Industry Hits Back At “Frontline”

By Cyril Tuohy

InsuranceNewsNet

Two powerful industry groups representing life insurers and corporate retirement plan sponsors have hit back against PBS’ show “Frontline” for Tuesday night’s airing of “The Retirement Gamble,” which took the industry to task over retirement plan fees.

Producer Martin Smith narrated the program, which aired on PBS at 10 p.m. Tuesday. Smith produces documentaries for PBS through his own company.

“It is not news that fees matter or that a successful retirement requires disciplined saving over a working career,” the Plan Sponsor Council of America (PSCA) said in a statement posted on its Web site. “The truth is, employees who work for large companies are overwhelmingly likely to pay 401(k) fees that are a small fraction of retail mutual fund rates.”

The Plan Sponsor Council represents corporate-sponsored retirement plans.

In a news release, the American Council of Life Insurers (ACLI) said that “Fees can vary depending on the services provided… It is important to look holistically at the plan and the services provided to determine whether fees are reasonable.”

Smith took issue with the fees charged by mutual funds for managing corporate 401(k) programs. He found that fees and explanations of expense ratios were often buried in the fine print of turgid, opaque language.

In one segment, a teacher is quoted as saying she eventually passed on moving her retirement assets out of an annuity because of the penalty.

The program also found that retirement plans offer too few low-cost options, and that actively managed funds offered by many plans were over the long term far more expensive than index funds. Other experts interviewed also said the industry made no effort to go beyond the “suitability” threshold of responsibility to investors, compared with meeting a higher “fiduciary” threshold.

“Employers serve as plan fiduciaries, choosing investment options for the plan, ensuring service provider fees are reasonable,” the ACLI said.

The PSCA went further and said that “it appears Mr. Smith is not aware of his responsibilities,” as a small-company plan sponsor.

“In the show, Mr. Smith stated that he was too busy to look at the fine print in his own plan,” the PSCA said. “When he eventually examined his plan’s investment alternatives, he wondered, ‘How did this get in here?’ The answer, of course, can be found by looking in a mirror. We hope that Mr. Smith understands his responsibilities as a plan sponsor and a fiduciary.”

PSCA, in a goodwill gesture, has offered Smith a free one-year membership in its organization. “PSCA members look forward to sharing their experiences and expertise with Mr. Smith,” PSCA said.

Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].