Compliance February 2, 2009

NewRiver Accuses Morningstar of Unlawful Use of Prospectus Product

Mutual fund data repository NewRiver, Inc., announced it has filed suit against Morningstar Inc. over use of its prospectus product.
Reported by

According to a release, the lawsuit alleges unlawful access to NewRiver’s Prospectus Express Web-based data warehouse and unfair competition related to NewRiver’s Prospectus Express product. “NewRiver intends to vigorously protect its proprietary interests in its Prospectus Express product through the prosecution of the lawsuit,” the release said.

A statement from a Morningstar spokesperson said the company believes NewRiver’s lawsuit is without merit and is a tactic to discourage competitors. According to the statement, it is one of four firms NewRiver is currently suing.

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Morningstar said it built its document library years ago for internal use, and in response to requests from clients, recently began to offer access to that database through its Global Document Library product. “In no way did Morningstar use any NewRiver technology, information, or data to create, build, or market our Global Document Library product,’ the statement said.

Morningstar said it looked at the dates of some widely available public documents contained in NewRiver’s database for benchmarking purposes to compare the timeliness of Morningstar’s data with NewRiver’s, but does not believe it violated any of NewRiver’s rights by accessing those public documents.

“We intend to continue to compete with NewRiver fairly, in the marketplace. We will not be deterred by NewRiver’s lawsuit,’ the statement said.

Data & Research February 2, 2009

73% of DC Sponsors Plan No 2009 Match Changes

While media accounts may be full of reports of employer decisions to suspend their retirement plan company match contributions, 73% of DC plan sponsors in a new survey plan no match changes.
Reported by

A Callan Associates news release about its DC sponsor poll said 1% planned a match decrease while 20% of respondents were unsure what steps they might take by the end of 2009 regarding the match.

One thing of which participating sponsors were certain: They intend to step up communications with participants in coming months. In fact, two out of three sponsors intend to provide more DC communication/education in 2009.

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Of these, according to the announcement:

  • 95% will increase investment communication.
  • 71% will increase communication around participation.
  • 64% will increase communication about retirement income adequacy.

Another area of DC sponsor certainty, according to the Callan data, sponsors’ primary areas of focus in 2009 are fund/manager performance and due diligence.

More than one-third (39%) of participating firms replaced a fund/manager in 2008 for performance-related reasons. Some 44% said they expect to replace a fund/manager for performance-related reasons in 2009.

Keeping a Closer Eye

Stepped-up monitoring is also a priority for respondents to Callan’s survey. Plan sponsors have been increasing investment committee meetings by holding ad hoc sessions or changing to monthly get-togethers.

More than three-quarters (76%) of plan sponsors report increasing the number of investment committee meetings in light of market volatility.

The Target-Date Fad

The Callan poll also reflected the continuing explosion in the popularity of target-date funds. According to the Callan announcement:

  • 59% of plans now use a target-date fund series as their default investment vehicle, up from 32.5% in 2006. Nearly half (43%) of plans use the target-date funds of their recordkeeper.
  • Balanced and asset allocation funds are used by 23.1% of plans, down from 27.5% in 2006.
  • Stable value is used by 12% of plans, down from 30% in 2006.

Portfolio construction, or the glidepath, of the target-date fund ranks as the most important criteria in selecting or retaining target-date retirement funds. Performance ranks a distant second.

Reassessing plan features and design ranks low in priority for plan sponsors in 2009. Few plan sponsors expect to add a Roth contribution, investment advice, automatic enrollment, or contribution escalation to their plans, according to the Callan data.

The Callan survey was fielded online in late November and early December 2008, and results incorporate responses from 107 companies. The majority (79.8%) of respondents offered 401(k) plans. Other respondents provided profit sharing, 457, and 403(b) plans. The majority of plans had more than $100 million in assets and nearly one-third had assets of $1 billion or more.

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