Can you feel the love tonight? Apparently not, at least if you are a plan fiduciary identified as having a “potential high-cost plan” on a list created by both the William K. Townsend Professor at Yale Law School, Ian Ayres and Prof. Quinn Curtis, Associate Professor of Law at the University Virginia School of Law! A, dare I say, “hostile” letter was recently sent to thousands of 401(k) plan sponsors from these distinguished professors which is producing quite an uproar (pun intended) within the 401(k) plan community. It is causing members of plan sponsor community to sit up and take notice!
Being referred to by reviewers simultaneously as a love note
and an anti-love note
, the message in the professors’ letter is clear – 25% of 401(k) plans are identified as potentially high-cost plans. According to the letter, Ayres and Curtis are in the midst of completing a study and in 2014 the two men will be publicly releasing the names of 401(k) plans that they have identified as the worst in the country for total plan costs, of comparable size presented as “aggregate data.”
The critics of the letter and the predictions made within the paragraphs of said correspondence have been quick to point out that the study is based on information which is over four years old and therefore outdated and faulty. Further, they warn that the Form 5500, which the professors used in their study, “was not intended to be a comprehensive database of plan fees,” and therefore the use of it in the study weakens the conclusion based on those forms. Additionally, commentators have pointed out that the letter contains implications that are flawed, especially when discussing fiduciary duties under ERISA.
On the other hand, not everyone is viewing this letter from Yale as the coming apocalypse for the 401(k) plan sponsors to be named in the report. Some experts believe the information generated by Ayres and Curtis will be viewed in the flawed nature it is offered and the damage will be minimal. Instead, the result will be to “kick the tires” of the car so to speak – the plans will be reviewed and changes will be made that will positively impact the 401(k) plans and participants will come out better off in the end! In this case, only time will tell.