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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 3/2/12

March 05
00:08 2012

1020805_25983300_Trending_Topics_2012.03.05_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:
The 4 Critical Elements of a Successful 401k Plan Education Program,” (Fiduciary News, February 28, 2012). This is the first of a four-part series including: “The Primary Objective of a Successful 401k Education Program,” “The Most Compelling Challenges in 401k Education,” and “Successful 401k Education Programs – Does Yours Measure Up?”.

Compliance – Be Careful What You Wish For:
Regulators seemed destined to rediscover the ills of TDFs through annuities as politicians look to get some of the milk the industry has squeezed from the cash cow known as the 401k plan.
Defined contribution plans to pick up lifetime income options more aggressively,” (Employee Benefit News, March 2, 2012) A rehash of the announcements from the DOL and IRS in early February.
The last 401k generation?” (Reuters, February 29, 2012) What happens when you put politicians and greedy industry lobbyists together in the same room? You get headlines like this. Labeling a system that has generated $4.3 billion in retirement assets a “failure” seems ridiculous. But in the age of class warfare, punishing the diligent savers for the sins of those who didn’t is par for the course. Add in a financial industry that doesn’t want to see this money cash out, and you’ve got a recipe for disaster – for anyone interested in controlling their own retirement destiny.

Fiduciary – Be Careful What You Ask For:
The industry asked the DOL to reconsider its Fiduciary Rule because an industry report claimed data suggested it would cost investors. The DOL agreed and asked the industry to provide the data. The industry asked the DOL to give it more time to compile the data. The DOL said, “Wait! Didn’t you already compile the data for that report you were talking about?”
FSI President and CEO Dale Brown voices concerns about the Labor Department’s fiduciary rule data request,” (Financial Planning, February 27, 2012) Read it. The FSI must have good lawyers, or at least a good knowledge of legal tactics.
Industry groups to DOL on fiduciary data collection: Sorry, we can’t help,” (InvestmentNews, February 27, 2012) OK, for those of you just joining the show, let’s spell this out. Regulator wants to help consumers, but new rules hurt select businesses (and helps others). The hurt businesses convince Congress the regulator didn’t do enough research before proposing the rule and, by the way, these hurt businesses have said data. Regulator backs down based on lack of research argument and asks hurt businesses for said data. Hurt businesses suddenly don’t have the data they said they had. Next move: Regulator.
DOL ‘Disappointed’ With Industry Input on Fiduciary IRA Request,” (AdvisorOne, February 29, 2012) So, the regulator makes the next move. And it is priceless. It turns out this “data” the industry can’t provide was already collected and analyzed by Oliver Wyman. Mr. Wyman was kind enough to issue a report to a couple of attorneys hired by the industry, who themselves were kind enough to send the report to the DOL. The good barristers even went so far as to highlight the damning conclusions of the report, just in case the DOL couldn’t read them. Oh, yes, and this was all done last April. One would think if the industry was able to provide data to Mr. Wyman, than it would have had the same data at the ready to provide to the DOL in support of Mr. Wyman’s conclusions. Not providing the data in a timely fashion leaves questions of doubt in the minds of more than a few cynics.
Defining A Fiduciary ‘Safe Harbor’,” (Financial Advisor, March 1, 2012) Donald Trone, founder of the Foundation for Fiduciary Studies, explains how one can mitigate fiduciary liability by implanting and documenting specific procedures.

Fees – Be Careful What You Read:
Which is it? Will the industry benefit from the new Fee Disclosure Rule because a loophole allows them to continue hiding fees? Or Will the industry benefit for the new Fee Disclosure Rule because it will expose hidden fees. Meanwhile, smart shoppers know sometimes you get what you pay for, so lower fees might not be what the media and regulators have made them out to be.
DC industry relieved over fee disclosure rules,” (Pensions & Investments, February 27, 2012) Here’s what vendors are happy about: The summary disclosure is voluntary, not mandatory. That means they can inundate plan sponsors with reams of disclosure data and require said plan sponsors to make heads or tails of it. The question is: Will smart vendors offer the summary disclosure as a value add?
Stop Paying Wall Street Extra for Your Mutual Funds,” (DailyFinance, February 28, 2012) This is an honest article that doesn’t bring up a mutual fund’s expense ratio at all. It focuses on the real “extra” fees some mutual funds charge.
New 401k Disclosure Rules Help Financial Advisors,” (Financial Advisor, February 29, 2012) This article, written by an adviser, explains how he intends to use the new rule to attract more business.
Mull options, even if 401k offers low fees,” (Chicago Tribune, March 2, 2012) Even though this article answers the question of “to rollover or not to rollover,” it’s still instructive in that sometimes lower fees aren’t what the investor really needs.

Investments – Be Careful What You Invest In:
The cost of safety is too high, the cost of asset allocation through TDFs is too high and, in the end, the problem isn’t about knowing how to invest.
How the Government is Robbing Pension Plans,” (Institutional Investor, February 27, 2012) Why is an article with this headline in the “Investments” category? Because it’s all about the fallout of low interest rates and the impact this environment has on investments.
Plan sponsors want to customize the target-date funds in their 401k plans,” (Employee Benefit News, March 1, 2012) These would be called the “asset allocation” options and have always been allowable under the 2006 PPA. That plan sponsors are finally scrutinizing TDFs is a good thing.
401k education: Is experience the only good teacher?” (BenefitsPro, March 1, 2012) We don’t need to teach 401k participants how to invest. We must first teach them how to save.

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.
401k Participants Turn Back to Equities in January,” (, February 27, 2012)
Is offering a DB and DC plan plus a match letting employees double-dip?” (Employee Benefit News, February 27, 2012)
Workers Would Trade Pay for Retirement Security,” (, February 27, 2012)
How much does retirement really cost?” (Employee Benefit News, February 28, 2012)
Northern Trust Loses Attempt to Transfer Blame to Pension Boards,” (, February 28, 2012)
Americans Cut Costs to Save For Retirement,” (, February 28, 2012)
In Retirement Planning, Knowledge Trumps Confidence,” (, February 28, 2012)
401k Plans: A Tale of Unrequited Love,” (, February 28, 2012)
What’s your retirement number?” (Chicago Tribune, February 29, 2012)
Top 7 Tips for Advisors to Create Best Retirement Plans,” (AdvisorOne, February 29, 2012)
Are we saving too much for retirement?” (BenefitsPro, March 1, 2012)
Retiree withdrawal syndrome: How much to live on,” (BenefitsPro, March 1, 2012)
Small-business owners need more retirement planning,” (USA Today, March 1, 2012)

Wisdom from Some of Our Favorite Blogs:
401kBasics: @401kBasics Plan Sponsor Quick Tips: Test Results #Fiduciary
fi360 Blog: Fiduciary Links: Don’t miss the 2012 fi360 Conference
fi360 Blog: Rare Court Decision Provides Glimpse at Current ERISA Fiduciary Thinking
ERISA Lawyer Blog: Employee Benefits-IRS Provides Guidance On Interest Charged On Plan Loans
Boston ERISA Law Blog: Fiduciary Prudence? 9.5 Million Reasons to Care

Hot Tips from Popular Web Resources:
Fox Rothschild LLP: Avoiding a DOL Audit of an Employee Benefit Plan Annual Report
Morningstar Advisor: The Logical Inconsistency of a Broker Fiduciary Standard

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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