As the federal probe into securities abuses by mutual fund companies deepens, frustrated retirement plan sponsors are finding it difficult to know how best to protect investors’ assets.
"Plan sponsors, of course, are very concerned," assured Ed Ferrigno, vice president of the Profit Sharing/401(k) Council of America. "But it’s such a fluid situation right now that they can’t give any cogent advice yet."

And what little information plan sponsors do have to go on isn’t helping clear the waters. Reports from the Securities and Exchange Commission show the agency has subpoenaed some 88 mutual funds, and "found problems with many, but they haven’t said which ones they are, which leaves plan sponsors in a tough spot," according to Ferrigno.
Not knowing which plans are safe, plan sponsors may be flying blind in deciding whether to pull assets from certain funds. "Who’s to say they haven’t gone from the frying pan to the fire?" Ferrigno wondered. Further, pulling assets from a fund brings with it new concerns, he said.
"Some funds are also recordkeepers for the plan," he points out. "And firing a recordkeeper could lead to legal issues or even a plan blackout to convert to a new fund." Also, "if plan sponsors take investors’ money out of a fund without participants’ active consent, the plan sponsor has fiduciary responsibility for that money – which is tricky," he added.

"Although plan sponsors do it every day, it does complicate matters."

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