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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 1/14/11

January 17
21:13 2011

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, 1020805_25983300_Trending_Topics_2011.01.14_stock_xchng_royalty_free_300401k fiduciaries and those 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:

Exclusive Interview: Boston ERISA Legal Author Stephen Rosenberg Explains DOL’s New Fiduciary Definition,” (Fiduciary News, January 11, 2011). Did the DOL just upstage the SEC? Or merely raise the liability for the 401k fiduciary?  Author and Legal expert Rosenberg addresses the implications of the DOL’s proposed new definition of fiduciary.

Fiduciary – the Day is Finally Here (at least from one regulator):

In the end, whose rules will rule? The SEC or the DOL? The SEC is expected to throw out the initial salvo this week, with the DOL pushing things back into March.

Advisers should use annual meetings to reinforce the benefits of adhering to fiduciary procedures,” (Investment News, January 9, 2011) This is a “bull-by-the-horns” market approach to enforcing the fiduciary standard: Use it a value differentiator when meeting with clients.
House subcommittee chairman sees merits of SROs, fiduciary standard,” (Investment News, January 10, 2011) Is new chair of the crucial House subcommittee signaling a grand compromise may be in the works – all advisers (whether brokers or RIAs) must meet the SEC’s fiduciary standard and all advisers (whether brokers or RIAs) must be regulated like brokers?
EBSA Extends Comment Period on Definition of Fiduciary,” (, January 12, 2011) With the pending announcement from the SEC scheduled for this week, the DOL decides to extend the comment period on its definition of Fiduciary to February 3, 2011. In addition, it plans to hold a public hearing on March 1, 2011. Everybody gets 10 minutes to have their say.
Text of EBSA Notice of Hearing and Extension of Comment Period on Definition of ‘Fiduciary’,” (EBSA, January 12, 2011) Here’s the direct link to the DOL announcement.
Brokers and Investment Advisers Face Off Ahead of SEC Report,” (, January 13, 2011) It’s down to a bare-knuckled brawl between competing industry lobbyists. Here’s something to chew on – it’s not about you or your business model, it’s about the client.
Single fiduciary standard, advisor SRO now seen as more likely,” (Investment News, January 14, 2011) This is the article to read for the most comprehensive overview of all that’s likely to spew forth from the SEC this week. It covers the fears and hopes of the industry and addresses the probability of specific occurrences.

Target Date Funds – A Day of Reckoning:

With the comment date for the DOL’s Target Date Fund Proposal ending on January 14th, the press was hot with breaking news on close-to-the-deadline filings. I read ‘em folks and I can only conclude the situation is a mess and will only get messier.

Target date fund proposal targeted by industry group,” (Investment News, January 13, 2011) Oh what a tangled web we weave, as this article so unintentionally explains.
SPARK Calls for Simplification of Target Date Disclosure Rules,” (, January 13, 2011) Usually when an industry group complains about regulation, they’re just trying to cover their back-sides. This time, however, it makes sense. SPARK outs the potential incomprehensibility of the DOL’s proposed “simplification” and warns this might scare – not help – investors.
ASPPA Suggests Additional Target Date Fund Disclosures,” (, January 14, 2011) Echoing SPARK’s concern, ASPPA asks the DOL to elaborate on certain aspects of the proposal. Unfortunately, the ASPPA also wants to add to the confusion by proposing its own additional disclosures.
Groups Urge DOL to Remedy Trouble Spots in TDF Proposal,” (Advisor One, January 14, 2011) If you don’t want to read the two previous articles, this one covers the subject in one piece.

Mutual Funds – How Not to Pick the Winners:

With all this talk of the fiduciary standard and Target Date Funds, as well as the canard of the active-vs-passive argument, we’ve forgotten the time honored question of “how to pick the best mutual funds.” The first step is always identifying what not to do. Two recent studies offer their ideas.

Are Direct-Sold Funds a Better Value?” (Retirement Income Journal, January 13, 2011) We usually don’t feature pay-per-view pieces but this one just might be on to something. It reports how academic research continues to support the idea investors are better off buying funds direct and not through a broker. This has significance in the fiduciary standard debate.
So many funds, so little time: The case for simplicity,” (Reuters, January 13, 2011) If you go to a diner with a ten page menu, it’ll take you awhile to order. If the cook only gives you 3 choices, you’ll make your decision right away. New research suggests too many 401k options actually discourages participation. Too bad the article then goes on to make recommendations I’m sure many of you will cringe at.

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.

The New Realities of Retirement,” (Personal Finance News from Yahoo! Finance, January 10, 2011)
Employee education boosts 401k participation at Brady Corp.,” (BizTimes, January 7, 2011)
Bad Disclosures – Recipe For Disaster?” (Pension Risk Matters, January 7, 2011)
401k’s have assisted millions of retirees,” (Cincinnati.Com, January 10, 2011)
8th Circuit tosses ERISA appeal over employees’ stock losses,” (WestLaw News & Insight, January 10, 2011)
401k: What’s the new normal?” (Cincinnati.Com, January 10, 2011)
401k retirement plans for everyone,” (MSN Money, January 12, 2011)
Are Improvements Needed in 401k?” (Financial Planning, January 14, 2011)
Study Chronicles Pressures on Plan Sponsors,” (, January 14, 2011)

Wisdom from Some of Our Favorite Blogs:

Chicago Financial Planner: That Nice Man at Church Wants to Sell Me a ….
401kBasics: Plan Sponsor Quick Tips: Common Plan Mistakes – Making Employer Matching Contributions
fi360 Blog: Fiduciary Links: The problem with disclosure
Susan Weiner’s Blog on Investment Writing: Guest post: “Client fears and financial advisor services”
401kBasics: Keep The Course: RMD Failures
ERISA Lawyer Blog: ERISA-Seventh Circuit Rules That The Buyer Of An Employer’s Assets Is Not Liable For Retirement Benefits Payable Under The Employer’s Top Hat Plan
The Rosenbaum Law Firm P.C. Blog: Target Date Funds and Truth In Labeling
fi360 Blog: Practice 2.7: Defining appropriately structured SRI strategies
Boston ERISA Law Blog: On Disclosure and Conflicts of Interest
BNA Pension and Benefits Blog: Target Date Funds: What’s In a Name?

Hot Tips from Popular Web Resources: Vanguard: Most Investors Understand Design and Risk of Target-Date Funds
SunGard Relius: Participant Fee Disclosure Regulations – Part VI: Investment Disclosures
SunGard Relius: Participant Fee Disclosure Regulations – Part VII: Investment Disclosures (Cont’d)

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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