He’s baaaccckkkk…
Yale Law School professor Ian Ayres — yes, that Ian Ayres – made a presentation at a Nov. 19 public hearing held by the Connecticut Retirement Security Board that featured an interesting proposal.
You may recall that in 2013, Ayres sent more than 6,000 letters to plan sponsors claiming that their 401(k) plans were “high cost” and implying that they may be violating their fiduciary obligations (see “Love Letters from Yale”).
The professor now wants all participants in 401(k) or any other type of self-directed retirement arrangement to take his investor “sophistication test.” Under his proposal, if plan participants fail this financial literacy test, they would be prohibited from investing in any “high cost” or “esoteric” investment fund. The definitions of those terms would be determined by him.
Ayres’ 2013 letters were based on conclusions he drew about industry fees from 2009 Form 5500 data accumulated prior to an industry-wide era of declining fees, and were subsequently disavowed by Yale (see “Yale Law School Disavows Ayres’ Research”). However, he hasn’t backed away from his “name and shame” crusade.
Instead, it looks like he’s doubling down — arguing that the Connecticut Retirement Security Board should use its authority to issue a “scarlet letter” to every major Connecticut employer with an average plan and fund level cost that exceeds 100 basis points. The letter would advise employers that, “You will fail [in your fiduciary obligations] if your plan contains a default investment fund that costs more than 50 basis points,” Ayres said in his Nov. 19 testimony.
None of this addressed the focus of the meeting, which was how to get more Nutmeg State citizens saving for retirement. In fact, Ayres’ tirade may well serve to discourage some employers from offering the plans that make it possible for those who are saving for retirement to do so.
In any case, good to have you back, professor! We missed you.
Andrew Remo is the Congressional Affairs Manager at NAPA and ASPPA.
