution [DC] plans with class-action lawsuits alleging a laundry list of misdeeds, including payment of excessive fees and selection of imprudent investments. PLANSPONSOR recently spoke with Jonathan Blaze, National Sales Director for MainStay Investments, a New York Life Company, to learn more about that company’s embrace of what it is calling behavioral and inspirational governance, or BIG, and how it can help plan sponsors and advisers negotiate the evolving governance landscape.

PS: What is behavioral governance and what tangible benefits do you anticipate plan sponsors receiving if they embrace such an approach?

Blaze: We at MainStay are developing the behavioral and inspirational governance [BIG] assessment—a way to methodically assess and improve leadership, stewardship and retirement plan governance dimensions.

Officers, advisers, directors, trustees, investment committee members and staff of defined contribution plans who have legal, financial, professional, and most importantly, moral liability for their decision-making processes all need to better understand and improve these processes.

The immediate catalyst for the work we’re doing is the new Department of Labor [DOL] fiduciary rule. Money managers have an important part to play in helping make reliable, practical information available to the retirement plan community.

PS: How can plan sponsors translate the high-level attributes of good governance into action—and how is MainStay helping them do it?

Blaze: Good governance is all about procedural prudence: creating a clear, repeatable process and then documenting and monitoring what you are doing, such that it will hold up to deep scrutiny at the legal level. It’s more important than ever in the current governance climate. We’ve partnered with Don Trone, author of the book Leader Metrics, which is focused on leadership, stewardship and governance as the three components of an organization’s ethos. We’ve also engaged Employee Retirement Income Security Act [ERISA] experts at Groom Law Group to understand trends in ERISA litigation. We’re asking some important questions at various depths, and from various angles: What does it mean to have more litigation exposure? What does all this mean, in day-to-day practical terms, for plan sponsors? The BIG paradigm attempts to answer all of this. Even very prudent organizations can benefit from this type of paradigm.

PS: How does a focus on behavioral governance impact the relationship between plan sponsors and their plan advisers?

Blaze: Every plan sponsor has a fiduciary obligation to look holistically and critically at their plan adviser and anybody else that has their finger in the plan and ask, for the sake of plan participants, for example, “Is this fiduciary also focused on inspired governance? Are we all on the same page and speaking the same language and is this a focus for the organization?” Because if not, it’s an acute threat not only to a sponsor’s plan, but because of the litigation threat, it’s also a threat to the sponsor’s core business—whether they are a university or a widget factory. Since it’s central to MainStay’s commitment to the DC community, we know what behavioral and inspirational governance looks like—for smaller plans as well as those set up within large, multinational corporations. Some plan sponsors are well on the way to creating a culture of inspired governance, and some are just learning what’s needed.

PS: On the litigation front, the number and type of suits has been increasing, with all kinds of landmark cases shaping the future of the defined contribution landscape and clarifying many fiduciary issues in practice. How might BIG play into litigation like this?

Blaze: Plan sponsors and the fiduciaries who advise their plans are essentially being asked to demonstrate a clear rationale; a thoughtful, compliant process for arriving at a whole host of decisions. It’s kind of like getting partial credit for a math problem. There’s the point you get for giving the right answer, but your teacher will grade you down if you don’t show your work. Fiduciaries have to show their work. American courts, in hearing the plaintiff’s bar, are asking the plan sponsor community: How did you arrive at the decision to choose that share class? How did you arrive at your decision to use this recordkeeper? How did you evaluate your revenue sharing agreement? MainStay, in partnership with Don Trone and Groom Law Group, has developed this paradigm, a way to say, okay, let’s organize this and methodically root it in the culture of plan sponsors. This can only benefit the many fiduciaries that have control or significant influence over a plan, and the participants who need to know their best interests are foremost.

PS: How are you actually delivering this information to plan advisers?

Blaze: We’ve developed an information-rich presentation that we can customize and present to firms who want to offer this critical information to their advisers. At a certain length, the training will even qualify for CE credit. More broadly, MainStay has made a commitment to continually provide timely and relevant insights to the plan sponsor community and the defined contribution investment only [DCIO] community as part of what we’re calling The Retirement Institute.

We created five online educational modules specifically for advisers who are pursuing the The C(k)P® Certified 401(k) Professional Designation that’s awarded by The Retirement Advisor University [TRAU], an affiliate of the UCLA School of Business. We’ve also published some great companion thought leadership, which can be found at that covers recent ERISA litigation, fiduciary liability insurance, and fiduciary physics, which is a governance primer.

PS: How will plan sponsors access these programs?

Blaze: Plan sponsors can access this information through The Plan Sponsor University [TPSU], an affiliate of TRAU. We’ll be offering a 1-hour training for CE credit on fiduciary governance and what it means for plan sponsors of all sizes. More broadly, plan sponsors can access our programs and thought leadership through their own plan advisers, whether they currently have a relationship with MainStay or not.

PS: Are there other physical components to what you’re offering?

Blaze: I mentioned the articles that are at—part of our Retirement Insights Series—that put context around the presentations. We’ve also developed tools that plan advisers can use to help plan sponsors implement the repeatable processes we’re advocating. For example, there is a checklist the advisers can use when working with plan sponsors and their investment committees on potentially adding fiduciary liability insurance—which by the way New York Life doesn’t sell, but can make a lot of sense for plan sponsors to hold. Our stance is, evaluate your coverage. Our checklist will walk a sponsor through some key questions. Does our current coverage protect us against allegations of fiduciary breach? Most standard plan sponsor insurance does not. You need to know: Are we covered from the moment there is a complaint filed? Through the expense and the disruption of defending ourselves, or only during a trial? Is the insurance purchased by the correct entity to provide the coverage you need? Does it have favorable provisions? These seem like small things, but in fact they can be critical. And not knowing can not only be costly; it can be devastating. We’re providing much more than information. We’re providing a plan of action for the adviser to invoke with their plan sponsor clients and prospective clients.


This article has been prepared for informational/educational purposes only. It is not intended to be an offer or solicitation of investment advisory services or products.

Neither New York Life nor its agents or affiliates provide tax or legal advice. Plan sponsors should speak to their own tax and legal advisers regarding their specific situation.

MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. Securities are distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302.

Don Trone and Groom Law Group are not affiliated with NYLife Distributors LLC