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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 2/18/11

February 22
01:40 2011

1020805_25983300_Trending_Topics_2011.02.18_stock_xchng_royalty_free_300Welcome 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 smile when you read these entertaining snippets, well, that’s the idea.

Fiduciary News Lead Story:

New York Fiduciary Panel Yields Surprise Honesty While Drawing Lines in the Sand” (Fiduciary News, February 15, 2011). The Committee for the Fiduciary Standard and the New York Law School convened a special panel to discuss the changing regulatory environment regarding the uniform fiduciary standard. Rather than a vibrant discussion we found the sides staking out their positions. Here’s a comprehensive play-by-play of each speakers’ points.

Fiduciary Standard – The Debate Matures: Even as the DOL is setting up for its grand hearing in early March, the SEC side of the equation appears to a have matured, mired in a muddled mass as industry groups and political groups use traditional campaign tactics to smear each other.

Groups Offer Fiduciary Change Suggestions,” (, February 11, 2011) Two groups, the Pension Rights Center and the National Employment Lawyers Association (NELA) applaud the DOL’s efforts to redefine “fiduciary” and have their say.
The Ramifications, Pitfalls and Unexpected Consequences of a Uniform Fiduciary Standard,” (On Wall Street February 15, 2011) If you don’t like to read, this one’s for you. AdvisorTV sat down with Brian Hamburger of MarketCounsel to discuss the SEC’s proposed “uniform fiduciary standard.” He feels it hurts RIAs.
The Advantage for Advisors of a Fiduciary Duty Right Now,” (Advisor One, February 15, 2011) Here’s an obvious novel idea that’s so simple it might actually work: Don’t rely on the regulators to solve the dilemma of the fiduciary standard – let the market decide. The author suggests drafting a simple one-page letter defining the duties and role of a fiduciary and have investors present it to prospective investment advisers and see who agrees to sign it. This idea is so good it’s surprising no “fiduciary” organization hasn’t already started promoting it.
GOP zeroing in on fiduciary study,” (Investment News, February 16, 2010) Did we say regulators above? Maybe we should have included politicians, too. Truth be told, Dodd-Frank became a political hot potato last year and, unfortunately, that’s where the issue of the fiduciary standard lays. Worse case: The Republicans may throw out the baby with the bathwater.
DOL Releases Fiduciary Definition Hearing Agenda,” (, February 18, 2011) This article links to the DOL’s agenda for its two-day hearings the first week of March. For fiduciary fans, the good news is this is in no way linked to Dodd-Frank.

Regulatory Updates – The DOL Still Exists:

Not wanting to stay out of the limelight for too long, the DOL issues an impressive list of significant regulatory rulings.

EBSA Sets New 408b2 Deadline for January 2012,” (, February 11, 2011) The DOL delays the start date of its new 408(b)(2) fee disclosure rules for six months. This article contains a link to the actual DOL statement.
Reprieve for 401k service providers,” (Investment News, February 15, 2011) Same story, slightly different take.
New DOL Advisory Opinion 2011-06A – Prohibited Transactions,” (Department of Labor, February 4, 2011) This opinion deals with a specific prohibited transaction – the type involving potential self-dealing.
Another New Advisory Opinion 2011-05A – Demutualization,” (Department of Labor, February 3, 2011) This is a rather interesting opinion for a Welfare Plan that received settlement assets based on fees paid by former employees. The DOL’s answer might surprise you.

Annuities –The Return of the Creature from the Black Lagoon:

Ironically, as States find pensions – essentially retirement annuities – have gone out of control, there’s still an active debate as to whether these things make sense for 401k plans.

Annuities in 401k Plans Offer Income, But High Fees,” (CNBC, February 15, 2011) If something is too good to be true, is it too good to be true? Sure the payouts sound great, but what about the fees (2%, according to BrightScope). If you think it adds up, maybe you’d also be interested in a sub-prime loan, too.
401k Annuity Options: Works in Progress,” (Insurance News, February 15, 2011) This line from the article says it all: “Some large employers are reluctant to adopt in-plan annuity options due to fiduciary liability issues.”

401k – Problems, Problems, Problems:

In a wonderful real-life example of the “Snapshot-in-time” anomaly, (the behavioral faux pas related to myopic decision making), we continue to see mainstream articles posing the question if the 401k has been a failed experiment.

You’re Not Alone – Many Boomers Feeling ‘Overwhelmed’,” (FreeErisa, February 16, 2011) This is a typical piece, similar to the Time article in the Fall of 2009, that exploits the dilemma faced by many near-term retirees.
Are mandatory IRAs on the way?” (Investment News, February 17, 2011) This is another version of the popular 401k 2.0 article published by Fiduciary News at the end of last year (see “401k 2.0 – A Proposal,” Fiduciary News, December 7, 2010).
6 Problems With 401k Plans,” (San Francisco Chronicle, February 15, 2011) Here’s a mainstream piece written for the typical 401k investor. It’s a good idea for plan fiduciaries to understand how plan participants might feel – and who’s telling them to feel that way.
Study Finds Lack of Understanding of Target Date Fund Diversification,” (, February 16, 2011) Here’s part of the problem – selling pie-in-the-sky promises (see annuities above). 401k investors won’t trust anyone if they keep putting their money in what they might feel are scams – whether the “scams” are intended 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.

Lincoln Allowed Causation Defense in Stock Drop Matter,” (, February 14, 2011)
Top 10 Priorities for Pension Plan Sponsors,” (Advisor One, February 8, 2011)
Small Firms Wary of Offering Retirement Plans,” (, February 15, 2011)
ERISA Class-Action Suits Shape US Retirement Future,” (Institutional Investor, February 16, 2011)
Class Action Costly Retirement-Plan Litigation,” (Institutional Investor, February 16, 2011)
Judge Declares Plan Trustees Liable for Nearly 1M in Diverted Funds,” (, February 17, 2011)

Wisdom from Some of Our Favorite Blogs:

401kBasics: Plan Sponsor Quick Tips: Common Plan Mistakes – Participant loans not conforming to requirements of the plan document
fi360 Blog: Fiduciary Links: Aguilar speaks on ‘harmonization’
401kBasics: Keep the Course: Commonly Asked Questions–How Many 401(k) plans can I have?

Hot Tips from Popular Web Resources:

Reish & Reicher: ERISA Fidelity Bonds—Who Needs Them, and Who is Responsible for Securing Them?
Reish & Reicher: Fiduciary Status for Referrals Plan sponsors can minimize fiduciary liability with adequate fiduciary education and certification.
The National Law Review: 401k Fees: A Hot Topic for Plan Fiduciaries and Participants
ERISA Lawyer Blog: EBSA Postpones Effective Date For New 408(b)(2) Disclosure Rules
ERISA Lawyer Blog: DOL Advisory Opinion Concludes That The Purchase Of A Promissory Note and Deed Of Trust By An IRA Would Be A Prohibited Transaction

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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