Bad Hair Day in Investment Fiduciary Land

From time to time, I have allowed students at the local beauty school to learn on a real head - mine. Invariably, I regret my decision, so much so that I am now resigned to using a professional service for future visits. Originally, I thought I could save some money for services that I always thought of as routine. Too many "bad" visits later, I have decided that hair cuts and coloring should be carried out by experienced persons who may charge more money but save me time and grief. Really, how often does one need to have a beauty disaster before the truth sets in that paying for knowledge is a good trade?

Applied to retirement plan fiduciaries, this "aha" moment begs the question as to what constitutes knowledge. Not surprisingly, the U.S. Department of Labor ("DOL") has recognized the need for fiduciary education and responded with its campaign called "Getting It Right - Know Your Fiduciary Responsibilities." According to the DOL website, this program "emphasizes the obligation of plan sponsors and other fiduciaries to:

  • Understand the terms of their plans
  • Select and monitor service providers carefully
  • Make timely contributions to fund benefits
  • Avoid prohibited transactions; and
  • Make timely disclosures to workers and their beneficiaries and reports to the government."

During a presentation I made last week in Atlanta as part of the National Center for Employee Ownership ("NCEO") annual conference and entitled "ESOP Company Strategic Decision Making," I suggested that sponsors include a budget line for training. Whether that takes the form of internal training or having an outside expert develop and lead an educational curriculum for fiduciaries will depend on a few factors, including the current status of fiduciary literacy. Continued learning is important for existing fiduciaries as well, especially now with so many new rules and regulations. My co-speaker, Mr. Robert Gross - a Senior Managing Director with Prairie Capital Advisors, Inc. - concurred when the topic switched to the use of outside and corporate counsel. Regular meetings with ERISA legal professionals can be invaluable. At a minimum, a get-together can kick start a meaningful dialogue about the role of the fiduciary, decisions that must be made in a timely fashion and how to select, monitor and evaluate the work being done by individuals with fiduciary responsibilities.

Don't wait for purple hair to realize the high cost of getting a "budget" deal. Focus instead on making sure that everyone involved at the plan level has a solid understanding of what has to be done, when and by whom.

Pension Usage of Swaps

I have been writing, training and consulting about the use of derivatives by pension plans for many years. There is no shortage of topics, especially in the aftermath of the Dodd-Frank Wall Street Reform and Consumer Protection ("Dodd-Frank") and the fact that pension investing and derivatives trading are significant elements of the capital markets. The OECD estimates the size of the private pension system in 2012 at $32.1 trillion. The Bank for International Settlements estimates the June 2013 global derivatives market size at $692.9 trillion.  

Given the importance of the topic of pension risk management and the evolving regulatory landscape, it was a pleasure to have a chance to recently speak with Patrick S. Menasco. A partner with Steptoe Johnson, Attorney Menasco assists plan investors, investment advisers and broker-dealers as they seek to navigate the laws relating to hedging, swaps clearing and much more. Here are a few of the take-away points from that discussion.

Question: Do the swaps provisions embedded in the Dodd-Frank legislation contradict the netting rules that are part of U.S. bankruptcy law?

Answer: No, the netting provisions of the Bankruptcy Code remain intact and should be taken into account in negotiating swap agreements. To the extent feasible, a performing counterparty wants to be able to net obligations in the event of a counterparty insolvency and default.

Question: Your firm obtained Advisory Opinion 2013-01A from the U.S. Department of Labor ("DOL") on February 7, 2013 regarding swaps clearing, plan assets and ERISA fiduciary duties. Explain the importance of identifying plan assets in the clearing context.

Answer: ERISA, including its prohibited transaction rules, governs "plan assets." Thus, it is critical to determine whether margin posted by a plan in connection with swaps clearing and the swap positions held in the plan's account are considered "plan assets" for ERISA purposes. Among other things, Advisory Opinion 2013-01A gives comfort that (1) margin posted by the investor to the clearing agent generally will not be considered a plan asset for ERISA purposes and (2) clearing agents will be able to unilaterally exercise agreed-upon close-out rights on the plan's default without being deemed a fiduciary to the plan, notwithstanding that the positions are plan assets.

Question: The headlines are replete with news articles about swap transactions with pension plans that could be potentially unwound in the event of bankruptcy. Detroit comes to mind. Should non-pension plan counterparties be worried about a possible unwinding in the event of pension plan counterparty distress?

Answer: Yes and no. The case in Detroit (which is currently on appeal) illustrates the risk that, notwithstanding state or local law to the contrary, federal bankruptcy judges may disregard the legal separation between municipal governments and the pension trusts they sponsor, treating those trusts as part of the estate. This may present certain credit and legal risks to the trusts' swap counterparties, although the Bankruptcy Code's swap netting provisions may mitigate some of those risks. I doubt that we will see anything similar to Detroit in the corporate pension plan arena because ERISA not only recognizes, as a matter of federal law, the separate legal existence of such plans, but also affirmatively prohibits the use of plan assets for the benefit of the sponsor. Separately, many broker-dealers negotiate rights to terminate existing swaps upon certain credit events, including the plan sponsor filing for bankruptcy or ceasing to make plan contributions.

Question: How does Dodd-Frank impact the transacting of swaps between an ERISA plan and non-pension plan counterparties such as banks, asset managers or insurance companies?

Answer: Dodd-Frank does a number of things. For one, it adds a layer of protection for ERISA and government plans (and others), through certain "External Business Conduct" standards. Generally, these standards seek to ensure the suitability of the swaps entered into by the investors. Invariably, swap dealers will comply by availing themselves of multiple safe harbors from "trading advisor" status, which triggers various obligations relating to ensuring suitability. Very generally, these safe harbors seek to ensure that the investor is represented by a qualified decision-maker that is independent of, and not reliant upon, the swap dealer. Under protocol documents developed by the International Swaps & Derivatives Association ("ISDA"), the safe harbors are largely ensured through representations and disclosures of the plan, decision-maker and swap dealer (as well as underlying policies and procedures).

Question: Dodd-Frank has a far reach. Would you comment on other relevant requirements?

Answer: Separately, Dodd-Frank imposes various execution and clearing requirements on certain swaps. These requirements raise a number of issues under the prohibited transaction rules of ERISA and Section 4975 of the Internal Revenue Code. Exemptions from those rules will be needed for (1) the swap itself (unless blind) (2) the execution and clearing services (3) the guarantee of the trade by the clearing agent and (4) close-out transactions in the event of a plan default. This last point presents perhaps the thorniest issue, particularly for ERISA plan investors that direct their own trade swaps and thus cannot avail themselves of the Qualified Professional Asset Manager ("QPAM"), In-House Asset Manager ("INHAM") or other "utility" or "investor-based" class exemptions. The DOL expressly blesses the use of the QPAM and INHAM exemptions in the aforementioned Advisory Opinion 2013-01A, under certain conditions. Senior U.S. Department of Labor staff members have informally confirmed that the DOL saw no need to discuss the other utility exemptions (including Prohibited Transaction Class Exemption ("PTCE") 90-1, 91-38 and 95-6) for close-out trades because they assumed they could apply, if their conditions were met.

Question: Is there a solution for those ERISA plans that direct their own swap trading?

Answer: It is unclear. There are only two exemptions, at least currently, that could even conceivably apply: ERISA Section 408(b)(2) and Section 408(b)(17), also known as the Service Provider Exemption. The first covers only services, such as clearing, and the DOL has given no indication that it views close-out trades as so ancillary to the clearing function as to be covered under the exemption. In contrast, the Service Provider Exemption covers all transactions other than services. But it also requires that a fiduciary makes a good faith determination that the subject transaction is for "adequate consideration." If the close-out trades are viewed as the subject transaction, who is the fiduciary making that determination? The DOL's Advisory Opinion 2013-01A says that it isn't the clearing agent. Thus, to make the Service Provider Exemption work, you have to tie the close-out trades back to the original decision by the plan fiduciary to engage the clearing agent and exchange rights and obligations, including close-out rights. That argument has not been well received by the DOL, at least so far.

Many thanks to Patrick S. Menasco, a partner with Steptoe & Johnson LLP, for taking time to share his insights with PensionRiskMatters.com readers. If you would like more information about pension risk management, click to email Dr. Susan Mangiero.

Fifth Third Bancorp v John Dudenhoeffer

For those unable to attend the April 2, 2014 U.S. Supreme Court hearing, a review of the transcript of Fifth Third Bancorp et al v. John Dudenhoeffer et al (No. 12-751) may be of interest. Appearances were made by Robert A. Long, Esquire and partner with Covington & Burling LLP (on behalf of Petitioners), Ronald Mann, Esquire and Albert E. Cinelli Enterprise Professor of Law with the Columbia Law School (on behalf of Respondents) and Edwin S. Kneedler, Esquire, Deputy Solicitor General, Department of Justice (on behalf of the United States, as amicus curiae, supporting Respondents.)

I will leave the legal interpretation to attorneys. The bullet points shown below are excerpted from the transcript and by no means reflect the totality of today's discussion. No doubt we will soon get insights from practicing attorneys who can properly parse the legal issues, ahead of a formal opinion from the U.S. Supreme Court bench.

From my perspective as an economist, I think it is always good whenever further guidance is provided about the important role of the ERISA fiduciary. Notwithstanding this notion of "more is better" in terms of shedding light on fiduciary duties, I envision a kerfuffle as it relates to the discussion about stock valuation. Encouraging the use of an independent appraiser makes sense. However, the valuation community has already been vocal about its fears that an expanded fiduciary standard could increase its liability and thereby cause some firms to exit the market and push up the price of an appraisal as a result. As an aside, during her April 1, 2014 presentation before Practising Law Institute pension plan investment workshop attendees, Counsel for Appellate and Special Litigation, Elizabeth Hopkins mentioned that ESOP enforcement continues to be an active area for the U.S. Department of Labor, with a particular emphasis on the valuation of company stock.

  • There were several questions about what constitutes "prudence," along with comments about the value of a stock that is issued by the plan sponsor and related disclosure requirements if the price of said stock is deemed to be "overvalued".
  • Throughout the proceeding, there were questions and comments about ERISA versus SEC Rule 10b-5 with respect to the use of information known by company executives.
  • Justice Kennedy asked about the landscape relating to the use of an independent fiduciary. Attorney Long commented that not all problems would be solved that way since "you'd have to have a monitoring trustee who would have to give the independent trustee any inside information that they had."
  • Justice Alito asked if an ERISA fiduciary can "take into account the interests of the participants as employees as opposed to their interests as investors" and offered that "It doesn't seem to me that those will necessarily be the same. And there may be situations in which something that would be potentially good for the participants as investors would be quite bad for them as employees." For example, individuals could lose their jobs if decision-makers for an Employee Stock Ownership Plan ("ESOP") stop buying company stock and this signal possibly leads to "bankruptcy and liquidation for the company."
  • Attorney Mann started to address what he called a "rock and a hard place" issue. Various justices commented thereafter, asking what a fiduciary is supposed to do when they have information about a stock. His reply was that, similar to a "corporate context where directors ordinarily are protected by the business judgment rule, if a situation arises in which their interests patently diverge from the interests of the shareholders, they don't simply decide to represent both interests but pick one over the over. They instead step aside and appoint...allow independent people to represent the shareholders."
  • Justice Kennedy asked Attorney Mann how he would write a statute to promote employee ownership of company stock.
  • Attorney Kneedler began his comments with a reference to Section 1104 and the focus of "operating the plan for the exclusive purpose of providing benefits to participants and their beneficiaries, which means the interests of employees are taken into account only insofar as they are participants in the plan, not more generally." He agreed with Justice Sotomayor that a "stock drop in and of itself" is not necessarily proof of poor procedural prudence. He added that "fiduciaries have an obligation to actually exercise their discretion and actually investigate...monitoring of the ... investment."
  • Justice Breyer inquired about the materiality issue, i.e. how much "in assets is accounted for by the ownership" of company stock by an ERISA plan.
  • Subsequent questions and comments focused on the notion of selling existing positions of company stock versus not buying anymore when material information suggests that the stock is expensive relative to its intrinsic worth.
  • When the podium returned to Attorney Long, he stated that "There is no circuit split on the issue that we've spent all our time discussing this morning. The only circuit split is on whether this presumption applies at the motion to dismiss stage." He cited the intent of Congress to encourage company ownership and suggested that rendering ESOPs "unworkable" would "basically cause many companies to say we can't put fiduciaries in that situation, so we're not going to have ESOPs at all."

The case was submitted at 11:30 a.m. Click here to download the Fifth Third Bancorp v. John Dudenhoeffer hearing transcript.

Cat Food or Cruises For Retirement

When I taught personal finance and investment management courses as a finance professor in the 1990's, I talked at length about the need to save early and save big. We went through sensitivity analyses that were based on input from the students. What always struck me was the lack of realism in terms of how long it would take to accumulate sufficient funds to stop working and begin the "golden years" phase. I would point out that bad planning could result in having to eat low-cost cat food instead of being able to book a long-desired cruise around the world or doing something similarly fun. This hypothetical got a few laughs until students looked at the numbers and realized for themselves that it's just math. Save too little and your choices will be limited.

The reality is that inadequate retirement planning on the part of some individuals will cost everyone. It is a perfect example of the free rider dilemma that makes it hard to motivate those who are not thinking about their future. Essentially, with any safety net system, anyone earning an income is going to be taxed to pay for government-provided benefits. This means that a national retirement deficit will take something out of the wallets of all. By extension, this means that everyone (in the U.S. and elsewhere) has a stake in improving financial literacy. (The issue of poverty and the adverse impact on being able to plan for retirement is not addressed herein but certainly cannot be ignored either.)

Financial education is hugely important and can't start soon enough in my opinion. Organizations that promote how to plan ahead should be commended. One such group, the International Foundation of Employee Benefit Plans ("IFEBP"), has gone a step further by creating the National Employee Benefits Day. Set for April 2 this year, the goal is to remind individuals to be pro-active, "take control of your future" and "get to know your retirement plan." Besides an educational section on their website, the IFEBP includes a worksheet entitled "Your Retirement Picture." Links are provided to retirement calculators such as the Smart Money Retirement Calculator. Of course, not every company offers retirement benefits. Even when an employee does have access to company-sponsored benefits, individual savings should not be ignored, however small.

The Jump$tart Coalition for Personal Financial Literacy is another organization that seeks to make economic empowerment a top priority. A non-profit organization, its stated mission is to promote "quality and effectiveness in financial education." Yet another notable organization is Junior Achievement which seeks to "foster work-readiness, entrepreneurship and financial literacy skills." I am proud to say that I once served as a Junior Achievement volunteer in two different schools and found the experience highly rewarding. I was told that the students and host teachers likewise found the classroom interaction to be productive and enlightening.

Courtesy of U.S. taxpayers, MyMoney.Gov is a helpful resource about topics such as borrowing, saving and consumer precautions against adverse circumstances. "This website is a product of the Congressionally chartered Federal Financial Literacy and Education Commission..." Click to read a flyer about "Financial Literacy and Education Commission Research and Data Clearinghouse."

Thomas Jefferson is quoted as saying that "It is neither wealth nor splendor; but tranquility and occupation which give you happiness." In Jerry Maguire, Cuba Gooding's character made "show me the money" a mantra for countless moviegoers. Practically speaking, currency is important. If you don't have it, your choices are limited. That is why financial advisors talk address saving and goal-setting in the same conversation.

While cat food is important for felines, humans will likely opt for something different. Let's hope your future includes the freedom to choose what you want.

Pension Risk Blog Is Eight Years Old

Wow - eight years and counting since I started www.PensionRiskMatters.com. I have worked with the Lex Blog team for half a dozen years and credit them for wonderful technical support and customer service.

Well over a million viewers and nearly a thousand posts later, I am told that my analyses and educational insights about a host of timely topics have been helpful to others. As I look back on what I have written over the years, I am struck by how much of what was deemed critical in its day remains immensely important now. Indeed, one might assert that topics such as pension risk management, service provider due diligence, fiduciary education and fee benchmarking have taken on a new life. There is more scrutiny of what goes on inside the investment committee meeting room and litigation seems to be on the rise. According to the producer of the upcoming American Conference Institute about the topic of ERISA litigation, he is facing a sell-out crowd this year. (I am happy to announce that I will be a co-panelist for a session at this conference and will address the topic of how to work effectively with an economic expert.)

I am deeply grateful for the feedback from this blog's many readers and always welcome comments and suggestions.

Happy 8th birthday PensionRiskMatters.com!

Happiness and the Bottom Line

In case you missed it, March 20, 2014 was International Happiness Day. Sponsored by the United Nations International, the Day of Happiness is a reminder that there are lots of good things in this world and a moment of reflection is a nice way to celebrate our gifts. Interestingly and not surprising, eighty-seven percent of people who took the online poll at www.dayofhappiness.net say that happiness trumps wealth. Is this bad news for the financial community? No it is not and here's why.

Research studies repeatedly link emotional well-being with economic productivity. In his informative book entitled "What Happy Companies Know: How the New Science of Happiness Can Change Your Company for the Better," Dr. Dan Baker (with Cathy Greenberg and Collins Hemingway) extols the virtues of businesses that recognize the importance of motivating workers with carrots and not sticks. By extension, happy workers will remain employed and their incomes typically rise as they carry out their duties with a smile. This is great news for the advisers who want to help those with money to invest.

Happiness is certainly a big business. A quick search of Amazon.com for books on this topic yields nearly 40,000 results. There's even a magazine called Live Happy. One of my favorite tee shirt companies is called Life is Good. You can watch "The Economics of Happiness" documentary and follow along with a study guide.

Some people keep a gratitude journal. Setting aside a few minutes of quiet time is likewise popular. ABC reporter Dan Harris must have struck a nerve as his book about meditation is a best-seller. Click to learn more about his 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works -- A True Story.

As readers of this blog know. I am a devotee of yoga and try to take a class whenever I can. My reasons include a desire to be fit and numerous advantages of taking deep breaths and focusing on the moment. The boost to concentration levels, especially for challenging projects, is a significant plus. The medical community continues to pay attention to the benefits of mindfulness. In late 2013, Bloomberg wrote about Harvard Medical School researcher, Dr. John Denninger, and his research about yoga, brain activity and immune levels. Since six to nine out of ten visits to see a doctor are cited as stress-related, costing companies roughly $300 billion per year, his federally-funded science can be helpful indeed to both individuals and employers. See "Harvard Yoga Scientists Find Proof of Mediation Benefit" by Makiko Kitamura (Bloomberg, November 21, 2013). Also check out "Take a Deep Breath," posted on the American Institute of Stress website.

Have a good day!

Peanuts and Pensions

In case you missed it, Kraft Foods Group Inc. ("Kraft") reported a fourth quarter 2013 increase in profit and a $1.11 per share accounting gain, due in part to its pension plan. Higher discount rates and bigger returns on its portfolio were cited factors, with a nod to the company's use of "some of the cost savings to boost marketing behind brands like Jello-O dessert and Planters peanuts." See "Kraft Net Soars on Pension-Related Gain" by John Kell (Wall Street Journal, February 13, 2014). Other news, straight from its earnings call, describes the use of roughly $600 million of the company's free cash flow to add contributions to the pension plans in 2013. The result is a rise in the funded ratio to 96 percent at calendar year-end, up from 77 percent one year earlier. Expected contributions for 2014 will run around $200 million, with $60 million of that number representing required cash to fund Kraft's Canadian pension plans. See "Q4 2013 Earnings Call Transcript," February 13, 2014 and "Kraft Foods Group Reports Fourth Quarter and Full Year 2013 Results," February 13, 2014. Noteworthy is that Kraft commenced a liability-driven investment ("LDI") strategy, to be phased in over multiple years, (and I am paraphrasing here) as a way to more appropriately line up "pension assets with the projected benefit obligation to reduce volatility" by moving towards an 80% fixed income, 20% equity securities mix. See page 62 of the latest Kraft 10-K filing.

This alert from Kraft is yet another example of the link between pension management and corporate finance. There are lots of other companies that have made similar declarations about the relationship between employee benefit plan economics and company operations. As I wrote in "Pension risk, governance and CFO liability" by Susan Mangiero (Journal of Corporate Treasury Management, 2012), private sector plan sponsors are acutely aware of the economic and legal aspects of offering ERISA plans to their respective work force. A dollar paid by shareholders for benefits could be seen as a cost that takes away from growing the enterprise or an investment in happy workers who add to the bottom line. Either way, the Treasury and Investor Relations teams are increasingly involved in discussions and related action steps to address the management of retirement plans. This is no coincidence. Liquidity, enterprise risk management, valuation, shareholder relations, talent retention and capital adequacy are a few of the numerous touch points that bring together the worlds of Human Resources ("HR"), the board and C-level officers such as the CEO and the Chief Financial Officer. This trend is unlikely to go away any time soon. To the contrary, expect more interactions across company functions and around the world.

To read a related blog post, see "Pension Risk, Governance and CFO Liability," PensionRiskMatters.com, March 4, 2012.

Private Equity Fund Limited Partners and Pension Funding Levels

Some pension plans invest in private equity funds or funds of funds. Certain private equity funds invest in companies with pension plans. This means that pension funds that invest in this asset class need to be aware of any deficiencies in their plans as well as those portfolio company plans to which they are likewise exposed. While the notion of "my brother's keeper" may not resonate well with stewards of billions of dollars, it is a reality. This is especially true, in the aftermath of the Sun Capital Partners III LP v. New England Teamsters & Trucking Industry Pension Fund decision, No. 12-2312 (1st Circuit, July 24, 2013).

Despite the "record year" described by Wall Street Journal reporter Ryan Dezember, private equity investments, like any other, necessitate careful due diligence on the part of institutional investors that seek a seat at the limited partner table. (See "Private Equity Enjoys a Record Year: Firms That Buy and Sell Companies Are Set to Return More Than $120 Billion to Investors in 2013," December 30, 2013). A critical question is whether continued gains will be diminished if a portfolio company has to divert cash to top off an underfunded pension plan. One way to address the issue is for a pension plan, endowment or foundation to ask the private equity fund general partner how much attention they pay to ERISA economics.

There are numerous other queries to make. In the March/April 2014 issue of CFA Institute Magazine, ERISA attorney David Levine (with Groom Law Group, Chartered) and Dr. Susan Mangiero, CFA (with Fiduciary Leadership, LLC), provide insights for improved due diligence, in a post-Sun Capital world. Suggested action steps include, but are not limited to, the following items:

  • Ask whether a private equity fund is "relying on the position that it is not a 'trade or business' and is therefore not subject to liability for a portfolio company's" ERISA plan deficit;
  • Request to see a list of the holdings for purposes of knowing whether a particular private equity fund has a majority ownership in any or all of its portfolio companies;
  • Investigate whether the Pension Benefit Guaranty Corporation ("PBGC") has red flagged any of the pension plan(s) of a business that is part of a private equity fund's portfolio;
  • Understand how, if at all, a private equity fund is planning to solve a pension plan underfunding problem;
  • Acknowledge that a portfolio company's ERISA liabilities could make an exit difficult, whether via an Initial Public Offering or an acquisition, and that this in turn could lengthen the time before a limited partner can cash out;
  • Identify the extent to which a private equity fund regularly examines the degree to which any or all of its portfolio companies are parties to labor contracts that may be difficult to modify; and
  • Be aware that this important legal decision could invite more litigation and regulatory actions that, regardless of outcome, have a cost and therefore a potential impact on future private equity fund returns.

If you have any difficulty in accessing our article, please send an email request to contact@fiduciaryleadership.com.

Deciding When to Tweak or Overhaul a Pension Plan

People in my family buy things to last. It doesn't always work out the way we want. For example, we can't watch internet movies through our television set because we have yet to upgrade to a newer box that has the technology to allow this to happen. However, sometimes it is better to upgrade, even if there is a short-term incremental cost to do so. I learned this lesson the hard way in recent weeks. Sick of an old laptop that constantly froze on pages with too many graphics and a printer that only worked when I cleaned the print head (and that became a frequent occurrence), I made a beeline to Staples. During my discussion with the technology salesperson, he agreed with me that the immediate outlay of buying new productivity tools would be a lot cheaper than upgrading with the purchase of a few parts. The speed, storage and ability to use newer versions of software were a few of the advantages we discussed.

Change can be a good thing or not. The concept of evaluating when to tweak plan design or asset allocation mix (or a host of other decisions), as compared to carrying out a complete overhaul, applies to retirement plans. Of course this assumes that it is even possible to modify. For a defined benefit plan that is grossly underfunded or a defined contribution plan that is set up to keep workers happy by offering a particular group of investments, reversing course could be problematic. On the flip side, a sponsor that can effect change that would be deemed advantageous by participants but does not take action could be accused of bad practices or worse. Keep in mind that lots of ERISA lawsuits allege actions that a fiduciary committee could have taken. The important thing is to be vigilant about what has to be done on an ongoing basis and respond accordingly,

At least some plan sponsors are taking heed of the need to review where things stand. According to a recent Aon Hewitt survey, 62 percent of polled 220 U.S. companies with traditional pension benefit offerings vowed to "adjust their plan's investments to better match the liabilities in the year ahead." Some respondents affirmed their intent to consider increased allocations to fixed income securities and hedging strategies, once their funding status improves. One out of eight companies queried are evaluating plan funding status as often as once per day. Click to download "2014 Hot Topics in Retirement: Building a Strategic Focus."

I have a t-shirt that reads "Change is good. You go first." It always makes me chuckle. Even when change is not warranted, it is important to demonstrate that at least someone has thought about risk factors and alternative ways to mitigate those identified uncertainties.Maybe the t-shirt should instead read "Assessing whether change makes sense is an important part of a fiduciary's responsibilities."

Romance Is Big Business

Despite a softer economy than in the past, Valentine's Day is still celebrated by millions of people with money to spend, billions of dollars in fact. According to information provided by the National Retail Federation, aggregate monies spent on flowers, candy and other tokens of affection are estimated at $17.3 billion, with the typical purchase in the amount of $133.91, a modest increase from last year's $130.97.

Candy, flowers, jewelry, cards and dinners out top the lift of favorite gifts to give. The U.S. Census Bureau sheds more light on Cupid's holiday spending bonanza. According to "Valentine's Day 2014: Feb. 14" (Profile America: Facts for Features, January 14, 2014), there were nearly 1,200 chocolate and cocoa product manufacturing establishments in 2011 that accounted for $13.5 billion in shipments that same year. Over 15,000 florists accounted for an estimated $355 million in fresh cut roses. The History Channel website counts 150 million cards that are sent each year, "making Valentine's Day the second most popular card-sending holiday after Christmas." That's a lot of affection for your favorite friends and family members.

Besides gift giving, a survey carried out by the National Confectioners Association reveals that six out of ten people "agree that celebrating holidays like Valentine's Day brings happiness in tough economic times." See "New survey says Americans will choose chocolate over flowers this season" (January 29, 2014). The United States is not alone when it comes to February 14. See "Valentine's Day around the world" for a nice wrap-up, courtesy of New Zealand 3News.

Here's to a fun day of celebrating good things. In case one day is not enough, National Gumdrop Day follows on February 15, along with a continuation of the Random Acts of Kindness Week that runs through February 16, 2014.