The regulation of employer-sponsored retirement plans in the United States relies on fiduciary standards drawn from donative trust law to regulate the conduct of those with authority or discretion over plan assets. The mismatch between the trust-based fiduciary framework and the rights and interests of employers and employees has contributed to the high cost of pension fund investing and the significant gaps in pension coverage in the private sector. In recent years, state and local governments have stepped in to reduce the retirement coverage gap by creating state-facilitated retirement savings programs for private-sector workers who lack access to employment-based coverage. In 2019, five states—including California, Illinois, Massachusetts, Oregon, and Washington—had programs open to participants.
This Symposium Essay shows that while the five programs vary in the roles and responsibilities imposed on state actors and on the participating employers, there is a notable shift away from traditional fiduciary obligations as the primary constraint on the conduct of plan administrators, particularly with respect to plan fees. In a stark departure from the regulatory regime for plans sponsored by private-sector employers, several states impose explicit caps on total fees that may be charged to plan participants. Furthermore, while in some cases, the fee caps are paired with traditional fiduciary obligations for state administrators, in other cases the statutory provisions make no mention of fiduciary duties. The Essay presents the benefits and the risks of the new regulatory approaches and outlines a research agenda to assess the effectiveness of fee caps as either a complement to or substitute for existing fiduciary-based regulatory frameworks. The findings from the state experiments in retirement plan governance will offer important insights to policymakers seeking to improve retirement security in the United States.
Business Organizations Law
Estates and Trusts
- Journal title
University of Cincinnati Law Review
- Date submitted
6 September 2022