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Regulation and Compliance > Federal Regulation > DOL

NAPA blasts Yale prof’s ‘high fees’ paper

By Paula Aven Gladych

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The National Association of Plan Advisors is up in arms about the release of Yale Law School professor Ian Ayres’ paper attacking high fees in the 401(k) industry.

The organization took issue with the first iteration of the paper, which was released last year, when Ayres attempted to “drum up outrage about high fees” in workplace plans. As part of his initial report, he called out the companies who were charging the highest fees.

Related story: Yale professor’s fiduciary threat has retirement execs fuming

NAPA says that the new report doesn’t call out individual employers but still uses five-year-old data that doesn’t take into consideration how far fees have come down since 2009.

In a blog post, Ray Harmon, NAPA’s government affairs counsel, highlights a report by Aon Hewitt that showed more than 75 percent of companies have reduced 401(k) plan expenses since 2011. And just this week, Mainstreet reported that plan fees continued to decline in 2013 due to new Department of Labor fee disclosure regulations.

“While we are pleased to see that the professor has heeded our request not to slander employers by name, we are still flabbergasted that he would assert expertise while missing major developments in the regulation of our industry in the last few years,” Harmon said.

Ayres also neglects the regulations that helped bring those fees down and says in his paper that he is “skeptical of fiduciary duties alone to resolve the problems in 401(k) plans.” He also referred to the DOL’s participant-level disclosure rule, which was implemented in 2012, as “an extensive new disclosure regime” that has been “proposed.”

Harmon also took issue with Ayres’ policy recommendations. The first included a mandatory enhanced qualified default investment alternative within 401(k) plans that would be chosen by the Department of Labor. He also wants the DOL to officially designate certain plans as high cost and require all such plans to offer in-service rollovers to IRAs. His last recommendation is that the DOL establish a 401(k) Investment Sophistication Test that a participant must pass to opt out of his new enhanced qualified default investment alternative.

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