403(b) Summit: With Investment Options, More Is Not
Always Better
April 22, 2008 (PLANSPONSOR.com) - Amelia Island, FL
- When it comes to the size of a 403(b) plan's investment
lineup, more isn't always better.
That is particularly true now that 403(b) sponsors
will be required to exercise the same due diligence about
their investment options as their 401(k) cousins have
always had to do, panelists said at an investment options
discussion at PLANSPONSOR's 403(b) Summit in Amelia
Island, Florida, April 9 and 10. While Thomas P. Cote,
CEO of Total Solution Financial Partners, said the
fiduciary comparisons between 403(b) and 401(k) sponsors
were difficult ones to draw because there is no
comparable 404(c) in the 403(b) world, Thomas D. Ming,
President, Tower Rock Advisors, Inc., argued 403(b)
sponsors could still use 401(k) rules as "direction" to
govern their own actions.
The task of regaining control over a program's
investment options is made all the more daunting by the
number of 403(b) plans with long lists of existing
vendors that still have ahead of them a plan design
determination about the length of the future vendor list.
"I have to believe that reputable vendors are going to be
willing to talk to you about how you can deal with this
problem in your capacity as a fiduciary," said
Cote.
As did several other discussion panel members at
the Summit, Barbara Delaney, President and Founder of
FFoA, an NRP member firm, warned sponsors to watch out
for particular problems with existing service contracts -
particularly those between the vendor and the
participant.
Several plan sponsors at the at the 403(b) summit
complained vendors were refusing to tell plans anything
about such vendor-participant arrangements - even the
dollar value of the assets involved - since the plans
were not a legal party to them. "You can't get out of
these contracts; they're horrendous," said Delaney,
President, FFoA, a member firm of National Retirement
Partners. "We're relying on the DoL (Department of Labor)
to pressure these vendors to let people out of the
contracts."
Once a plan decides on the number of vendors,
panelists told the attendees, then comes the
just-as-challenging process of selecting individual
investment options. In that vein, Ming said the 403(b)
world is likely to see the same strong industry reaction
to target-date funds and managed accounts that the 401(k)
world has seen.
"That's what you have to look at," said Delaney.
"Are the participants getting the best options out
there?"
Fred Schneyer
editors@plansponsor.com