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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 4/29/11

May 02
00:28 2011

1020805_25983300_Trending_Topics_2011.04.29_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. If you think we’re missing something important, then please let us know.

Fiduciary News Lead Story:
Great Info for Every 401k Plan Sponsor: Review of 401k Averages Book” (Fiduciary News, April 26, 2011). Fee disclosures will become the trending topic among 401k plan sponsors and fiduciaries. It will be tempting to overweight this parameter. But if your plan has an index fund or you’ve ever contemplated using index funds, this book contains one piece of data you absolutely must have.

Mutual Funds/ETFs – A Turvy-Topsy Week:
Who knew? Who knew all our popular assumptions could so easily be questioned. Perhaps this was national cynics week. In either case, lots of interesting stories that challenge the prevailing groupthink.
Are Index Investors Getting Shortchanged?” (Wall Street Journal, April, 23, 2011) With index fund salesman apparently winning the battle of marketing, the Wall Street Journal questions if this is really in the best interest of investors. While the article repeats the now academically discredited argument that index funds regularly beat active funds, it does focus on the issue of real fees – commissions, loads and 12b-1 fees, not the fund’s expense ratio.
ETFs can present pricing problems,” (InvestmentNews, April 24, 2011) This interesting article begins with the exploits of a naïve professional who switched from mutual funds to ETFs, not realizing the latter traded more like closed-end funds. For the uninitiated, market liquidity suddenly becomes important for those trading ETFs. These animals are quite different than mutual funds and the importance of liquidity has long been an issue with ETFs.
Commitment from Retirement Plans Could Spark ETF Growth,” (, April 25, 2011) A great article to see exactly what the ETF salesmen are pinning their hopes on. The article explains how, despite headlines to the contrary, ETF growth continues to lag behind earlier projection. Here’s the most interesting thing in the piece: The true advantage of ETFs isn’t their touted lower cost, it’s their ability to more easily invest in non-traditional assets. Nothing in the story about what most benefits 401k investors.
ETFs in 401k Plans: Ticking time bomb or investor’s Holy Grail?” (BenefitsPro, April 28, 2011) Perhaps before we consider the appropriateness of ETFs in 401k plans, it makes sense to reexamine the issues brought by placing mutual funds in 401k plans.
ETFs, mutual fund fees top SEC priorities FundWatch,” (MarketWatch, April 28, 2011) Eileen Rominger, director of the Securities and Exchange Commission’s division of Investment Management, promises addressing 12b-1 fees are important for the SEC. Reads more like damage control after the cornucopia of quotes from Shapiro outlining ever so many reasons why the SEC can’t address 12b-1 until next year. Oddly, if not consistently, Rominger, for all her talk, doesn’t offer any definitive time frame.
SEC: We haven’t forgotten about 12b-1 fees,” (InvestmentNews, April 29, 2011) This time it’s SEC Commissioner Elisse Walter who tries to make folks forget about Shapiro’s earlier statements. Of course, Walter admits the SEC has to clear up the whole Dodd-Frank mess first. That’ll be done sometime in late July.
Are Index Funds Less Risky Than Active Funds?” (, April 27, 2011) Roger Wohlner blasts away at common misconceptions regarding index funds. They’re not less risky. They don’t always outperform. They don’t always have low expenses. In short, they’re just like any other investment product. But that’s not all. You should read what he writes about all these newfangled ETFs.

Fiduciary – More of the Same:
It’s official. The SEC has ceded all credibility to the DOL when it comes to the fiduciary standard. While the SEC looks under every rock to thwart the initiative, the DOL finds fiduciary gold (or, at least, relevance) at every turn.
Mary Schapiro, SEC: The Extended 2011 IA 25 Profile,” (Advisor One, April 25, 2011) Wow. Eye-opening. Read it and see for yourself. The SEC isn’t treating the fiduciary standard as anything about consumer protection, just a standard procedure involving the usual lobbying and political process. It seems like lately Schapiro has been using the industry media to cry crocodile tears. How about if she lets us interview her?
Rule 408(b)(2) Amendments ‘Fully Drafted’ at DOL,” (Advisor One, April 27, 2011) What does Rule 408(b)(2) had to do with the fiduciary standard? The amendments to 408(b)(2) may provide an early indication to how serious the DOL may be about strengthening the definition of fiduciary. It’s expected the amendments will address disclosures of fees and conflicts of interest by ERISA plan service providers.

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.
Special report: Mutual funds most used by DC plans,” (Pensions & Investments, April 18, 2011)
Turning Plan Sponsors’ Risk into Reward: Learning From Lawsuits,” (Advisor One, April 26, 2011)
DOL Urges 9th Circuit to Reverse Ruling in Stock Drop Case,” (, April 26, 2011)
The largest 401k,” (BenefitsPro, April 27, 2011)
So Many Types of 401ks. Which is the Perfect Match for Your Business?” (Forbes, April 26, 2011)
Free EBSA Webcast Focuses on Form 5500 Filing,” (, April 26, 2011)
Firms Should Offer More Help to Retiring Employees,” (, April 27, 2011)
Pension Plan Participant Sues over Alternative Investments,” (, April 27, 2011)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: Cross-Tested 401k Plans
fi360 Blog: Fiduciary Links: FINRA members getting to know their customers better
fi360 Blog: 3(21) vs. 3(38) and are you holding yourself to the fiduciary standard?

Hot Tips from Popular Web Resources: Resolving the 401k Fiduciary Dilemma
Center for Retirement College: A Role for Defined Contribution Plans in the Public Sector

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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