Hosting an industry conference? Ask us about including it in this ticker?
What do you think of our site upgrade?

Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 11/19/10

November 21
23:37 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 1020805_25983300_Trending_Topics_2010.11.19_stock_xchng_royalty_300those in the business of supporting these fine folks. If you smile when you read these entertaining snippets, well, that’s the idea.

Fiduciary News Lead Story:

New Study Explains Why the 401k Match FAILs,” (Fiduciary News, November 16, 2010). Pre-publication draft of new study sheds new light on the value – or lack thereof – of 401k matching and participant education. In a Fiduciary News exclusive, one of the study’s authors suggests a solution.

Fees – Giving Thanks No One Reads the Fine Print:

Never a week goes by without some media outlet complaining about 401k fees. Why? Because fees are easy to count. Good service is difficult to measure, but a fee always carries a number attached to it.

Shining a Light on Murky 401k Fees,” (Wall Street Journal, November 13, 2010) Here’s the irony of all this hubbub about fees – of all the “bad” fees, the sophisticated fiduciary would call 12b-1 fees the least murky. (You want murky, try adding up all the fees in an insurance product – that’s if you can find them.) So, what does the Wall Street Journal call “murky”? Not a word about those famous annuities some folks want to see in 401k plans. No, it’s all about 12b-1 fees. Again, the ICI recently reported 12b-1 fees are relevant in less than 10% of the 401k market. But it’s OK to require all (that’s 100%) 401k plans to offer annuities.
12b-1 reform fades into the background,” (Investment News, November 14, 2010) At the same time the DOL is mandating fee disclosure (see above), Investment News reports the SEC is deferring judgment on the disposition of 12b-1 fees. For some reason, the SEC thinks a little hard to charge the same fee directly (like most 401k investment advisers do) versus getting a mutual fund (with just a tad bit of self-interest) to charge it instead. And they wonder why Main Street has such a poor perception of Wall Street. And their lobbyists…
Fund industry objects to limits on certain fees,” (MarketWatch, November 15, 2010) Apparently, this lobbying thing really works (see above). Interesting thought: Why would a mutual fund willingly give up performance points (by paying 12b-1 fees)? Simple: You can’t see performance (remember – “past performance cannot guarantee future results). You can, however, apparently bribe gatekeepers to funnel their clients’ hard earned money to those same said mutual funds. Oh. Now I get it. That’s why it’s called marketing.

Regulatory Update – Giving Thanks to Those Minding the Store:

The lobbyists can only get so far. Behind the scenes, regulators continue to regulate. They make the rulings we’re interested in, start nudging the industry towards common sense solution and even, on occasion, nail the bad guys.

401k Limits Won’t Rise,” (Wall Street Journal, November 14, 2010) Nothing to see here. Just move along. Max is still $16,500, plus another $5,500 for those 50 and over trying to catch up.
EBSA Cracking Down on Contributions not Deposited,” (, November 16, 2010) This is an employee’s worst nightmare. We’re not talking just about a delay in depositing the salary deferrals. No, we’re talking about employers who actually used the money for their own corporate purposes.
Fiduciary Standard, More Adviser Oversight Likely – Finra Chief,” (Wall Street Journal, November 16, 2010) This is an easy one to figure out, but you need to read it to be sure. FINRA wants to expand its horizons. Maybe this is good. Maybe this isn’t. Read the article and it should be obvious.
Government Cracks Down on Worker Benefit Thefts,” (ABC News, November 16, 2010) ABC carried this Associated Press story, which contains more details than the PlanSponsor article above.
The DOL’s DC Fiduciary Shift, and the SEC’s on Munis: Connecting the Advisor Tea Leaves,” (Advisor One, November 17, 2010) This article offers what perhaps might be a sneak preview to the SEC’s thinking on the fiduciary standard. Read it for the details.

Investments – Giving Thanks to Those Who Try Their Best:

The road to discovery (and success) is often littered with dark alleyways and mysterious forks. The world would be a whole lot less exciting without them (and, besides, they give us something to write about).

The Intelligent Investor: Are ETFs a Menace?” (Wall Street Journal, November 13, 2010) The Wall Street Journal comes a little late to the game on one of the previous week’s top stories.
More financial advisers are recommending absolute returns strategy mutual funds,” (Wall Street Journal, November 13, 2010) Here’s a short piece about what’s becoming the definitive trend in investmentspeak.
Worthwhile? The most widely held funds in 401k plans,” (Philadelphia Inquirer, November 17, 2010) Unfortunately, the article doesn’t contain the list (here’s the original BrightScope press release from October). Interestingly, the story points out how these funds performed worse than the market, but four them were index funds (and, on top of that, one was a bond fund and one was an international fund).

Participants – Giving Thanks to What It’s All About:

Participants take a beating every day. They’re either collectively too “human” to make the rational decision or they’re being taken advantage by corrupt Wall Streeters or getting whipsawed by mindless regulators. It’s good to know, however, in the end, they seem to be doing the right things and getting where they need to go.

2 of 3 participants start or add to 401k contributions,” (Pensions & Investments, November 15, 2010) As laudable as this sounds, it’s difficult to determine the significance of these numbers. While the numbers are a little bit better than the previous year, we don’t see the longitudinal data and we don’t know the details of the sample used.
Survey reveals top retirement concern of Americans,” (Investment News, November 17, 2010) The Edward Jones survey shows Americans continue to worry most about health care during retirement. Apparently, some have already solved this dilemma, because the second more cited concern was the fear they’d need to work longer and retire later.
46% of Pre-Retiree Boomers Have Target Retirement Date,” (Financial Planning, November 16, 2010) This is good news. The first step to success is to have a plan. Even better, almost have can retire when they want to.
Study: Retirement Incomes Up As 401k Plans Replace Traditional Pensions,” (Barrons, November 18, 2010) More good news as it turns out 401k plans have provided more retirement income to retirees than they would have received in traditional pension plans. Makes one wonder – if it worked in the private sector why wouldn’t it work in the public sector?

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.

401k Scorecard Shows Good News and Bad News,” (, November 15, 2010)
CalPERS Says it Won’t Pay Bell Pensions,” (, November 12, 2010)
Personal Pension Plans: Simplicity is Key,” (Financial Planning, November 15, 2010)
What Plan Sponsors Want From Advisers,” (, November 16, 2010)
Schwab: Company matches mean more 401k participation,” (Pensions & Investments, November 16, 2010)
Restoring Retirement Readiness,” (Registered Rep, November 1, 2010)
The Unretiring Generation,” (Registered Rep, November 1, 2010)
Pennsylvania pension reform bill heads to governor,” (Pensions & Investments, November 16, 2010)
BofA Merrill’s Live 401k Advice Is a Hit,” (Financial Planning, November 15, 2010)

Wisdom from Some of Our Favorite Blogs:

401kBasics: Plan Sponsor Quick Tips: Crucial Safe Harbor Considerations
fi360 Blog: Fiduciary Links: 12b-1 fees front and center
401kBasics: Keep the Course: Investments 101—Cash Equivalents

Hot Tips from Popular Web Resources:

FreeErisa: US Labor Department sues owner of defunct Massachusetts, Rhode Island company to restore more than $6.6 million in misused funds owed to company pension plan
FreeErisa: Sandwich Generation Faces Retirement Uncertainty

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


No Comments Yet!

There are no comments at the moment, do you want to add one?

Write a comment

Only registered users can comment. Login is sponsored by…

Order Your 401k Fiduciary Solutions book today!

Vote in our Poll


The materials at this web site are maintained for the sole purpose of providing general information about fiduciary law, tax accounting and investments and do not under any circumstances constitute legal, accounting or investment advice. You should not act or refrain from acting based on these materials without first obtaining the advice of an appropriate professional. Please carefully read the terms and conditions for using this site. This website contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that may be provided by or through such websites.