Who says government regulation doesn’t influence behavior? The predicted 401(k) move from money market funds to other low-risk options is on, according to The Wall Street Journal.
The reason, the paper reports, is that new rules require fees, or “gates,” to be imposed on money market funds that invest in both corporate and government debt in order to prevent 2008-style runs that broke the buck.
Funds that invest only in government debt, however, are exempt. As one might expect, the Journal notes higher inflows into government-only money market funds, as well as more investor interest in stable value funds.
“The moves to stable-value funds come amid at least three lawsuits filed by lawyer Jerry Schlichter in which plaintiffs allege that plan officials breached their fiduciary duty by using low-yielding money funds without considering stable-value funds,” the paper explains. “Defendants health insurer Anthem Inc. and human-resources-services company Insperity Inc. have filed to dismiss the claims against them; Chevron Corp. hasn’t filed a legal response and didn’t respond to a request for comment. Insperity has claimed in a court filing that it isn’t a fiduciary of the plan.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
