Products December 7, 2009

N.Y. Life Expands DCIO Stable Value Offerings

New York Life Investments said it is expanding its defined contribution investment only (DCIO) efforts through its lineup of stand-alone stable value products to third parties.

Reported by

An announcement said New York Life recently introduced the new Guaranteed Interest Account, a stable value group annuity product issued by New York Life and backed by its general account. The Guaranteed Interest Account and another group annuity stable value offering, the New York Life Insurance Company Anchor Account, a 15-year-old group annuity separate account product invested primarily in high-quality fixed-income securities, are available as stand-alone products to third parties such as defined contribution platforms and intermediaries.

New York Life Insurance Company’s general account is managed by New York Life Investments’ Fixed Income Investors Group, which is also the adviser to the anchor separate account, according to the announcement.

“There is a lack of capacity in the stable value market today. Sponsors and advisers are clamoring for stable value products with the backing of a solid financial institution for their participants,” said Don Salama, senior managing director of New York Life Investments’ retirement plan businesses.

Compliance December 7, 2009

GAO Makes Suggestions to DoL about Fee Reporting

In a new report, the Government Accountability Office (GAO) made suggestions to the U.S. Department of Labor (DoL) to address plan sponsor and provider confusion over new reporting requirements for the Form 5500 Schedule C.

Reported by

Specifically, the GAO report recommended that the DoL:

  • provide additional guidance and require all indirect compensation be disclosed on the Schedule C;
  • coordinate the implementation of its new Form 5500 requirements with the publication of its 408(b)(2) regulation; and
  • require that asset-based fees be explicitly reported.

The office said the DoL has not provided sufficient guidance for sponsors and providers to accurately determine what elements of compensation qualify as eligible indirect compensation (fees or expense reimbursements charged to investment funds and reflected in the value of the investment). Therefore, interpretations have been left up to sponsors and providers and may result in a range of reporting practices, causing the Department to receive inconsistent and incomplete data.

The report noted that in addition to the new Form 5500 requirements, the DoL has proposed another regulation about service provider fee disclosure (its 408(b)(2) regulation), but it has not yet been finalized. According to the report, sponsors and service providers GAO talked with stressed the importance of coordinating this initiative with the new Form 5500 requirements, as doing so may reduce the burden and the cost to service providers of making changes to their data gathering and reporting systems and clarify for plan sponsors the information they need to understand and compare the fees charged by various service providers.

The GAO said that in its discussions with Labor officials, they agreed there was a need to coordinate the two regulations, and said that although they are working to finalize the proposed 408(b)(2) regulation, it is uncertain when it will be published.

In addition, the GAO noted that it previously reported that the information provided to DoL on the Form 5500 has limited use for effectively overseeing fees paid by 401(k) plans because it does not explicitly list all of the fees paid from plan assets. As an example, the report said plan sponsors are not required to explicitly report asset-based fees that are netted from an investment fund’s performance, even though they receive this information for each of the mutual funds they offer in the 401(k) plan. So the GAO concluded that despite the changes to the Form 5500, the new information provided may not be very useful to the DoL, plan sponsors, and others.

According to the report, the DoL generally agreed with the GAO’s recommendations, although it proposes evaluating the data after reporting begins to determine how best to address indirect compensation.

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