Improve Your Plan—Or Else?

July 22, 2013 (—A curious letter from a Yale professor that tells plan sponsors their fees are too high could be reason to benchmark and do plan studies.

By PLANSPONSOR staff | July 22, 2013
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Starting in late June, plan sponsors began receiving ominous letters from Ian Ayres, a professor at Yale Law School.  Their retirement plan’s fees are too high, the recipients were told, and the writer reminded them that “fiduciary duties are the most stringent imposed by the law.” Apparently about 6,000 letters were sent, though in somewhat different versions.

One version told the recipient Ayres intended to “publicize the results of our study in the spring of 2014” and to “make our results available to newspapers including The New York Times and Wall Street Journal, as well as disseminate the results via Twitter with a separate hashtag for your company.”

"The tone of the letter seems almost threatening, but I’m not sure that’s what he intended,” said Fred Reish, chair of the Financial Services ERISA team, at Drinker, Biddle & Reath.

Jim Sampson, managing principal at Cornerstone Retirement Advisors, told PLANSPONSOR he thought Ayres’ letter was “a very typical example of someone who gets a little bit of information and thinks they can change the world, and is going to cause more grief than help.” And the comments that are swirling around online are “pretty typical of what we’ve seen over the years,” Sampson said. “Someone using outdated information, completely out of date—four years out of date—and completely wrong.”

Brian Graff, chief executive and executive director of the American Society of Pension Professionals and Actuaries (ASPPA), called the tone of the letter shocking in his blog. “Here we have employers offering retirement benefits to their workers, which is entirely voluntary, by the way, and this Yale Law School professor is essentially threatening them. And the threat is based on some study that is based on inherently flawed data.”