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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 9/2/11

September 06
00:06 2011

1020805_25983300_Trending_Topics_2011.09.02_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:
Risk and the 401k Investor: How Plan Sponsors Can Avoid Misleading Employees,” (Fiduciary News, August 30, 2011). Here are three easy practices a 401k plan fiduciary can implement to avoid one of the common investing mistakes identified by researchers in the 1020805_25983300_Trending_Topics_2011.09.02_stock_xchng_royalty_free_125field of behavioral finance.

Fiduciary – This Shouldn’t be a “What is ‘is?’” Kind of Question:
The good guys (and investors) lose when the argument turns to defining what a fiduciary is. What? Eight centuries of codified tradition and 200 years of case law aren’t enough?
What’s Going On With IRAs?” (SmartMoney, August 29, 2011) How can an author so utterly uninformed be oh, so, right? The premise of this article is IRAs are being ignored in the whole fiduciary debate. Obviously, the author doesn’t subscribe to the Wall Street Journal.
ERISA expert to plan advisers: Don’t shy from offering affiliated funds from service providers,” (InvestmentNews, August 31, 2011) The oft-quoted Fred Reish is quoted here saying using affiliated products offered by service providers is OK. Many feel this is a violation of the prohibited transaction rule fiduciaries must abide by. Of course, the DOL, as things currently stand and even with the adoption of the proposed new definition of the fiduciary rule, will continue to permit the use of affiliated funds as long as the service provider uses any 12b-1 fees to offset existing expenses. Many bundled service providers merely “waive fees” instead of disclosing what the offset is. This will not be permitted once the new fee disclosure rules start next year.
Shifty rhetoric and the fiduciary debate,” (BenefitsPro, September 1, 2011) This piece picks apart the Wall Street Journal editorial critical of the DOL’s proposed new fiduciary rule.

Fees – Let’s Count the Eggs Before We Count the Chickens:
Everyone – and we mean everyone, from regulators to vendors to associations – all have an opinion on the “ideal” fee rate for 401k plans. Unfortunately, we won’t know what the market will bear until these fees are disclosed next year. Remember, for every penny pinching Yugo buyer there’s a safety conscious consumer willing to pay more for a safer SUV.
1 percent is the new 401k cost ratio threshold,” (BenefitsPro, August 30, 2011) There’s a typo in this article that says the “SEC” will require 401k plans to disclose fees next year. We all know the author refers to the new “DOL” fee disclosure requirement. This is a teaser article for 401k Averages Book. Fiduciary News has previously published its full review in the article “Great Info for Every 401k Plan Sponsor: Review of 401k Averages Book” published on August 26, 2011.
Service agreements and DOL’s new retirement plan regulations,” (BenefitsPro, August 31, 2011) This is a great article which outline the circumstances under which service providers will fall under the fee disclosure requirements. Remember, this takes effect next April.
401k investors and sponsors will likely be surprised by administration fees charged on their accounts as part of new disclosure requirements made by the labor department,” (Financial Planning, August 31, 2011) The title says it all… literally, there practically nothing else new in this article.

Investments – An Interesting Take:
Is a 401k plan merely a savings plan, or is it intended to be an investment plan? In the best of all possible worlds, it’s both. The adoption of a universal fiduciary standard will help encourage this.
401k Plans Are For Saving, NOT Investing,” (Forbes, August 29, 2011) Ironically, the article is about investing, and how two Fortune 50 companies have one of the worst selection of investment options the author has ever seen. Once the fiduciary matter is settled, watch for greater scrutiny on mutual fund due diligence.

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.
Agreement Reached to Settle ERISA Claims Related to Tribune Company ESOP,” (Financial Planning, August 23, 2011)
Why 401k plans will fall short for most Americans,” (Reuters Money, August 26, 2011)
401k top performers,” (BenefitsPro, August 31, 2011)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: Employer Deductibility
fi360 Blog: Fiduciary Links: David Swensen on mutual fund conflicts
fi360 Blog: Fiduciary consulting – embrace it

Hot Tips from Popular Web Resources:
Wolters Kluwer: Few Participants Taking Advantage Of Investment Advice Offers, Mercer Finds
Mercer: Proposed fiduciary rules for public plan advisors submitted to SEC

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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