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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 4/1/11

April 04
00:24 2011

1020805_25983300_Trending_Topics_2011.04.01_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:

How Will New ADV Part 2 Help (or Hurt) 401k Plan Sponsors?” (Fiduciary News, March 31, 2011). Be careful what you ask for. The SEC’s new Form ADV Part 2 disclosures make it harder for 401k Plan Sponsors to feign ignorance when it comes to conflicts of interest.

Fiduciary Standard – Don’t Ask About the Premium Version:

Think about this for a second. Let’s say the government regulated doctors but not medicine men, but then let the medicine men practice medicine without the same standards it holds doctors to because practicing medicine is only incidental to all that medicine men do.

Bringing brokers up to fiduciary standards,” (The Washington Post, March 27, 2011) Here’s the mainstream media’s first take on the industry’s bubbling bru-ha-ha. As the headline bluntly states, they’re pointing the finger at brokers.
Fiduciary Standard for Brokers Not Likely Until After July,” (Financial Planning, March 28, 2011) Now we have an industry rag pointing the fingers at brokers, too.
The Problem Isn’t With RIAs: Why a Fiduciary Standard for Brokers Makes Sense,” (Advisor One, March 29, 2011) Finally, Bob Clark spells it out for all to see, making it no question where the problem resides. (To be fair, the brokers are only doing what the SEC has allowed them to do.)
Fiduciary standard could choke distribution of mutual funds,” (Investment News, March 30, 2011) And in related news, Prohibition choked distribution of alcohol, drug laws cut into sales of illicit narcotics and seat belt laws make it harder for people to die in car crashes. Seriously, maybe the fiduciary standard will return us to the days before supermarket convenience when mutual funds actually had to earn their sales.

Pension Pot Holes – Popping Up This Spring:

In the ongoing conversation it’s difficult to say with certainty where we stand in terms of public retirement plan liabilities. The math is fuzzy but the gut, and the sum of the actions of all politicians (no matter which party), suggests where’s there smoke, there’s fire.

Pension, healthcare deal reached with L.A.’s largest city union,” (Los Angeles Times, March 25, 2011) For all the talk of Wisconsin, California is on the leading edge of this thing. Anything they do might offer an answer – or a FAIL – to other states.
How deep is pension hole?” (Atlanta Journal Constitution, March 28, 2011) More on the funny math of pensions. Funny thing is, no matter which way this author calculates it, California doesn’t rank among the ten worst states. Something doesn’t add up. Anybody out there know?
Public Pensions not Facing Immediate Crisis,” (, March 29, 2011) Yet another way to use math and again California doesn’t make the list.
Public pensions show gains, but doubts linger,” (Reuters, March 31, 2011) Wait, maybe we are facing a crises as “the gains may not be enough to cover looming shortfalls.”
States Consider Hybrid Plans For Funding Retirement,” (Institutional Investor, March 30, 2011) Fittingly, we end with a story of public employee 401k plans based on Orange County California’s decision to go to a define contribution plan. As we said, watch California.

Target Date Funds – Still in the Target Scope:

The problems of Target Date Funds (TDFs) just keep compounding (would you expect any different for the fastest growing product). As long as the DOL continues to grace TDFs as a default option for automatic enrollment plans, we can expect more articles like these.

Ramped up SEC enforcement targets fund industry,” (Investment News, March 30, 2011) It’s the wild west and the sheriff is out trolling. Trouble is, TDFs were set up in such an eely fashion, is there really anything the SEC can grab on to without slipping off?
Retirement: The trouble with target date funds,” (Reuters, March 30, 2011) Does a good job summarizing the problems with TDFs but gets caught (by a journalist commenter) gratuitously plugging a firm at the end.
Are Customized Target-Date Funds Really That Good?” (Institutional Investor, March 30, 2011) Here’s an interesting article on a hybrid version of the TDF which appears to offer customization at a lower price. But, as the story warns in its last paragraph, this is a case of caveat emptor. Since the company is choosing the allocation by hiring the manager, its removing that choice from the employee, and that leaves the plan sponsor with increased liability.
Target date funds take aim at retirement goals,” (Chicago Tribune, March 31, 2011) Read this article if you can stomach a reporter acting like an investment adviser. It’s plain scary how many laymen will see this story as unmitigated truth. Despite an excellent reference to Richard Thaler and a straight-forward warning that TDFs can lose money, the overall tone seems too much like the author’s been drinking the Kool-Aid.
5 Considerations for Investing in Target-Date Funds,” (, March 30, 2011) Contrast this article, written by an experienced financial professional, with the above piece. Author Roger Wohlner calmly explains the facts and is not afraid to highlight the real world pitfalls of TDFs.

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.

Deep Market Drops Throw Retirement Plans Off,” (Financial Advisor, March 23, 2011)
Higher Taxes Loom for 401k Savers,” (Wall Street Journal, March 27, 2011)
Daily 401k fixed income transfers down,” (Pensions & Investments, March 25, 2011)
Why Your Nest Egg May Not Last,” (Wall Street Journal, March 27, 2011)
New regulations spur cheaper 401k options,” (Investment News, March 28, 2011)
Stock Drop Case against UBS Tossed,” (, March 29, 2011)
Employee 401k Returns Outperform Plan Sponsors,” (Institutional Investor, March 30, 2011)
Five retirement-plan tax mistakes to avoid,” (MarketWatch, March 31, 2011)
Auto-Enrollment in Retirement Plans Increases Participation, but May Limit Savings,” (Advisor One, March 30, 2011)

Wisdom from Some of Our Favorite Blogs:

fi360 Blog: Fiduciary Links: Center of fiduciary universe will be in San Antonio this May
fi360 Blog: Answering your questions on 408(b)(2) and fiduciary advice
RetirementRevised: Watch out for problems with automated 401k plans
ERISA Lawyer Blog: ERISA-EBSA Issues Fact Sheet On The Definition of the Term “Fiduciary”
fi360 Blog: What two Moench presumption cases mean for fiduciary liability
Boston ERISA Law Blog: What Can We Learn From a List of the Best 401k Plans?

Hot Tips from Popular Web Resources:

DOL-EBSA: Understanding Retirement Plan Fees And Expenses
JSOnline: Fewer employers contributed to 401k plans in 2010
Holland & Knight: Target Date Funds: Don’t Set Them and Forget Them
BenefitsPro: 401k Disclosure: April Fool’s Gold

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Roger Wohlner
    Roger Wohlner April 04, 10:08

    Thanks for mentioning my US News Target Date post and overall for keeping us informed on key topics in the retirement plan space. This post is a weekly MUST READ.

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