TO: Field Managers
SUBJECT: Plan Sponsor Proxy Fiduciary Responsibilities
FROM: Shaun Mathews, President
Several of you have indicated that certain plan sponsors have questioned
whether as a fiduciary they must vote no to a request to raise management
fees.
As is indicated in the proxy statement, the fee increase is being proposed to
benefit the fund and its shareholders by providing resources to the fund
manager comparable to those received by managers of other funds (which the
sponsors probably currently include in their contracts). The resources would
provide increased management capabilities to the funds and allow them to
remain competitive. The fee increase recommendation was approved unanimously
by the independent directors of the fund after a thorough review of the
marketplace and competitive fees, but more importantly, it is based upon their
best judgement regarding the financial resources needed to produce competitive
and high quality services on behalf of the Aetna portfolios going forward. The
fund directors owe a fiduciary duty to the shareholders in the fund in the
same way that the plan sponsors owe a fiduciary duty to participants. In
discussing this issue with plan sponsors, you should point out the provisions
in the proxy statement that discuss how and why the independent board of
directors of the funds voted unanimously to recommend these fee increases.
As a fiduciary, the plan sponsor is not obligated to vote "no", since such a
vote might be detrimental to the shareholders of the fund by limiting
resources available to the fund. Given the information provided in the proxy
about the independent board's rationale and recommendations, a "no" vote could
raise the same fiduciary concerns for a plan sponsor as a "yes" vote, since
this could impact the resources available to manage the funds going forward.
Plan sponsors who raise these questions should be directed to the proxy which
provides the very adequate rationale for voting yes.
In the final analysis, if a plan sponsor is concerned about fiduciary
responsibility in voting the proxy, based on the materials provided to the
sponsor, a "yes" vote is very justifiable. A plan sponsor who is having
difficulty weighing these issues can always "abstain."
Please let me know if you have any questions.
