MFA Offers Policy Guidance on Alternative Investments for 401(k) Plans
"Retirement savers are best served by having access to a broad range of investment options that meet their long-term horizons[.] These principles offer a roadmap to help policymakers empower fiduciaries and reduce legal uncertainty to improve retirement security for America’s workers."
Bryan Corbett, MFA President and CEO.
"Retirement savers are best served by having access to a broad range of investment options that meet their long-term horizons[.] These principles offer a roadmap to help policymakers empower fiduciaries and reduce legal uncertainty to improve retirement security for America’s workers."
Bryan Corbett, MFA President and CEO.
The Managed Funds Association ("MFA") outlined a set of principles to guide policymakers on expanding access to alternative assets in 401(k) and other defined contribution retirement plans.
The MFA stated that the set of principles respond to a recent Executive Order that broadens investment choices for retirement savers and aims to reduce regulatory uncertainty for plan sponsors while improving long-term outcomes for participants. (See related coverage.) The MFA emphasized that fiduciaries, not the government, are best positioned to determine appropriate investment options under ERISA.
The MFA highlighted the following:
- Broader Access. The MFA emphasized that retirement savers are best served by flexible investment strategies, such as through target date or asset allocation funds, that may include alternative investments.
- Strategy Neutrality. The MFA explained that regulatory clarification on alternative investment strategies should be strategy-neutral and process-based, rather than requiring plan sponsors to select or exclude specific asset classes.
- Professional Oversight. The MFA said that alternative investment strategies should be offered only through professional investment managers and fiduciaries under appropriate oversight. The MFA noted that 401k "plan sponsors are subject to ERISA’s fiduciary duties in selecting, monitoring, and overseeing the investment fund options made available in the plan, and participants would continue to receive fund educational material that clearly explains the strategies and risks of each fund offered."
- Balanced Fee Evaluation. The MFA said that fees should be evaluated in the context of services provided and long-term outcomes.
- Litigation Reform. The MFA said that excessive ERISA litigation discourages innovation and urged policymakers to support fiduciaries’ prudent judgment in offering alternatives.