Yale Law Professor scares 6K Plan Sponsors and everyone missed the point

When I was in law school and the Executive Editor of the student magazine there, I uncovered a scandal where the bulk of editors and staff members of a student run law journal did not fill out and verify they completed the hours of work necessary to receive academic credit for that work.  There was never explanation of why that was so, just attacks on my credibility. Rather than admitting their mistakes, the law journal’s editors tried to change the subject, but the scandal was still there. Substantive change was implemented by the law schoolafter the scandal to alleviate the concerns I raised.

A Yale law professor by the name of Ian Ayres sent out 6,000 letters to plan sponsors around the country that he targeted as having high fees.

The tone of the letter wasn’t particularly nice, but I haven’t met many professors (especially law professors) who know how to write anything other than a law article very well.  The letter stated “Using data from the form 5500 your company filed with the Dept. of Labor in 2009 and BrightScope Inc. I have identified your plan as a potential high cost plan. We recommend that you improve your plan menu offerings, including adding lower fee options, both at the plan and fund level, and consider eliminating high-fee funds that do not meaningfully contribute to investor diversification.” Ayres then claimed he would name these expensive plans on Twitter in 2014.

Of course, advisors, ERISA attorneys, and plan sponsors are in an outrage, but everyone is missing the point.

I’m sure Professor Ayres is doing some type of research regarding plan expenses and his manner in writing to plan sponsors could be a lot nicer and he could be a lot more current than Brightscope’s 2009 ratings.

The point is that information regarding plans and expenses are public information. Anyone wishing to target expensive plans can do so, whatever service they want to use including the Department of Labor’s efast Website. So plan sponsors need to take into consideration that if their plan pays too much in fees, someone out there in the public can easily access that information.


In addition, only a poorly written letter threatening to shame plan sponsors got their attention. I have met so many plan providers who tell me that they have reviewed the expenses of a plan sponsor and get blown off by that sponsor when the fee discussion comes up. Plan sponsors don’t have to be shamed into doing their job in making sure that plan expenses are reasonable for the services provided.


Instead of crying about the effects of a poorly written letter, a recipient of this letter should take this letter from Ayres as a call to action to improve their plans. If Ayres sees it based on old data, plan sponsors should see the same problems using current data. The Ayres letter is no a scarlet letter, it can be removed by a little action by the plan sponsor.

Everyone in the industry shouldn’t just attack the messenger, but check the message.

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