The Department of Labors regional office in Boston has launched an investigation challenging the way many corporate pension plan fiduciaries value their alternative investments.
The result could be a huge increase in expense and work for plan fiduciaries.
Pension plan executives often rely on the financial statements of the general partners in their alternative investment partnerships to report the value of those investments in the plans Form 5500 annual filings with the DOL.
But in a letter to an unidentified pension plan, James Benages, director of the DOLs Boston regional office, contends that plan fiduciaries need to have a process in place to independently value the alternative assets.
The letter, dated July 1, said that Mr. Benages believed the plans failure to have an established process by which the fair-market value of alternative investments can be determined violated ERISA and, if not changed, could result in a lawsuit against the plan.
A process which merely uses the general partners established value for all funds without additional analysis may not insure that the alternative assets are valued at fair market value, according to the letter. (The copy of the letter obtained by Pensions & Investments had all information that could be used to identify the plan sponsor deleted.)