Retirement planning officials are warning plan sponsors about a Yale law school professor's threat that he plans to release a study next spring asserting that they have breached their fiduciary duties with respect to plan costs and investments. Still, some in the industry caution that the study relies on old data.
The yet-to-be released study by Ian Ayers, William K. Townsend professor at Yale Law School, and Quinn Curtis, associate professor of law at the University of Virginia School of Law, is creating a firestorm of opposition among retirement planning executives. They argue that while the professors' evaluation of the data used in the study is flawed, it is sure to spark inquiries from Congress and clients.
The Yale professor has sent letters to approximately 6,000 sponsors of 401(k) plans claiming that many of them may have breached their fiduciary duties by sponsoring a "potentially high-cost plan," and that they consider improving their fund lineup and doing away with more expensive fund offerings, according to Fred Reish (left), partner and chair of the financial services ERISA team at Drinker Biddle & Reath.
Ayers threatens in his letter to plan sponsors that the study results—which he says are based on data compiled from Forms 5500 for the year ending Dec. 31, 2009, as well as BrightScope data—will be given to The New York Times and the Wall Street Journal, as well as disseminated via Twitter, with a separate hashtag for each company's results.
In a July 23 Client Bulletin, Reish and his colleagues warn that while the Yale professor's data evaluation is questionable, and "may not be accurate or relevant to their plans," plan sponsors should take it seriously.
Indeed, Eric Ryles, managing director of Judy Diamond Associates, publisher of retirement and employee benefits industry prospecting tools and plan data, says that the professors' analysis is based on dated information. "The study is based on very outdated information from 2009," Ryles says. "There are currently 79,000 or so 2011 filings which should meet the same basic criteria as [the Yale professor's survey] sampling. There are approximately 1,500 or so 2012 filings which would do the same."
