Panelists tackle big topics at DC East

A series of diverse topics — including fiduciaries, annuities, mergers and acquisitions, fees, social media, stable value and inflation protection — was tackled by panelists at Pensions & Investments' 18th annual East Coast Defined Contribution Conference, held March 7-9 in Miami.

Marla Kreindler, a partner at Winston & Strawn LLP in Chicago, pointed out that while there are many definitions of a fiduciary, “some of them mean nothing.” Panelists noted if a plan executive is unsure whether a service provider is a fiduciary, wording can be put into the provider's contract to ensure the firm and its employees act prudently and in the best interest of participants.

As to which providers are fiduciaries, panelists agreed managers of separately managed accounts are, collective fund trustees generally are, mutual fund advisers generally aren't, managers of insurance company separate accounts might be, and managers of insurance company general accounts generally are not fiduciaries.

During the general session on retirement income options, Martha L. Tejera, search consultant with Tejera & Associates LLC, Bainbridge, Wash., acknowledged that DC plan executives are frustrated that record keepers' platforms don't contain enough choices of annuity options. “That's temporary,” she assured them.

Ms. Tejera also noted that a participant who bought an out-of-plan annuity at the end of 2008 would have bought half the value of an annuity purchased at the end of 2007.

A concurrent session, “How You, Your Plan and Your Participants Can Thrive Following a Merger or Acquisition,” featured three DC plan executives. Jaime Erickson, defined contribution manager at Akzo Nobel Inc., Chicago, said that following the acquisition of Imperial Chemical Industries PLC, London, in January 2008, Akzo Nobel officials successfully mapped all of ICI's investment options except for stable value. The problem, she said, is that ICI's stable value portfolio contains traditional guaranteed investment contracts, while Akzo Nobel has all synthetic GICs.

Joseph Masterson, senior vice president at Diversified Investment Advisors, Purchase, N.Y., said during the concurrent session on fees that fee revenue has been coming from the active investment options in a DC plan. As a result, he said, “the active investors are paying for the passive investors.”

In discussing fee disclosure, Mary Ann Tweddle, retirement, relocation and financial portfolio manager at United Parcel Service of America Inc. in Atlanta, said UPS discloses fees for all fund options. Still, “if you ask participants what their fees are, they can't answer,” Ms. Tweddle said.

And, Marina Edwards, senior consultant at Towers Watson & Co. in Chicago, suggested that defined contribution plan executives review their plans' fees every two to three years.

The panel on social media — “Is Facebook in Your Plan's Future?” — drew the biggest crowd of any concurrent session.

Stephen Johnson, director, social media, at TIAA-CREF, New York, said, “Social media is a revolution in our society.”

After seven years of using various social media channels, TIAA-CREF has about 11,400 "friends" on Facebook, more than 10,000 members of myretirement.org, the company's proprietary and closed network for retirees and near-retirees. In addition, roughly 650 people follow TIAA-CREF on Twitter.

Facebook and Twitter, plus LinkedIn, are non-proprietary sites and, as such, offer little control, Mr. Johnson said. Employers interested in using the social media can use internally developed proprietary sites that offer more control, he said, but take more time and resources. Jillian Verspyck, marketing communications director at ING Institutional Plan Services, North Quincy, Mass., said Microsoft Inc.'s SharePoint product is an internal collaboration site that allows a company to control access and content while also permitting blogs, discussion groups and other networking-type tools.

Ms. Verspyck also discussed the risks of retirement plan executives using social media tools. Those risks include the exposure of a company's benefit structure to the competition, exposure of the plan and plan rules to liability, potential identity theft, and negative commentary or reviews.

In a general session on stable value, Antonis Mistras, senior portfolio manager, global fixed income, at DuPont Capital Management, discussed the “roller coaster” of 2008 and 2009. In 2008, he said, participants in the approximately $6.5 billion defined contribution plans at E. I. du Pont de Nemours & Co., Wilmington, Del., took assets from equities to put into stable value.

Participants didn't understand stable value, though, and were disturbed by the things they heard, Mr. Mistras said. So, DuPont plan officials spent a lot of time talking to participants and to corporate management about the investment option, he said. By 2009, however, “all was quiet on the participant front,” Mr. Mistras said.

Mr. Mistras also talked about stable value wraps, saying, “When you buy a wrap, you are dumping the tail risk on the bank.” He noted that since 2008, as the universe of wrap providers has shrunk and those that remain are charging higher fees, stable value wraps have become a seller's market.

At another general session, this one on inflation-protection investment options, Jaye K. Ciontea, retirement plans supervisor at Plexus Corp. in Neenah, Wis., said plan officials hired consultant Blue Prairie Group, Chicago, because “our committee recognized we didn't have the expertise” in the inflation-protection area.

With Blue Prairie's help, Plexus introduced real estate and emerging markets funds in 2007, as well as target-date funds. The target-date funds included those inflation-protection investments as well. Ms. Ciontea said she and other plan officials were pleased that participant allocations in the individual inflation-protection options “were in line with the allocations in our target-date funds.”

She said the investment committee considered gold but decided against it because it is a poor diversifier. Ms. Ciontea said the only way she could see investing in commodities would be by unitizing the target-date funds to be able to put commodities into funds that aren't core options.

In another panel, Ira Winsten, director of compensation and benefits at CenterPoint Energy, Houston, said because CenterPoint's defined benefit plan was converted to a cash balance plan, the company's $1.2 billion defined contribution plan “is becoming more important and DB is becoming less important.”

Mr. Winsten said company officials decided plan participants needed help with their DC plan investments for several reasons, including because they had a high, historical concentration in “volatile” company stock.

In response, plan officials added target-date funds, managed account and online advice in 2005 and, in 2007, made target-funds the default option. He noted more than 26% of CenterPoint's plan participants are using one or more of the three sources of “professional help.”

Online Editor Gregory Crawford contributed to this story.