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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 3/11/11

March 14
00:45 2011

1020805_25983300_Trending_Topics_2011.03.11_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:

Time for 401k Plan Sponsors to Admit Target Date Funds Too Broke to Fix?” (Fiduciary News, March 8, 2011). Should the ideal 401k fiduciary face the problem head on or ignore it? What if there’s an easy alternative that’s already been proven to be better? This article reveals a link to an academic study that will surprise many. When you read its results, you’ll know why the industry has buried it.


Fallout continues from the DOL hearings earlier this month as the BD industry attempts to pit the DOL against the SEC. In the end, the SEC

Let the 401k investor beware,” (Washington Post, March 6, 2011) This just in, government agency issues report revealing sky is blue. No, just joking. But this article does explain how a recent GAO study shows service providers’ conflicts-of-interest hurt 401k investors to the point where the investors are better off not asking them for help.
Regulatory Confusion Keep Advisors, Broker-Dealers In Limbo,” (On Wall Street, March 7, 2011) This article profiles the opening general session presentation at the American Society for Pension Professionals and Actuaries’ 401k Summit. What we see here is a continuation of the “divide and conquer” strategy to ameliorate the potential adoption of a uniform fiduciary standard. For those interested in marketing campaigns, this article surprisingly lays it out verbatim (something one would normally not want the opposition to see, let alone know about).
At ASPPA 401k Summit, IRON Financial’s Friedman Mitigates Fiduciary Risk,” (Advisor One, March 7, 2011) A pretty good overview of Section 3(38) if you like taking legal advice from an investment adviser. Kinda makes you wonder why the author couldn’t find at least one ERISA attorney who could at a minimal confirm what was said.
When Is a Salesperson Not a Salesperson? Brokers and Fiduciary,” (Advisor One, March 8, 2011) Once again, Bob Clark comes up with a delicious piece.
EBSA Hears Warning on Pending Rule Changes,” (, March 1, 2011) If you’re currently an independent fiduciary servicing a 401k plan, please read this article and let us know if the new rules will increase your costs or cause you to curtail services.
EBSA Extends Comment Period for Fiduciary Definition Change,” (, March 8, 2011) Appears to be a simple regurgitation of the DOL release.
CFP Board Backs Most Of DOL’s New Proposed Rules For Advisors,” (Financial Planning, March 8, 2011) This is interesting. Apparently there’s an “opt-out” provision in the DOL’s new rules that allow advisers to give conflicted advice simply by saying so. Here we go with the whole disclosure thing again.
FINRA Alternative: New SRO With ‘Bona Fide’ Fiduciary Standard for RIAs,” (Advisor One, March 8, 2011) Seriously, Mississippi? ’nuf said.
DOL extends period for grousing about ‘fiduciary’ definition,” (Investment News, March 9, 2011) A bit more of an extended article with lots more color, but nothing ground breaking.
Law students’ SRO aims to ‘give Finra a run for its money,’” (Investment News, March 9, 2011) OK, maybe not “’nuf said.” The more one reads, the more one thinks this might be funded by Finra itself.
SEC’s Blass at IAA: Fiduciary Standard Will Only Be Toughened,” (Advisor One, March 11, 2011) It looks like the BD industry to hide under the skirts of the SEC might not work. The new timeline for the SEC is April-June to some up with a new standard and that any change will make it even tougher than the existing one, but “we’re not going to alter the BD model.” It would seem the only way to do that is to prevent dual registration.


Wisconsin is so yesterday. Does any objective person still accept the concept of defined benefits – especially for public employees?

Bill Gates Addresses The ‘Completely Unsustainable’ Crisis In Public Pensions,” (Business Insider, March 3, 2011) This was a sneak preview into the Microsoft founder’s TED presentation. Here’s a snippet: “pension obligations are projected to grow at rates that look to be completely unsustainable, unless something is done. But so far, many states aren’t doing much to deal with their fundamental problems.” Of course, this was written before Wisconsin.
Broke Town, U.S.A.,” (New York Times, March 3, 2011) This is a scare piece wrapped around a true story. Read all about the small town of Vallejo and see one possible future of towns and cities across America.

A Series of Bad Ideas:

Every once in a while we get a week with singles stories that, in the words of the master thespian, are truly bad theater. They’re too easy to ignore, but, be warned, keep those ears perked. An idea repeated often will sooner or later be mistaken for truth. Don’t let this happen to you!

401k Plans Are Still O(k),” (Financial Advisor, March 2011) Here’s an example of what we appear to be seeing too often recently – a corporate press release being reformatted into a “news” story. Be on the look-out for these and complain directly to the publisher when you see them.
Target-Date Funds’ Subjective Objectives,” (Advisor One, March 1, 2011) We’re not really sure where the author is heading, but on the face of it, he appears to use SPARK’s comment letters to the DOL as a starting point to refute, not merely the DOL’s suggested revisions to TDF disclosures, but possibly the entire concept of the TDF itself. Either TDFs are appropriate the beginning of Senator Harkins one-size-fits-all “investment pools” (see below) or every investor is different and requires individual service.
Sen. Harkin: New retirement scheme hinges on advisers,” (Investment News, March 8, 2011) Everything old is new again. Under a different name, this Senator wants to devolve 401k plans into investment pools (he doesn’t call them “Pensions”). He blames 401k plans for employees’ miserly savings habits. Wouldn’t it be easier just to require mandatory contributions?
Rominger mulling timeline for 12b-1 fee rule,” (Investment News, March 11, 2011) What comes first: the 12b-1 fee rule or the uniform fiduciary standard? In truth, it’s easy to see how the two are linked. This article is basically a puff piece introducing the new 12b-1 sheriff in town.

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.

Judge Approves Class in Tribune ESOP Suit,” (, March 7, 2011)
5 Common 401k Pitfalls,” (, March 9, 2011)
The 401k March Toward Equities Continued in February,” (, March 11, 2011)
Consultants Want Active Management in Defined Contribution Plans,” (Financial Planning, March 9, 2011)

Wisdom from Some of Our Favorite Blogs:

The 401k Fiduciary Advice Blog: 5 Participant Success Features to Add to Your 401k Plan
401kBasics: Plan Sponsor Quick Tips: Common Plan Mistakes – Filing Form 5500 & Distributing Summary Annual Report
fi360 Blog: Fiduciary Links: RIA business tripled over past decade
The 401k Fiduciary Advice Blog: fi360 Webinar Recording: The Combined Effects of the DOL’s Proposed Advice Regulation and 408(b)(2)
fi360 Blog: New federal fiduciary definition may have adverse impact on ESOP marketplace

Hot Tips from Popular Web Resources:

FreeERISA: 401k Consultants Support Active Management and Custom Target-Date Strategies as Important to Retirement Success
DBJ Associates: What Do Elephants, Mosquitoes’ and 401k’s Have In Common?
Dorsey & Whitney LLP: DOL Proposes to Change Who is a Fiduciary Under ERISA with Respect to Investment Advice
FreeERISA: Defined Benefit Plans Outperformed 401k Plans During 2008 by Largest Margin Since Early 2000s, Towers Watson Analysis Finds

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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