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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 3/18/11

March 21
00:47 2011

1020805_25983300_Trending_Topics_2011.03.18_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:

DOL Detractor Reveals Due Diligence Secret to 401k Plan Sponsors,” (Fiduciary News, March 16, 2011). You’d trust someone who had your interests at heart. Would you give your trust to someone who didn’t? How can you tell if someone places your interests first? With feigned support for the DOL’s new definition of fiduciary, testimony intended to tweak a loophole may have accidently revealed the perfect due diligence strategy for 401k plan sponsors.

Fiduciary Standard – The New Shell Game:

Just as it appears this whole “fiduciary” thing might (with emphasis on “might”) be taking hold in the retirement plan world, House Republicans call the SEC’s bluff on the retail side of “fiduciary” while a couple of Mississippians come out of the woodwork and offer themselves as a solution.

More Plans Opt for Co-Fiduciary Advisers,” (, March 16, 2011) According to a recent survey, more than half of the respondents indicate they’re plans have an investment adviser acting as a co-fiduciary. A word of warning, in looking at the actual results of the survey, it’s not clear if respondents actually knew what a “fiduciary” was.
GOP opposition mounting to fiduciary duty, user fees,” (Investment News, March 15, 2011) The SEC says it can’t eliminate exemptions to fiduciary standard without more money. The House Republicans say don’t harm small businesses, so if they can save money if there’s no fiduciary duty, so be it.
Republicans Want More Study Before SEC Sets U.S. Fiduciary Rule,” (Bloomberg, March 17, 2011) Three Republican Chairmen send a letter to both the DOL and the SEC asking them to coordinate efforts.
House GOP to SEC: Regulator Lacks ‘Solid Basis’ for Fiduciary Rulemaking,” (Advisor One, March 18, 2011) House Republicans side with two Republican SEC Commissioners in dissenting against the SEC’s proposed adoption of the Fiduciary Standard by saying there’s no clear evidence of a need for a fiduciary standard. Industry leaders agree with both sides
House Republicans to SEC: Halt fiduciary duty rulemaking,” (Investment News, March 17, 2011) House Republicans – who have the power of the purse – want the SEC to “conduct a thorough cost-benefit analysis that considers consumer preferences” and also “assess the broader practical impact” imposing a fiduciary standard will have. They promise to hold a hearing “in the coming weeks.”
The Intelligent Investor: Rookie Regulators Take On Wall Street,” (Wall Street Journal, March 12, 2011) Well, if the SEC can’t do it, why not a couple of college students? This article showcases the exploits of two University of Mississippi law school students and their attempt to displace FINRA as the SRO for investment advisers.

Target Date Problems Go Mainstream:

If a tree falls at an industry convention, no one hears it. But if a tree falls on the evening news, the whole nation hears it. Well, at least they used to. What it really needs is to go viral on YouTube.

4 Trends Target-Date Fund Investors Should Watch,” (The Oakland Press, March 12, 2011) Normally we would have placed this article down in the “Major Plan Sponsor Moves and News Section” but this article doesn’t come from the usual source – and that’s what makes it significant. Here we have a local newspaper picking up an AP story which, though merely repeating the same-old same-old, at least is sending the information to the people who need it most – the 401k investors. The article even adds the caveat that investors pay higher fees in order to get a chance to earn higher returns – that’s more than we can say for the DOL.

A Warning Shot Across the Bow – This is One All 401k Plan Sponsors Should Pay Attention to:

Here’s the real thing to think about – if there are problems with something as simple as stable value funds when it comes to distribution restrictions, image if we had annuities in 401k plans.

DOL Asked to Add to Participant Disclosure Rules, (, March 16, 2011) The GAO has asked the DOL to review regulations regarding disclosures for 401k investments with distribution restrictions. These include trendy illiquid asset options (like commodities and real estate) but also, and most importantly, the popular stable value funds.

Public pension pose prickly problems:

We all know the impact these retirement plans have on our municipal budgets, but what can they teach us about corporate retirement plans? At the very least, most private firms are probably glad they addressed this issue decades ago.

Dodging the Pension Disaster,” (National Affairs, Spring 2011 Issue) Wow, this is a really good article. It starts with the situation in Utah and then differentiates it from the other 49 states. It spins an intrigue of vested interests seeking to maintain the status quo, explains how the system was structurally deficient from the very beginning, shows how accounting tricks swept the problem under the table and, finally, outlines how the effort for reform may find as its greatest enemy not public employee unions but the clock itself.
401k-style retirement plans for Ohio workers on the table, GOP leaders say,” (, March 10, 2011) Although the article doesn’t mention it, it appears Ohio is trying to copy what Utah did (as explained in the above article).
No Easy Fixes in Illinois Pension Mess,” (Wall Street Journal, March 16, 2011) If Utah sits on one end of the spectrum, then, despite all the press Wisconsin gets, Illinois sits on the opposite and. This article provides an excellent review of all the options facing Illinois legislators. It’s also instructive for all pension plan sponsors to see what might work and what might not work when dealing with a troubled plan.

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.

Verizon Involuntary Plan Transfer Suit Declared Class Action,” (, March 11, 2011)
DC plan leakage challenges executives, providers,” (Investment News, March 13, 2011)
Retirement savers’ confidence plummets,” (MarketWatch, March 15, 2011)
Nest Eggs: Thinking Outside the Box,” (SmartMoney, March 14, 2011)
Disclosure Sought on Lending in 401k Plans,” (MarketWatch, March 16, 2011)
A ‘Safe’ Retirement Savings Rate,” (Financial Advisor, March 15, 2011)
Most Plan Sponsors Staying Away from Auto Enroll in 2011,” (, March 16, 2011)

Wisdom from Some of Our Favorite Blogs:

401kBasics: Plan Sponsor Quick Tips: Correcting failed ADP/ACP Nondiscrimination Tests
Chicago Financial Planner: 5 Common 401k Pitfalls
fi360 Blog: Fiduciary Links: Filling the need for an SRO for advisers
ERISA Lawyer Blog: Seventh Circuit Rules That Employer Is Required To Make Contributions To A Pension Plan, Despite Oral Agreements To The Contrary
401kBasics: Keep The Course: Commonly Asked Questions-My employer won’t sign my withdrawal form

Hot Tips from Popular Web Resources:

DOL sues accounting firm over 401k,” (Employee Benefit News, March 15, 2011)
Worker pessimism about retirement deepens,” (Employee Benefit News, March 16, 2011)

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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