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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 6/24/11

June 27
00:12 2011

1020805_25983300_Trending_Topics_2011.06.24_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:
Why Should 401k Plan Sponsors Care What Others Think About the Fiduciary Standard?” (Fiduciary News, June 21, 2011). The result of a new J.D. Power & Associates survey poses a double jeopardy for 401k plan sponsors. In the end, though, there’s only one correct answer to the question.

Fiduciary Standard – Here Comes the Cavalry:
We begin with a delicious thought experiment and end with a scene right out of A Miracle on 34th Street.
Educating ERISA Investors on the Fiduciary Standard: What if the DOL was as aggressive as the FDA?” (BenefitsPro, June 22, 2011) What’s the 401k equivalent of the horrific pictures the FDA just came out with?
Financial Planning Coalition Lobbies SEC on Fiduciary Standard, Dodd,” (Financial Planning, June 23, 2011) This coalition submitted a petition with more than 5,200 signatures from investment advisers in support of a uniform fiduciary standard. A spokesman for the group said there’s broad support for the fiduciary standard, with any opposition primarily coming from the insurance industry.

Fees – If you can measure it, it will count more:
The more we read, the more we think this whole fee thing is a sleight-of-hand maneuver by the folks who don’t want you to see the real problem fees. And naïve members of the press act as willing accomplices.
Supreme Court leaves fund investors hanging,” (MarketWatch, June 19, 2011) Usually we agree with Chuck Jaffe, but here’s a case we differ on. Chuck takes the populist route in assuming the Supreme Court’s decision allows funds to keep misleading wording in their prospectus. From a non-lawyer standpoint, it looks like the Supreme Court is just saying the mutual fund is the only organizing formally responsible for any misleading information. If this is true, it takes the wind out of the sails of Chuck’s position.
The Search for a Better 401k Plan,” (New York Times, June 17, 2011) There was a time when the editors at a paper as elite as this one would not have permitted an article like this to have been printed. Where do we start? Let’s start with using as a premise “if the investment costs and fees inside your 401(k) or similar fund average, say, 1 percent of your assets each year instead of 0.25 percent, the difference can cost over $100,000.” That 1% number probably only applies to the largest of plans, even though the article purports to focus on smaller plans. Then, instead of calling out the non-investment related bundling fees that infect small plans, the article resorts to the too tired argument of “low cost” mutual funds, even repeating the urban myth that index funds regularly outperform actively managed funds. Perhaps the author should have interviewed Ary Rosenbaum (see citation on low fees down below under “Hot Tips from Popular Web Resources”).
Nowhere to Hide on Hidden 401k Fees,” (CFO Magazine, June 20, 2011) Anticipation far exceeded the actual article, as it is nothing more than a restatement of the Tibble v. Edison case covered the week before by Fiduciary News. While advising 401k plan sponsors to check for hidden fees and reasonable fees, the piece fails to give the upcoming fee disclosure rules much mention at all.
10 fees that can wreck your retirement savings,” (MarketWatch, June 23, 2011) Aren’t depressed enough about fees, yet? You will be if you read this.

Investments – Beware of Greeks bearing bonds:
We really only focus on the investment issues facing ERISA plans, but that headline was too tempting to pass up. After a flurry of activity the last few weeks, ERISA related investment activity died down, with only a retread article appearing on our radar.
Exchange-traded funds: A good idea in danger of going bad,” (The Economist, June 23, 2011) For those who have forgotten the litany of risks associated with ETFs – illiquidity in the underlying markets and the use of derivatives – this article offers a quick primer. While it concludes we need more transparency, it’s really arguing many ETFs ought to be for sophisticated investors only.

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.
Workers Unhappy with 401k Plans,” (, June 17, 2011)
The Pros and Cons of Taking a 401k Loan,” (SmartMoney, June 22, 2011)
Why aren’t we talking about retirement?” (BenefitsPro, June 22, 2011)
Gen Y Takes on More Risk in 401k Plans,” (, June 23, 2011)
Women, plan ahead for retirement with IRA, 401k,” (Chicago Sun-Times, June 23, 2011)
401k Account Balances Rising,” (On Wall Street, June 23, 2011)

Wisdom from Some of Our Favorite Blogs:
Retirement Plan Blog: Some fiduciary services are more equal than others
Chicago Financial Planner: Investing is Not Sexy
401kBasics: Keep The Course: Commonly Asked Questions-How Much Can I Contribute to Roth and Pre-Tax 401k Contributions?
fi360 Blog: Fiduciary Links: What the J.D. Power fiduciary survey means
fi360 Blog: Fiduciary safe harbor protection and the duty to share

Hot Tips from Popular Web Resources:
The Rosenbaum Law Firm P.C. (via JDSupra): Why Retirement Plan Sponsors Shouldn’t Only Focus on Low Fees
Smart Investor: Why Fees Matter for 401k Plan Fiduciaries, But Not Defined Benefit Pension Plans

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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