US Retirement Plans Combat Market Timing

Survey Confirms Plan Sponsors Taking Steps to Address Trading Abuses

BETHESDA, MD –AUGUST 3, 2004 – More than two-thirds (69%) of large retirement plan sponsors have taken action to control market timing in their 401(k) plans, according to a new survey by the Committee on Investment of Employee Benefit Assets, a committee of the Association for Financial Professionals (CIEBA of AFP). An additional 14% of survey respondents plan to institute rules or procedures to address market timing or excessive trading in the near future.

CIEBA members are responsible for investment of most of the nation’s largest retirement funds. Fifty-one CIEBA members responded to the survey on market timing, conducted in May of this year. Total market value of the survey respondents’ U.S. defined contribution plans was $192.5 billion.

“As fiduciaries, CIEBA members have the responsibility to ensure that participants in our plans are protected. This survey clearly demonstrates that sponsors of large plans have taken the issue of market timing in defined contribution plans very seriously,” said Gary Glynn, CIEBA Chairman and President of U.S. Steel and Carnegie Pension Fund. “In fact, almost one-third (30%) established rules or procedures to control market timing or excessive trading more than a year ago, before the media had focused on this issue.”

Results confirm that, at the time of the survey, one-quarter (25%) instituted their rules or procedures within the last year, one-third (33%) six months ago, 8% three months ago, and 30% more than one year ago. Eighty-five (85) percent of plan sponsors found their rules to be either very or somewhat effective at curbing market timing and/or excessive trading.

According to the survey 31% of plan sponsors have limited the number of trades (maximum trades) 25% require mandatory holding periods, 23% levy redemption fees, 17% impose lock-out periods, 15% issue warning notices and 12% use fair value pricing.

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The Committee on Investment of Employee Benefit Assets is the voice of the Association for Financial Professionals on employee benefit plan asset management and investment issues. CIEBA is a nationally recognized forum for ERISA-governed corporate pension plan sponsors on fiduciary and investment matters. CIEBA represents more than 110 of the nation’s largest retirement funds. Its members manage $1 trillion in defined benefit and defined contribution plan assets, covering 15 million participants.