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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 12/16/11

December 19
00:04 2011

1020805_25983300_Trending_Topics_2011.12.19_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.

FiduciaryNews Lead Story:
Santa’s 2011 401k Nice and Naughty List,” (Fiduciary News, December 13, 2011). In a Season of Traditions we proudly begin a new tradition, one in keeping with our mission to celebrate fiduciary (with a dash of mirth).

Compliance – The Art of Distraction:
Seems like a lot of folks want to point out the warts in 401k plans. Perhaps that’s because they don’t want others criticizing their bread and butter. If you think the 401k industry is a racket, wait’ll they take a deep look into public pension plans.
Public retirement ages come under greater scrutiny,” (CBS News, December 10, 2011) Story starts with a 59 year old former California teacher newly retired and earning a $175K annual pension. It resurfaces the public-versus private tensions that began in 2009 and climaxed in 2010, leading to greater scrutiny regarding public pensions. Here’s the twist, the union boss, echoing the Occupy movement, claims the problems stem from “lack of accountability” on Wall Street rather than the results of decades-long backroom political deals.
Public retirement ages come under greater scrutiny,” (BenefitsPro, December 12, 2011) Same exact story. Different media outlet.
DiNapoli blasts 401k plans as DB replacement,” (Pensions & Investments, December 13, 2011) Yet another reason why the once Empire State keeps going downhill. Simple example: He cites a study saying 401k plans lost a collective trillion dollars during the “Great Recession.” He fails to say how much pensions – private and public – lost during the same period. He also fails to use the proper unitized statistic. And this from the person most responsible for understanding mathematics and finance in one of the nation’s largest states?
Do 401k Plans Match Traditional Pensions?” (, December 13, 2011) Here’s a more fair and balanced article that shows traditional pensions really weren’t all some now claim them to be. Outside large union plans, according to the article, pensions usually didn’t work well for the typical worker. The article explains why.
Pension games: How Illinois became the worst in the nation for pension debt,” (Chicago Tribune, December 16, 2011) Watchdog journalism at its best. Perhaps this is what DiNapoli is trying to hide from New York reports.

Fiduciary – Meanwhile, the Racketeers do an end-run:
While one group of politicians takes aim at the heart of 401k plans (see above), another group and their minions take aim at those seeking to improve the 401k plan.
House Republicans ask DOL to go easy on retirement plans,” (InvestmentNews, December 11, 2011) The battle lines are being drawn around the IRA issue. It seems like the Republicans have a six point proposal to allow IRA holders to avoid the protection of the Fiduciary Rule because they can make their own choices. Perhaps they’re thinking it’ll be tougher for individual IRA investors to organize against the entrenched industry interests versus the collective body of 401k investors.
Why Schapiro’s ‘Business-Model Neutral’ Fiduciary Approach Shouldn’t Be News,” (AdvisorOne, December 12, 2011) This is a tough one to read and understand. Is the author in favor of allowing prohibited transactions or is he saying some prohibited transactions are more prohibited than others. It seems like he’s saying both.
Mary Schapiro and the Strange Case of ‘Business-Model Neutral’,” (AdvisorOne, December 13, 2011) Bob Clark does his usual fine job and hits it out of the park with tongue-in-cheek sarcasm. Definitely worth reading.
SEC fiduciary Rx not what the doctor ordered,” (BenefitsPro, December 15, 2011) Yet another metaphorical take on Mary Schapiro’s now infamous words. Bottom-line: Thank goodness she wasn’t regulating the health care industry.
SIFMA’s chairman emeritus John Taft offers three changes for fiduciary rulemaking,” (Financial Planning, December 15, 2011) Read it. Reverse it. And you get the correct answer.

Fees – Storm Warnings:
Let’s see if all this talk about the coming sticker shock caused by fee disclosure doesn’t get turned around as an excuse to delay the implementation of the new fee disclosure rule.
Lincoln Financial’s Tom Gonnella says investors will be upset with 401k fees,” (Financial Planning, December 13, 2011) Nothing new here except for this little (obvious, now that he mentions it) tidbit: The sticker shock will be biggest for C-level execs, but only because they generally have the largest accounts. Here’s the interesting twist – they are also the plan decision makers. This doesn’t bode well for certain bundled providers.
Lincoln Trust SVP says once retirement plan sponsors get a taste of 401k fee disclosure, they’ll want more,” (Employee Benefit News, December 14, 2011) Same report as the above. Added comment – there’s an alternative to TDFs coming next year.
How to benefit from new retirement fee disclosures,” (Reuters, December 13, 2011) Here’s a helpful “How-To” guide for 401k investors. Plan sponsors might consider this “opposition research.”
Middle Market Employers not Ready for Fee Disclosure,” (, December 15, 2011) It says what it says.
Just Out of Reish – Burden ‘Sum’,” (, December 16, 2011) Fred Reish gives point-by-point instructions for plan sponsors on the upcoming DOL’s new 408(b)(2) rule.

Investments – The faster we go, the further behind we get:
No matter how hard we try, there is no Holy Grail investment option and there’s no simple way to quantify their value.
Retirees want guaranteed-income solutions,” (InvestmentNews, December 11, 2011) Seriously? InvestmentNews actually published this article, written by a spokesman for the insurance industry? What? Were the editors at lunch and they left the advertising department in charge of the editorial office? And the journalism industry wonders why no one trusts them anymore.
Annuities Are a Retirement Option, but Be Wary of Fees,” (USA Today, December 12, 2011) Normally this article would go in the “Fees” section, but because the topic of annuities is being actively discussed as a viable investment option in retirement plans, it stays here. Once annuities are genuinely accepted as an investment option, then stories like this will move to the “Fees” section. In the meantime, read this article if you still think annuities are the second coming (unless you think by “second coming” you think we’re referring to TDFs).
Day trading within your 401k,” (BenefitsPro, December 14, 2011) Really? Do we really want to go there? Again?
Are ETFs in trouble?” (Reuters, December 14, 2011) Yes, and, according to the article, so will mutual funds be once investors discover how they use derivative instruments to spike (and add risk to) their portfolios.
Comparing target date funds using returns-based style analysis,” (Pensions & Investments, December 15, 2011) Oops! The title looked exciting but when the story leads with a classic misinterpretation of the 1986 BHB study, then you gotta question all its statistics.

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.
Employer outreach best way to keep retiree plan assets,” (BenefitsPro, December 9, 2011)
403b plans becoming more like 401k plans,” (BenefitsPro, December 14, 2011)
Keep an eye on advisers and retirement funds,” (MarketWatch, December 14, 2011)
401k investors earned an average of almost four percent in past five years,” (Financial Planning, December 14, 2011)
Do 401k Plans Benefit Low-Income Workers More than Others,” (, December 13, 2011)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Going independent with patience

Hot Tips from Popular Web Resources:
Nixon Peabody: Fourth Circuit rules on duty to investigate and diversify investments
Plan Sponsor Council of America: Time for Balance
Deloitte Consulting: 2011 Annual 401k Benchmarking Survey: Plan sponsors and providers work at closing the retirement readiness gap while getting ready for new fee disclosure regulations

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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