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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 12/23/11

December 27
00:20 2011

1020805_25983300_Trending_Topics_2011.12.26_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:
New Survey Reveals How 401k Plan Sponsors Rank 8 Hot Topics,” (Fiduciary News, December 20, 2011). Deloitte’s annual survey produces two shockers: One explains why annuities aren’t as popular as the press makes them out to be, the other, well…

Compliance – Class Action Lawyers Foaming at the Mouth?:
If the DOL keeps its word, 2012 will mark the year the veil is pierced on so many areas of the 401k universe it will only be a matter of time before our courts are filled with precedent setting cases.
Retirement industry changes on deck for 2012,” (BenefitsPro, December 21, 2011) Here’s a quick rundown of the ramifications of the two biggies coming up: Fee Disclosure and the Fiduciary Rule. Best quote in the article: “2012 might be the year of the lawsuit.”

Fees – Promises, Promises:
The drum beat begins to again delay the implementation of the DOL’s Fee Disclosure Rule. In the meantime, folks are preparing for it and already complaining it doesn’t go far enough.
10 fee disclosure facts every plan sponsor should know,” (BenefitsPro, December 19, 2011) Short, sweet and to the point.
ASPPA to DOL: Extend Fee Disclosure Rule Deadline,” (AdvisorOne, December 20, 2011) And so it begins, the expected plea to move the fee disclosure deadline once again. Expect more of this as we approach April 1, 2012.
The Big Flaw in 401k Reform,” (Huntington Post, December 20, 2011) The author makes one good point made in the article – fee disclosure won’t matter if employees aren’t saving enough. But then he ruins it all by proposing a recommendation that reeks of self-interest. To whit: the author, an index fund salesman, thinks all 401k plans should have portfolios made up of index funds. Surprise, surprise, surprise.

Investments – Returning to Fundamentals:
Keep it simple, and the people will follow the golden path. After decades of complicating investments, there’s a growing movement to simplify option as more and more plan sponsors adopt the fruits of behavioral finance research.
Exotic strategies a mixed bag for target funds,” (InvestmentNews, December 18, 2011) On top of a lack of a track record for the fund as a whole, some TDFs have also employed a strategy with a lack of a track record.
Plan Sponsors Remain Cool to Annuity Products,” (Institutional Investor, December 19, 2011) The promise of retirement Nirvana should make these products the cat’s pajamas of retirement plans, but the awful reality of increased liability and higher fees keep plan sponsors away.
Retirement Plan Investment Options Beginning to Decline: Aon Report,” (AdvisorOne, December 20, 2011) Well, according to the article, not really, if you count target date funds. It seems their numbers have expanded like a virus in 401k plans, despite the problems associated with them. TDFs are eating up a lot of shelf space on 401k option menus.
ICI says 401k investors look for more balanced approach to retirement savings,” (Financial Planning, December 21, 2011) Talk of young investors abandoning stocks seems a bit pre-mature.
The perfect gift for 401k plan sponsors,” (BenefitsPro, December 22, 2011) This 401k Christmas Carol defines the perfect gift in a “spirit” even Charles Dickens would appreciate. The secret lies in the Investment Policy Statement.

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.
Top 30 401k Plans of 2011,” (AdvisorOne, December 20, 2011)
Ghosts of 401k plans past,” (BenefitsPro, December 21, 2011)
Study Says 401k Plans Undermine Government Efforts,” (PlanAdviser, December 21, 2011)
Sensata Technologies to freeze defined benefit pension plan, boost 401k,” (Pensions & Investments, December 21, 2011)
Younger investors save more for retirement,” (BenefitsPro, December 21, 2011)
5 retirement blunders of 2011,” (BenefitsPro, December 22, 2011)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: SRO will cost twice as much as SEC exam program
The Trust Advisor Blog: No Retirement for the Affluent Until Age 80?
fi360 Blog: Walmart settlement a lesson in prudent practices

Miss anything? Feel free to add a comment below.

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About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Peggy McGillin, CFP(R)
    Peggy McGillin, CFP(R) January 02, 16:20

    Dear Christopher,
    Please share the research behind point number 3 “Improving understanding of (and potentially reducing) plan expenses. The last sentence states “bundled relationships often feature higher fees”. I am curious as to the logic, I know that smaller plans are more often bundled and they have higher fees but is there any research that shows that bundled (adjusted for size) are generally more expensive than unbundled. It makes sense because then it has been easier to simply have the participant pay but I cannot find any research that specifically demonstrates this point. Please help. I am partial to unbundled and transparent solutions and I am a fee-only RIA.Thank you.

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