DC Briefs:Mutual fund officials warnof disclosure complexity

WASHINGTON — A Department of Labor proposal to increase the fee information that all ERISA plan service providers must make to plan sponsors should make clear that businesses that serve mutual funds — including investment managers, brokers and accounts — will not be considered as providing services directly to the plans that use those mutual funds, said Paul Schott Stevens, president and CEO of the mutual fund industry's Investment Company Institute, testifying at a DOL hearing on April 1.

Unless the DOL makes that clear, the hundreds of service providers to a mutual fund might have to enter plan-service contracts with the thousands of plans that might offer the mutua1 fund as an investment option, Mr. Stevens said.

“Mutual funds have dozens — sometimes hundreds — of service providers, none of whom has any idea about the extent to which particular employee benefits plans are invested in the mutual fund,” Mr. Stevens said. “If these entities were turned into service providers to every plan that invests in the fund, it would at the very least become extremely costly and difficult for mutual funds to be offered to employee benefit plans.”

Other industry officials also urged the DOL to reconsider its proposal to make its wide-ranging new fee-disclosure requirements effective 90 days after their final adoption.

“We need a full year to get ready,” said Douglas Kant, senior vice president and deputy general counsel for Fidelity Investments.

LONDON — The average defined contribution plan in Europe offers about 15 investment options, but 70% of members choose the default option, according to a European DC pension survey published by Mercer.

Within default options, balanced funds remain the most common, with 35% of the plan sponsors surveyed offering the strategy. Lifecycle funds were the second most popular choice, offered by 23% of about 235 DC plan sponsors surveyed.

“With so many members in the default fund, it is important to ensure the design of the default fund option is right for as many members as possible,” said Tim H. Burggraaf, consultant at Mercer based in Rotterdam, Netherlands, in a news release about the survey.

About 42% of the sponsors surveyed do not periodically review investment choices, and 76% do not offer investment advice. Forty percent of the plans surveyed do not offer members a choice of managers; 24% of the plan sponsors offered a choice of more than three managers.

“Considering members pick up a large part of the cost of their pension, and also carry most of the risk, it is the employers' responsibility to keep an eye on fund selection and to proactively make changes when investments fail to deliver,” Mr. Burggraaf added.

The survey involved plan sponsors in 13 European countries with aggregate DC assets of e520 million ($817 million). Most of the survey was conducted in November 2007.

SAN FRANCISCO — Thirty-five percent of defined contribution plans administered by Schwab Corporate & Retirement Services offered a Roth 401(k) feature in 2007, up from 26% from a year earlier, according to a study by Schwab. The highest adoption rate has come from professional services firms where employees are more likely to work with personal financial advisers who consult with them on investing in a Roth 401(k) plan, according to the study.

NEWPORT BEACH, Calif. — PIMCO introduced its first target-date funds. The five PIMCO RealRetirement Funds incorporate domestic and international securities as well as real assets such as real estate and commodities, said spokesman Steven Vames. The funds are for 2010, 2020, 2030, 2040 and 2050.