Compliance September 17, 2013

A Conversation with the DOL

September 17, 2013 (PLANSPONSOR.com) – Assistant Secretary of Labor Phyllis Borzi, with the Department of Labor’s (DOL’s) Employee Benefit Security Administration (EBSA), said it has been engaged in a very vigorous focus on defined contribution (DC) plans.
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Speaking at the Plan Sponsor Council of America’s (PSCA’s) 66th Annual Conference, Borzi revealed she is a big supporter of defined benefit (DB) plans, but realizes the three-legged stool of retirement savings has changed, so the industry and the DOL must work together to create ways for employees to save and to educate them about the importance of saving. “I have no magic bullet for DC plans,” she said, adding that her focus has been broadening transparency and accountability, and reducing conflicts of interest.

What Borzi now calls the “conflict of interest rule”—the fiduciary definition proposal—will not be out in October because “we want to make sure it’s right,” she said. She explained that the regulators are not finished with prohibited transaction exemptions. “When released, it will be a complete package of rules and exemptions,” she added.

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Borzi said the jury is out about the effectiveness of the 408(b)(2) service provider fee disclosures, because in particular, service providers are not following the rule to the letter. According to Borzi, the agency did not intend for providers to offer a master list of services and fees and have plan sponsors figure out which services they are using and paying for. Also, she said, it doesn’t serve the purpose of the regulations if the plan sponsor doesn’t have to understand the fee information it is provided because providers take care of everything for 404(a)(5) participant fee disclosures.

Borzi said the agency is looking at things they can do to clarify the rule—whether they can improve the regulations to meet its original goals. The agency has no timeline for such clarification. Borzi revealed the agency is working on a guide for plan sponsors about how to review the 408(b)(2) disclosures they receive. “We need to continue to educate plan sponsors about what their choices are and how to evaluate them,” she said.

When asked about target-date fund disclosures, Borzi confirmed the agency is working on such guidance. As with the conflict of interest rule, it is working together with the Securities and Exchange Commission (SEC).

The EBSA is also working with the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) to issue companion guidance shortly about the effect of the Supreme Court Defense of Marriage Act (DOMA) ruling.

Deals and People September 17, 2013

Standish Adds Liability Driven Investing Staff

September 17, 2013 (PLANSPONSOR.com) – Standish Mellon Asset Management Company LLC, the fixed income specialist for BNY Mellon, has named Nate Earle as liability driven investing (LDI) product specialist and Colyar Pridgen as liability strategist.
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Earle has joined the Standish team that implements LDI strategies for pension plans. Pridgen is working with Standish’s investment actuarial group, which integrates investment actuarial considerations with customized LDI strategies.

In these newly created positions, Earle reports to Andrew A. Catalan, managing director and head of LDI strategies for Standish. Pridgen reports to Jeffrey Passmore, senior liability strategist in the LDI group.

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“Nate and Colyar add depth to our LDI business, which has grown significantly over the last three years,” said Catalan. “With interest rates higher and the funded status improved at typical U.S. plans, long duration strategies have become more attractive to pension plans.”

Earle recently completed his M.B.A. degree at the Kellogg School of Management at Northwestern University in Evanston, Illinois. Prior to his studies, he worked for Pacific Investment Management Company in Newport Beach, California.

Pridgen, an actuary, was most recently a consultant for Towers Watson in Chicago, Illinois, where he provided consulting services to corporate retirement plan sponsors. Pridgen received his bachelor’s degree from Cornell University in Ithaca, New York.

Standish Mellon Asset Management Company LLC, with approximately $165 billion of assets under management, provides investment management services across a broad spectrum of fixed income asset classes.

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