PLANSPONSOR - April/May 2020 - 12

UPFRONT
All Eyes on Financial Markets
IN TIMES of market volatility, experts
suggest that fiduciaries of defined contribution
(DC) plans or defined benefit
(DB) plans should hold additional meetings
and ask more questions about their
plan's investments.
Jim Scheinberg, managing partner,
founder and chief investment officer
(CIO) at North Pier Search Consulting,
says sponsors of defined benefit plans
" should be checking that their assets are
conforming to their written investment
policy statement [IPS]. The drawdown in
equity values has been substantial.
" Their funding levels could be below
their targets and possibly below the ranges
to which they are bound within their investment
policies, " Scheinberg continues.
" Some of them are having conversations
about rebalancing liquidity displacements
in certain asset classes. The problem is,
there is no bid in some of those areas, so
timing has to be factored into the equation.
Committees might need to be changing
policies or extending latitude. "
Market volatility may also affect DB
plans' funding targets. Attorney Gregory
12 PLANSPONSOR.COM April - May 2020
L. Ash, leader of Spencer Fane LLP's
employee benefits practice group, says
sponsors of DB plans should " consider
asking their actuaries to conduct mid-year
valuations, taking into account current
market conditions, so any contribution
increases that are necessary to avoid
at-risk or endangered status can be spread
over a longer period. "
For DC plans, Scheinberg says, an
item that should be at the top of retirement
plan committee agendas in the
coming quarter is the evaluation of the
qualified default investment alternative
(QDIA), specifically any that are a targetdate
fund (TDF). " The QDIA selection
process has been relatively easy during
the bull market. But this extreme volatility
is exposing features that might be more
risk prone and perhaps not appropriate
for the demographics for whom they were
chosen. Some of the TDFs are in the more
aggressive category. Fiduciaries need to
revisit that. "
Because of that market volatility,
retirement plan fiduciaries should be
asking additional questions of their
Art by Hyesu Lee
investment managers and advisers, say
attorneys Randy Scherer, Lisa Van Fleet
and Steve Evans at Bryan Cave Leighton
Paisner (BCLP) in a blog post. " When the
circumstances include a volatile market,
acting prudently may require a fiduciary
to research more, ask more questions or
more regularly seek expert advice. "
They note that many investment
managers and plan providers are supplying
educational materials about how to respond
to market changes. " Fiduciaries should
utilize these resources and/or take similar
action on their own, " they say, reminding
fiduciaries to document the actions they
take, as well as the process behind those.
Ash points out that the Employee
Retirement Income Security Act (ERISA)
says fiduciaries must act prudently
in respect to " the circumstances then
prevailing. Consider calling a special
meeting to evaluate the situation, " Ash
says. " Waiting until the next regularly
scheduled meeting of the fiduciaries-
which could be months away-might
not be considered prudent in light of the
market's volatility. " -Lee Barney
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PLANSPONSOR - April/May 2020

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