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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/24/12

February 27
00:03 2012

1020805_25983300_Trending_Topics_2012.02.27_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:
401k Plan Sponsors and the Risk of Fiduciary Liability,” (Fiduciary News, February 21, 2012). Expert ERISA attorneys explore the issues confronting plan sponsors today.

Compliance – Why Barbers aren’t Doctors (Anymore):
The biggest issues facing America today are financial, not constitution (at least they shouldn’t be). So, why do we continue to rely on lawyers to balance our national books?
5 ongoing 401k plan myths debunked,” (BenefitsPro, February 17, 2012) This article bluntly attacks the assumptions made by lawmakers claiming they can reduce “costs” by eliminating tax incentives for 401k savings plans.
IRAs suddenly of great interest to Washington,” (InvestmentNews, February 21, 2012) Two different proposed bills causes some to wonder. One bill wants to encourage savings so people can have larger IRAs. The other wants to increase government revenues (i.e., raise taxes) by penalizing estates wishing to pass down larger IRAs to heirs. Sounds like the perfect bait and switch.

Fiduciary – Regulators Get Aggressive:
From the DOL: Actions. From the SEC: Words. Which one speaks louder to you?
U.S. Labor Department to release fiduciary rule by July,” (Reuters, February 23, 2012) What the headline says.
DOL Cracks Down on Retirement Plan Advisors for Fiduciary Negligence,” (AdvisorOne, February 24, 2012) The article says the DOL’s 2011 enforcement figures are $300,000 more than 2010. While the story says the DOL is focusing on the failure of plan sponsors and their vendors to follow proper fiduciary procedures, it doesn’t cite specifics.
SEC’s Schapiro: ‘I Still Strongly Believe’ in Fiduciary Mandate for Brokers,” (AdvisorOne, February 24, 2012) And what will come of it?

Fees – Coming Soon at a 401k Plan New You – Fee Wars:
In 3-D! That’s Disclosure! Disclosure! Disclosure! The first battle: defining what “real” fees really are. Maybe the DOL could provide a little help on this one.
How to Avoid Paying Mutual-Fund Share-Class Fees,” (Wall Street Journal, February 19, 2012) Here’s a common problem many 401k plan sponsors have – knowingly or unknowingly – placed themselves in. In fact, it may end up being the basis of the Tibble-Edison case.
Why things just got a lot tougher for 401k plan sponsors,” (BenefitsPro, February 22, 2012) More fall out from the DOL’s new Fee Disclosure Rule. It rings louder based on the above article stating the DOL is bring more fiduciary related enforcements.

Investments – Just Give Me Money:
Apparently, that’s what 401k investors want. Or so they’ve been told. As we learn from our articles this week, not only is income hard to extract from investments, but sound investment principles might be hard to extract from investors.
Simple Index Funds May Be Complicating the Markets,” (Wall Street Journal, February 18, 2012) We hate to say we told you so, but… Here’s a more formal take on what FiduciaryNews.com attempted to say with a feeble attempt at humor a couple of years ago (see “3 Reasons to Outlaw Index Investing Right Now (and One Selfish Reason Not To) in 5 Acts,” FiduciaryNews.com, May 12, 2010).
Target-Date Fund Investors More Confident, ING Says,” (Financial Advisor, February 21, 2012) What do they like most? The “guaranteed income stream” TDFs provide post-retirement. Hmm, we’re not aware the typical TDF offers this promise. Oh, and the survey respondents also like “diversification.” Apparently, they’re not aware of the dangers of over-diversification. Well, it just goes to show you how effective marketing can be.
Equity-Indexed Annuities: The Magic Bullet?” (Yahoo! Finance, February 22, 2012) Roger Wohlner does it again, cited a series of serious questions investors must ask before stepping into this product.
Stable value funds make hay off puny money fund rates,” (InvestmentNews, February 24, 2012) As a few stable value funds close, others are formed to take their place. Article says stable value funds beat money markets by 1-2%.

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.
Does retirement income even exist anymore?” (BenefitsPro, February 20, 2012)
Annual savings week pushes for workers to wake up and smell the 401k,” (Employee Benefit News, February 21, 2012)
Is traditional retirement a thing of the past?” (Employee Benefit News, February 21, 2012)
Plan Sponsors Getting Big Fines From DOL,” (Financial Advisor, February 21, 2012)
Restructuring experts can hold pension plans’ future in their hands,” (Pensions & Investments, February 22, 2012)
Judge denies challenge to 401k initiative,” (San Diego Union-Tribune, February 23, 2012)
Many Small Business Owners Not Up To Speed On Retirement Plans,” (Financial Advisor, February 22, 2012)
The IRA: A ‘gateway’ retirement plan?” (BenefitsPro, February 23, 2012)
Private pensions in crisis: Where do we go from here?” (Employee Benefits News, February 23, 2012)
GE’s unfunded pension liability spikes in 2011,” (Pensions & Investments, February 24, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Obama’s 2013 budget includes bump in SEC examination funding

Hot Tips from Popular Web Resources:
CFO.com: Seven 401k Strategies for 2012

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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