“No Duh!”was my favorite response by a colleague to the DOL’s alt asset proposed regulation, which is replete with references to the need of the fiduciary adviser to “read and critically review” the core documents of any of a plan’s investments. That proposed reg does grant plan sponsors some grace, only requiring that they (who retain the investment adviser) “read and critically review” the assessment of that fiduciary adviser, without imposing on them the obligation to also read those underlying investment documents. Sponsors can rely upon their 3(21) and 3(38) advisers to fulfill that obligation.

This is just not an “alt asset” investment requirement: it looks to have been wrapped up as part of a general prudence expectation for non-alt investments, as well, such as annuity contracts and mutual funds (or at least some their procedures). I strongly suspect that this now explicit prudence requirement that fiduciaries read and critically review documents will NOT be changed in the process of finalizing this regulation. This function is, as one may say, as American as apple pie. I think that it is a general assumption that fiduciary advisers actually do “read and critically review” these base documents (thus the appropriateness of the “no Duh” comment) as part of any fiduciary review, or their firms’ technical staffs actually accomplish this feat. Yet I also strongly suspect that this procedure has been generally more strongly honored in its breach. Having written many annuity contracts, CIT documents and other investment documents over time-while having had to read and assess far too many of them in the process- I also will assure you (as if you didn’t already know!) that these documents are not written to be read-or even understood by the faint of heart.

This really goes to the core of the matter, I think. With ERISA having no readability standards, the advisers seeking to take advantage of the benefits granted (see, for example, Matthew Eickman’s excellent write up on these opportunities) to them by the safe harbor (or now just to be prudent) are likely to find themselves having to translate some of these very ugly documents into a sort of plain English that is decipherable by their plan sponsor clients. It looks as if a successful “translation” may become a part of the advisers’s own fiduciary obligation.

Plan English has been a goal eluding federal and state regulators in the retail market for a very long time. The SEC, in its A Plain English Handbook, actually has some meaningful suggestions about what this standard could look like:

We’ll start by dispelling a common misconception about plain English writing. It does not mean deleting complex information to make the document easier to understand. For investors to make informed decisions, disclosure documents must impart complex information. Using plain English assures the orderly and clear presentation of complex information so that investors have the best possible chance of understanding it.

Plain English means analyzing and deciding what information investors need to make informed decisions, before words, sentences, or paragraphs are considered. A plain English document uses words economically and at a level the audience can understand. Its sentence structure is tight. Its tone is welcoming and direct. Its design is visually appealing. A plain English document is easy to read and looks like it’s meant to be read.

Applying this in the context of DC Lifetime Income Programs, I have always strongly felt that their successful implementation really does require a knowledgeable advisor. Its not that such matters are particularly complex, they are just in an area in which the typical plan sponsor has little familiarity. With these newly explicit prudence requirements, advisers probably now need to dive in where they probably have not in the past.