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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 10/29/10

November 01
07:18 2010

Welcome to Fiduciary News Trending Topics. Each Monday, we’ll give you a quick synopsis of the major news events and trends impacting ERISA plan sponsors, 401k fiduciaries and those in the business of supporting these fine folks. If you 1020805_25983300_Trending_Topics_2010.10.29_stock_xchng_royalty_free_300smile when you read these entertaining snippets, well, that’s the idea.

Fiduciary News Lead Story:

Exclusive Interview with Stanford Professor Charles Lee: Why Fees May be Less Important to 401k Plan Sponsors,” (Fiduciary News, October 26, 2010). Professor Lee’s research exposes two myths that make it critical for 401k plan sponsors to fully vet all the relevant research as part of their standard due diligence process. Fees represent only one of them. The other might be a surprising “gotcha!” – especially if you haven’t graduated from college (or got an MBA) before 2000 – so much so you might not believe your own lyin’ eyes.

Wither “Fiduciary”?:

There’s no doubt that between the one-two autumnal punch provided this year by the DOL, the proposed revision to the definition of fiduciary has taken the top headlines. This promises to be a substantial battle. Let’s see if the DOL has the you-know-what to withstand the entrenched status quo.

Proposed DOL regs expose more advisors to fiduciary liability,” (RIABiz, October 22, 2010) Don’t be fooled thinking this is a repeat of what you read last week. One of the advantages of giving yourself some time to file an article is being a little bit more thorough. It’s kinda like why “the fastest guns in the West” often didn’t survive too long – they didn’t take the time to aim. This article adds some delicious insight, including this closing line: “‘If it gets rid of schlocky advice, that’s OK with me,’ Borzi said.”

Speaking of Fees:

It’s not the fees you can see that you should worry about, it’s the fees you can’t see. Bundled products have traditionally been used to hide certain fees and give some providers an undo advantage. Maybe this will solve that problem.

Department of Labor Releases New 401k Fee Disclosure Rules,” (Institutional Investor, October 2010) Here’s another article that took the time to savor the news before blurting it out. The article really gets to the meat of the matter – the challenge of figuring out the bundled costs. The piece implies the new rules have the potential to expose revenue sharing abnormalities – should they exist. Still, the industry’s real issue isn’t revealing this information to plan sponsors as required in 2011, but determining a cost effective way to report fee to participants as required in 2012.


This is a problem that might not go away until the bottom falls out. Sorta like those “worry-free” mortgages a few years ago.

Trouble Brewing: The Disaster of California State Pensions,” (National Center for Policy Makers, October 25, 2010) This article provides a rather interesting tidbit – all the bad news we’ve been seeing has used data as of June 30, 2008. Things have gotten a lot worse since. There’s also a hint the plan’s equities have performed only as well as the market has this past decade (meaning, they haven’t performed at all). Is this what we mean by “too big to fail”?
Pension industry to fight for retirement plan tax breaks: IN’s Schoeff,” (Investment News, October 25, 2010) Is it possible retirement needs will bring together the Tea Party and the liberals? That’s what this article suggests. Of course, the first 80% of the article explains how to buy influence in government. Not sure if that’s a Tea Party thing or not.

Major Plan Sponsor Moves and News:

What are other plan sponsors and fiduciaries doing with their plans? And how are participants responding? The latest in legal proceedings involving plan sponsors and fiduciaries.

As US Unemployment Stays High, More 401k Savers Take Loans,” (Wall Street Journal, October 22, 2010)
ETFs Gaining Traction with 401k Service Providers,” (Investor Place, October 26, 2010)
Warning: Retirement Disaster Ahead,” (Wall Street Journal, October 26, 2010)
The Funds 401k Investors Love Most,” (Institutional Investor, October 2010)

Wisdom from Some of Our Favorite Blogs:

fi360 Blog: Fiduciary Links: DOL expands fiduciary definition
401kBasics: Plan Sponsor Quick Tips: Delinquent Filer Voluntary Compliance (DFVC) Program
fi360 Blog: DOL takes action to require additional transparency and accountability
401k Fiduciary Advice Blog: A User’s Guide for 401k Education v. Advice – What Fits Your Participants?
401kBasics: Keep The Course: Why Can’t I Take a 401k Withdrawal?
Chicago Financial Planner: Beating the Market, the Holy Grail?
Behavior Gap: Greater Fool Theory

Hot Tips from Popular Web Resources:

Employee Benefits Institute of America: DOL Final Regulations: Fiduciary Requirements for Fee Disclosure in Participant-Directed Individual Account Plans
Employee Benefits Institute of America: DOL Releases Proposed Regulations That Would Broaden the Definition of Fiduciaries Providing Investment Advice
Deloitte: New ERISA Fee Disclosures for Participant-Directed Individual Account Plans

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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