The Markets January 13, 2012

Long-Term Funds Mark Worst Stretch in Four Years

Long-term mutual funds had a second consecutive month of net redemptions with outflows of $9.8 billion in December 2011. 
Reported by

Morningstar Inc. reports long-term funds have now experienced outflows in five of the last seven months to mark the worst stretch since the late 2008-early 2009 financial crisis. Including funds that merged or liquidated during the year, long-term funds collected inflows of just $67.1 billion in 2011.

Additional highlights from the report include: 

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•  U.S.-stock funds continued to be the primary driver of outflows, as they shed $17.7 billion in December and about $84.7 billion for the year. 2011 was the sixth consecutive year of U.S.-stock outflows and the worst year for the asset class since $121.2 billion fled in 2008.

•  Although December saw international-stock funds suffer their worst monthly outflows since March 2009 with redemptions of $6.5 billion, outflows for the asset class were roughly flat for the year, leaving them about $85.2 billion ahead of U.S.-stock funds in 2011.

•  Municipal-bond fund flows steadily improved during 2011, with the trend turning positive after outflows peaked at $13.3 billion in December 2010. The asset class finished strong with inflows of $4.8 billion in December, its strongest month since August 2010.

•  Across all asset classes, passively managed long-term funds had inflows of $76.4 billion in 2011, narrowly exceeding the $74.7 billion collected in 2010. The bulk of these inflows went into international-stock and taxable-bond funds. Meanwhile, actively managed funds shed approximately $9.4 billion in 2011.

To view the complete report, visit http://www.global.morningstar.com/decflows11.  

Compliance January 13, 2012

EBSA Announces Voluntary Correction Program Events

The Department of Labor (DOL) announced upcoming voluntary fiduciary correction program workshops in three states.
Reported by

An Employee Benefit Security Administration (EBSA) Voluntary Fiduciary Correction Program (VFCP) Workshop will be held in Pasadena, California, on January 26, and Voluntary Fiduciary Correction Program and Abandoned Plan Workshops will be held in Detroit, Michigan, on March 20, and in Fort Wright, Kentucky, on January 27 and April 23.     

 The workshops will discuss the following Employee Retirement Income Security Act (ERISA) transactions that are eligible for correction under the VFCP: 

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 • Delinquent Participant Contributions to Retirement Plans, or Insured Welfare Plans, or Welfare Plan Trusts.  

 • Fair Market Interest Rate Loans Between Employee Benefit Plans and Parties-in-Interest (PIIs).  

 • Below Market Interest Rate Loans with Parties-in-Interest, or Nonparties-in-Interest.  

 • Below Market Interest Rate Loans to PIIs or Non PIIs due to delays in perfecting loan collateral security.  

 • Participant Loan Amount Exceeds Plan Limitations.  

 • Participant Loan Duration Exceeds Plan Limitations.  

 • Default Participant Loans.  

 • Purchase of Assets by Plans from Parties-in-Interest.  

 • Sale of Assets by Plans to Parties-in-Interest.  

 • Sale and Leaseback of Property to Sponsoring Employers.  

 • Purchase of Assets from Non PIIs at other than Fair Market Value (FMV).  

 • Sale of Assets to Non PII at other than FMV.  

 • Holding of Illiquid Assets Previously Purchased by Plan Benefit Payments based on improper Valuation of Plan assets.  

 • Payment from a Plan of duplicate, excessive, or unnecessary compensation.  

 • Expenses Improperly Paid by a Plan including Settlor fees.  

 • Payment from a Plan of dual compensation to Plan fiduciaries.  

 In addition, the workshops in Detroit and Fort Wright will cover the DoL’s Abandoned Plan Program and who may qualify as a Qualified Termination Administrator (QTA).   

 Attendees can receive one-on-one assistance with respect to either the Voluntary Fiduciary Correction or Abandoned Plan Programs.  

 More about the Pasadena event is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpCA012612.pdf.  

 More about the Detroit event is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpABPlanMI.pdf.  

More about the Fort Wright events is available at http://www.dol.gov/ebsa/pdf/workshopflyers/vfcpABPlanKY.pdf.

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