Even though the Department of Labor has jurisdiction over only private retirement plans, the agency's top pension official is suggesting public defined contribution plans adopt the same fee disclosure that the DOL requires of corporate America.
Phyllis Borzi, assistant secretary for the Employee Benefits Security Administration in Washington, said she hopes state and local DC plan officials will ask their vendors for fee disclosure — or that vendors will adopt for all plan sponsor clients what they must provide to corporate plans.
Ms. Borzi made her comments in a keynote speech on Wednesday at the National Association of Government Defined Contribution Administrators annual conference in San Diego.
This is the second consecutive year Ms. Borzi has spoken at NAGDCA, even though her office doesn't oversee public plans.
Ms. Borzi said she has been speaking to DC plan participants as well, and the first thing she tells them is, “Open the envelope” that contains information on their DC plan accounts. She said she tells them that paying 1% more in fees results in a 28% reduction in their accounts.
Ms. Borzi also had some advice for plan trustees: If an investment manager can't explain its investment strategy, “get rid of 'em.”
In other comments, Ms. Borzi said:
- “I wish we had a GPS to help navigate to retirement security.”
- “There is no shortage of people to separate us from our money.”
- “Notice I use 'lifetime income' and not 'annuity' … I am not a shill for the insurance industry.”
Emphasizing that she was speaking for herself and not as a Labor Department official, Ms. Borzi also said that public “defined benefit plans are under siege, which I consider to be tragic.” She said she has always believed that the ideal way to ensure an adequate income at retirement was to give employees “both a DB plan and a supplemental DC plan.”