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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 10/21/11

October 24
00:02 2011

1020805_25983300_Trending_Topics_2011.10.21_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. But, note this well, we avoid press releases masquerading as news stories (even though they might be reported by journalists) as well as mass media pabulum that merely mouths investment myths and mistakes.

Fiduciary News Lead Story:
How Many Investment Options Should 401k Plan Sponsors Offer?” (Fiduciary News, October 18, 2011). A better question: Why don’t enough 401k plan sponsors ask this important fiduciary question?

Compliance – The New Phone Book Just Came Out!:
Well, there’s an upside to inflation afterall.
IRS boosts caps on 401k contribution, death tax exemption,” (InvestmentNews, October 20, 2011) Here are the new numbers. Read ‘em and weep.

Fiduciary – The Rollar Coaster Swings Up:
It looks like the news this week favors the idea of a universal fiduciary standard. We’ve heard this all before.
Survey: Fiduciary Duty Top Reason Investors Choose RIAs,” (Financial Planning, October 17, 2011) Don’t get too excited. It was the top reason among only 29% of the respondents. The second highest reason (personalized service) received 21%.
10 things you’re (probably still) doing wrong as an ERISA fiduciary,” (, October 17, 2011) For once, a “top ten” list that easy to read and worth reading – by plan sponsors and vendors alike!
What’s a ‘Fiduciary’? Keep Fingers Crossed,” (, October 18, 2011) For those who’ve been asleep for the past year, this article provides a good overview of the goings-on regarding the DOL’s proposed change to the definition of fiduciary, albeit with a slant more towards the point of view of vendors, not CFOs.
Fiduciary standard an RIA’s best friend,” (InvestmentNews, October 20, 2011) Three days later, a repeat of the story that tops this category’s list.
IAA’s Tittsworth: Fiduciary Ruling Likely in Q1 of 2012: RIS,” (AdvisorOne, October 21, 2011) This article includes a good rundown of the evolution of the Fiduciary Standard over the decade or so. BTW, Tittsworth refers to the SEC making a decision, not the DOL.
The head of a $12 billion RIA spars with UBS and LPL execs on the great fiduciary debate,” (RIABiz, October 21, 2011) The best part of this article is the discussion of the distinction between a 3(21) fiduciary and a 3(38) fiduciary.

Fees – Now they notice:
The big news this week is the DOL’s announcement they’re targeting service providers for fee scams. We’ll wait to see what actually happens, but this might be only the first domino.
How to Know Your 401k Plan is the Best Your Employer Can Choose,” (ABC News, October 14, 2011) This article focuses mainly on the Ameriprise lawsuit, which features recordkeeping fees based on asset based fees, not the usual per-participant fee. This could be interesting.
Labor Department eyes reps, advisers in payola probe: Report,” (InvestmentNews, October 21, 2011) It appears they’re just targeting service providers at this time. Will this lead to targeting plan sponsors?

Investments – Oh, Behave!:
Once we get done with the fiduciary way maybe we can return to the investment theory war, especially since we’ve got much more academic ammo in support of behavioral solutions rather than stochastic solutions (i.e., Modern Portfolio Theory). If you thought trying to convince the embedded interest to accept the fiduciary standard, just wait ‘til you try convincing them their precious statistical theories don’t amount to a hill of beans, no matter how rational they appear.
How Much Risk Do Clients Really Need to Take?” (AdvisorOne, October 19, 2011) Here’s an article that echoes a similar series Fiduciary News ran over the summer on the 2nd Deadly Sin of Professional Money Managers. Bottom-Line: It’s not how much risk you can take, it’s about how much money you need.
Why 401k investors fail,” (BenefitsPro, October 20, 2011) A somewhat humorous metaphor on why overthinking your investment strategy might lead to poor decisions.
MFS’ Pozen Takes Aim at U.S. Deficit, Slams Target-Date Funds: RIS,” (AdvisorOne, October 21, 2011) His simple complaint: just because you were born in the same year doesn’t mean you plan to live the same retirement lifestyle, retire the same year and have the same starting assets.
Benartzi Says 401k Success Hinges on Improving Access, Removing 3 Obstacles: CFDD 2011,” (AdvisorOne, October 21, 2011) Besides warning of inertia, loss aversion and myopia, Benartzi explains his 90-10-90 PlanSuccess rule. A must read.

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.
Too Many Workers Leaving 401k Matching Dollars on the Table: FINRA,” (Financial Planning, October 17, 2011)
401k participants jumping on new offerings,” (BenefitsPro, October 18, 2011)
Three in 10 Workers not Participating in Employer 401k Plan,” (, October 18, 2011)
Three Fourths of Firms Reinstated Match to Previous Level,” (, October 19, 2011)
New Research Challenges 4% Withdrawal Rule,” (Financial Advisor, October 19, 2011)
401k Plans: When Opting Out Makes Sense,” (, October 19, 2011)
Citigroup, McGraw-Hill Win Appeals in Retirement Plan Suits,” (Businessweek, October 19, 2011)
The impossible goal of real retirement income,” (BenefitsPro, October 20, 2011)
75% of companies reinstate 401k match, Towers Watson finds,” (Pensions & Investments, October 20, 2011)
As 401k balances slip, fund companies are rolling out new bells and whistles,” (, October 20, 2011)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: 5500 Wrap-Up!
Boston ERISA Law Blog: Interpreting Ambiguous Plan Language
ERISA Lawyer Blog: ERISA-EBSA Provides Guidance On Multiemployer Plans Entering Into Leasing Arrangements
fi360 Blog: Fiduciary Links: The 2012 fi360 Conference is coming to Chicago!
fi360 Blog: Answering your questions on a fiduciary approach to alternative investments

Hot Tips from Popular Web Resources:
Orrick: Fall Fiduciary Update: Significant New Developments for Benefit Plan Fiduciaries

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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