Three State Pension Plans Support DOL Fiduciary Proposal

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By Sean Forbes

Aug. 4 — At least three state public pension plans say they support the Department of Labor's proposed conflict of interest rule, including two of the nation's largest.

In comment letters submitted to the DOL on its proposal (RIN 1210-AB32), officials with the California Public Employees’ Retirement System (CalPERS), Colorado Public Employees’ Retirement Association (Colorado PERA) and the New York Common Retirement Fund (CRF), which collectively cover more than 4.2 million participants, said they generally were concerned about the advice their members receive regarding investments outside the plans or rollovers to non-pension investments.

Public pension plans aren't subject to the requirements of the Employee Retirement Income Security Act, which the DOL enforces, but are subject to other federal rules, as well as state and local governmental regulations.

Ann Boynton, deputy executive officer for benefit programs policy and planning at CalPERS, said that the proposal “aligns with CalPERS beliefs on fiduciary responsibility,” and that the state plan supports even stronger transparency requirements than those in the DOL proposal.

CalPERS is the nation's largest state public pension plan, with more than 1.7 million members and more than $301 billion in assets as of June 30.

Gregory C. Smith, executive director of Colorado PERA, also weighed in, saying that, “We have received regular reports from members who have many years of service credit that get advice from financial advisers to give up the security of the monthly benefit and move the lump sum to an alternative investment vehicle.”

Such advice may meet the Securities and Exchange Commission's “suitability standard,” which allows advisers to sell products that generally meet an investor's needs and risk tolerance, but the advice should be subject to the higher fiduciary standard, Smith said.

Smith also said that because Colorado PERA acts as a fiduciary on behalf of its members and therefore “knows the importance of our advisers’ loyalty and care when recommending investments for our large plans,” individual investors should get that same level of fiduciary duty when investing their own money.

Thomas P. DiNapoli, New York's State Comptroller and a CRF trustee, said that the existing rules under ERISA don't provide sufficient protection for workers trying to save through individual retirement accounts and defined contribution plans

“The retirement security for far too many of today’s working households—especially low and middle income New Yorkers—is at serious risk,” DiNapoli said. “Closing the loopholes on conflicting investment advice will help assure that working families have the information they need to prevent the further erosion of the limited retirement assets they have been able to accumulate.”

The CRF is the third-largest pension fund in the U.S., with $183.5 billion in estimated net assets as of March 31 held in trust for pension benefits, according to the CRF website.

DiNapoli said that New York also runs the nation's largest tax code Section 457 plan, a deferred compensation plan for state and local governments and tax-exempt organizations. When participants are advised to roll over their Section 457 plan assets into an IRA, they need to know that their adviser is working in their best interests, and that the proposed rule would improve the reliability of the advice that they receive, he said.

Support From Federal Retiree Group

Richard G. Thissen, national president of the National Active and Retired Federal Employees Association, said that the proposal would also improve the advice given to federal employees and retirees.

NARFE is a nonprofit membership organization focused on protecting pay, retirement and health benefits of federal employees.

The suitability standard is “extremely weak,” and allows advisers to put their own interests ahead of their clients, Thissen said. The federal Thrift Savings Plan funds charge very low administrative fees, on average .029 percent, that beat alternatives that provide the same or similar returns outside the TSP, he said.

Despite the advantage of those low fees and fiduciary oversight, more than half of participants removed their funds from the TSP within a year after separating from service, according to the most recent Federal Retirement Thrift Investment Board report, Thissen said.

“That number is worrisome given the low costs of TSP investments, and it speaks to the prevalence of the bad advice that federal employees and retirees are receiving,” Thissen said.

The FRTIB, meanwhile, is trying to keep participants in its system. In its 2013 annual report, the FRTIB said it adopted a policy of “actively encouraging participants to transfer their other retirement savings into the TSP, where they would be managed at low cost pursuant to fiduciary standards.”

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

The CalPERS letter is at, the Colorado PERA's is at and the CRF's is at The NARFE letter is at


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