October Three Consulting

In our previous article we reviewed [Professors Ayres and Curtis's paper Beyond Diversification: The Pervasive Problem of Excessive Fees and 'Dominated Funds' in 401(k) Plans] (John M. Olin Center for Studies in Law, Economics, and Public Policy Research Paper No. 493). Our purpose in that article was simply to describe what Professors Ayres and Curtis are saying. In this article we evaluate their findings and proposals, discussing the limits of and possible objections to their conclusions.

In the paper Professors Ayres and Curtis conclude that 401(k) plan participants suffer significant losses from (1) sponsor-fiduciary fund menu construction decisions, (2) participant asset allocation mistakes and (3) high fees on plan investment options. To remedy this problem they make several innovative proposals for changes in the rules for 401(k) plan fund menu construction.

Explore a real-time comparison of assets and liabilities for both a traditional pension plan and cash balance plan based on current market conditions. Our monthly snapshot provides immediate feedback as well as a look ahead for Plan Sponsors.

On April 11, 2014 the Center for American Progress (CAP) released a report "Fixing the Drain on Retirement Savings How Retirement Fees Are Straining the Middle Class and What We Can Do about Them."

Pension sponsors treaded water in May, with both assets and liabilities edging up in tandem for both model plans we track . Our traditional Plan A remains down 5% during 2014, while the more conservative Plan B is down 2% on the year.

In February the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries released its Exposure Draft RP-2014 Mortality Tables, recommending new mortality tables for the valuation of defined benefit plan liabilities. In this article we review the SOA RP-2014 report, focusing on its consequences for regulatory purposes. We begin with a discussion of the regulatory framework and then proceed to a discussion of the exposure draft and its implications.

April was another down month for pension sponsors, marked by declining interest rates and sluggish stock markets. Both ?model? plans we track lost ground last month, with our traditional ?Plan A? losing about 2% and the more conservative ?Plan B? dropping less than 1% during April. For the year, sponsors have now given back roughly one-fourth of 2013's ?bounty? ? Plan A is now down 5% during 2014, and Plan B is down more than 2%.

Pension finances deteriorated slightly in March, and both ?model? plans we track ended the first quarter of 2014 in modestly negative territory. Traditional ?Plan A? lost about 1% last month and is now down almost 4% for the year, and ?Plan B? slid less than 1% during March, ending the quarter almost 2% in the red.