Jonathan 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
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
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
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
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 mainstayinvestments.com/dcio 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
mainstayinvestments.com/dcio—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