Press Release
Survey Warns: 'Hard and Fast' Rule Could Adversely Affect Retirement Plans
WASHINGTON, DC — In a new survey by the American Benefits Council, 85 percent of responding members believe U.S. retirement plans and their participants will be adversely affected by requirements that investment fund trades cease much earlier each day to accommodate the "hard and fast 4:00 p.m. trade cut-off" time currently being considered by the Securities and Exchange Commission (SEC). Of those responding, 83 percent also said that the retirement plans they sponsor or for which they provide services will be at a distinct disadvantage compared to other investors because the SEC proposals would require that different parties (such as broker/dealers, third-party recordkeepers, and bundled plans offered by mutual fund providers) will all have different trade cut-off times.
These measures and the independent investigations leading to an anticipated SEC proposal are the subject of the Senate Banking, Housing and Urban Affairs Committee's two-day "Review of Current Investigations and Regulatory Actions Regarding the Mutual Fund Industry." The SEC is expected to propose the "hard and fast 4:00 p.m. trade cut-off" rule in response to reported illegal mutual fund investment trades made after 4:00 p.m. Eastern Time. "While the Council agrees that these abuses should be addressed for the sake of all mutual fund investors," Council President James A. Klein said, "the SEC proposal would unfortunately place participants in retirement plans at a disadvantage compared to other investors.
"Instead of protecting investors, these rules would actually legitimize the very situation the SEC wants to stop," Klein continued. "The 4:00 p.m. close was designed to give every investor a fair chance to make trades as information of interest becomes available to them. The Council believes that the 'hard and fast' rule could require retirement plans — which are not expected to receive an exemption under the SEC rule — to close trading early in order to have enough time to process the requests. Essentially, this would reduce to a second-class status the millions of American workers and retirees currently participating in defined contribution retirement plans. 80 percent of Council members responding to our survey noted concern that trades under this regime would take more than one day — and as many as three days — to process."
In addition, participants in the Council survey said that plan costs would also be increased as a result of plan administrators facing far more expensive and complicated reconciliation issues (77 percent) and revisions to recordkeeping systems to adapt to the SEC proposed changes (78 percent). Additionally, 75 percent of respondents noted that plan participants would feel the brunt of these added expenses through plan fee increases.
The Council conducted the survey of both plan sponsor and service provider employee benefits professionals via the Internet between November 11 and November 13, 2003. Results from the survey are available on the Council's web site at: http://www.americanbenefitscouncil.org/services/surveys.htm.
Jan Jacobson, Council director, retirement policy, is available to comment further on these issues. Interviews can be arranged by contacting Deanna Johnson Keim, APR, Council director, communications, or Jason Hammersla, Council communications associate, by phone at 202-289-6700 or via e-mail at djkeim@abcstaff.org or jhammersla@abcstaff.org.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
