Both defined contribution and defined benefit plans use money market accounts to ease administration. Money market funds also are used to provide liquidity in unitized funds.

"Concerns have been raised that the Commission may require either that a money market fund's NAV "float" on a daily basis or that the fund would be required to hold back some percentage of an investor's shares as a "liquidity fee" for 30 days when an investor redeems their shares," the letter said. "We believe these changes will alter the fundamental characteristics of money market funds, namely their stable pricing and full liquidity. This could have unexpected adverse effects on plans that use these important investment vehicles."

As an example, the council said that defined benefit plan fiduciaries may exit money market funds because they no longer meet the plan's needs for ready liquidity. The changes also could cause difficulties for ERISA fiduciaries that the Commission has not considered. Shares "held back" or restricted would continue to be considered ERISA "plan assets." The proposal under consideration would require that "held back" or restricted shares would be used to make the fund whole if a fund cannot maintain its $1.00 NAV (commonly referred to as "breaking the buck" or "breaking the dollar").

"It simply is not clear that an ERISA fiduciary could allow the plan's assets to be invested under these conditions consistent with regulation of plan assets under ERISA."

A proposed liquidity fee would pose significant operational problems for the recordkeeping of 401(k) plans. The council also expressed concern that if these major regulatory changes take place, employers will be left without a viable alternative to money market funds that can meet the needs of the plan and its participants, particularly the need for low-cost cash management.