Plan Sponsor on 401(k)s and MMFs
Plan Sponsor magazine published an article, "Money Market Reform: Plan Sponsors are Misinterpreting the Rule Amendments." It says, "Some qualified retirement plan sponsors and service providers are misinterpreting the likely impact of the Securities and Exchange Commission (SEC)'s money market fund (MMF) reforms, opining that the rulemaking will necessarily drive defined contribution plans away from retail money market funds. Concerned industry groups warn that, despite a relatively long window provided for the reforms to take effect, huge numbers of plan sponsors will all at once, as the end-date approaches, turn to re-examining their money market options in light of their fiduciary duty to plans and participants. The industry groups say they worry that plan sponsors will feel compelled to replace their retail MMFs with government MMFs, which will escape some of the new restrictions.... To clear up any misunderstandings, the SEC is focusing on educating the retirement planning industry about the likely impact the July 2014 money market fund rule amendments will have." It continues, "The rulemaking also contains guidance about the fees and redemption gates that have caused some Employee Retirement Income Security Act fiduciaries to doubt whether they will still be able to offer retail MMFs. This is a common misconception -- that retirement plan fiduciaries will be flat out required to start using government-sponsored MMFs, which will not have the use of liquidity fees and/or redemption gates.... The money market fund rulemaking generally understands defined contribution retirement plans as collections of natural persons, rather than as a distinct class of institutional investors. This, in turn, means most of these plans will be able to continue to invest in retail MMFs." See also, Reuters' "U.S. T-bill rates jump on debt ceiling worries", which says, "Interest rates on U.S. Treasury bills due in November jumped on Monday on worries the absence of a deal to raise the federal borrowing limit will result in the government delaying payments on its debt obligations. About $235 billion of Treasury bill issues are scheduled to mature next month. Jitters about delayed repayments to T-bill holders in less than a month distorted the interest rates in this sector."
