Compliance February 25, 2010

EBSA Recovered More Than $1B in 2009

The U. S. Department of Labor’s Employee Benefits Security Administration (EBSA) reported recovering $1.36 billion in 2009 for employee benefits plans governed by the Employee Retirement Income Security Act (ERISA).
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An EBSA news release said the agency closed 3,669 civil investigations in fiscal year 2009.  In more than 72% of those cases, the agency found violations and obtained correction.  Criminal offenses involving employee benefit plans led to indictment of 115 individuals.

The agency also recovered $124.5 million for workers and their families through informal resolution of individual complaints. In addition, the agency said results were achieved through the its compliance assistance programs.

The Voluntary Fiduciary Correction Program (VFCP) received 1,692 applications from employers, plan officials, service providers, and other fiduciaries to self-correct violations of ERISA, and the Delinquent Filer Voluntary Compliance Program, which helps plan administrators comply with ERISA’s filing requirements, received 26,603 filings.

EBSA also reported it handled 365,457 inquiries from the public and conducted more than 1,500 education and outreach events that reached workers, employers, plan officials, and Congressional members. 

“These results reflect a strong, fair and aggressive program to protect the benefits of American workers, retirees and their families. We believe our civil enforcement program demonstrates the success of using targeted investigations,” said EBSA Assistant Secretary Phyllis C. Borzi, in the release.

A fact sheet about EBSA’s enforcement results, as well as more information about the VFCP, is available at www.dol.gov/ebsa.

The Markets February 25, 2010

SI Report Sees Inflection Point for the Mutual Fund Industry

The mutual fund industry gathered $4.2 trillion in net cash flows worldwide in the second half of the decade, according to a new report from Strategic Insight (SI), an Asset International company.
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In 2009, investors withdrew $650 billion from money-market funds, but in turn contributed almost $900 billion globally to long-term funds across asset classes. 

“Equity and mixed funds led the way with $1.7 trillion in cash contributions, followed by almost $900 billion to fixed-income funds, mostly from the U.S., but with meaningful contributions from Asia.” commented Daniel Enskat, senior managing director and head of Global Consulting at SI.

The analysis noted that $60 trillion in cash is “on the sidelines earning near-zero yields,” and that demand for income yielding investments will benefit mutual funds.

Future Trends

Additionally, the report noted that Asia local long-term fund flows of $850 billion in the last five years were almost 10 times larger than in Europe, and Asia-attributable offshore flows of about $120 billion brings Asia almost on par with the US.  “In other words, Asia with only a fraction of U.S. assets under management and only about 5% mutual fund household penetration across the region (compared to close to 50% in the US) generated almost equivalent net flows,” according to SI.

Asia-Pacific is expected to surpass North America in terms of the number of high-net-worth investors at some point in the next three years, while different investment cultures, goals, and asset allocation frameworks “could result in a new era for wealth management in emerging markets with regard to portfolio construction and client segmentation,” noted SI.

SI said that global money managers are relocating CEOs to Asia, while Asian institutions see a “once in a lifetime” opportunity to take market share away from global competitors.  Additionally, the report cited a “rare opportunity” in the European fund management industry, which it said could benefit from hundreds of billions in net flows back to funds in 2010 as investors continue to cautiously shift back to equities and long-term investments.

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