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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 3/23/12

March 26
00:20 2012

1020805_25983300_Trending_Topics_2012.03.26_stock_xchng_royalty_free_300Welcome to 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:
Why the Traditional Structure of Investment Policy Statements Won’t Work for 401k Plan Sponsors,” (, March 20, 2012). What worked in the past might mislead today. Worse, it might not include everything it needs to include. Find out what’s still useful, what isn’t and what needs to be added.

Compliance – Nobody Knowing Nothing:
If the plan sponsors themselves don’t know enough about ERISA, they ask their service providers, who apparently also don’t know enough about ERISA. The service providers, on the other hand, are regulated by the government, who the media blames for the “failure” or 401k plans, despite the media’s own inability to know (or remember) the sins of the past.
Four steps to take when conducting a retirement plan provider review,” (Employee Benefit News, March 1, 2012) Despite the attractiveness of the title, this article starts strong but then peters out. A better article might have assigned a different type of service provider for each step.
One-third of professional service firms don’t understand ERISA,” (BenefitsPro, March 20, 2012) Plan sponsors relying on their service providers for ERISA advice might want to take a close look at this article.
401k Retirement Plans Are Under Fire: What Could Replace Them?” (Time, March 21, 2012) Time Magazine just won’t give up with its anti-401k theme. Its proposed cure appears to be public pension plans. Apparently their source must be Madoff.

Fiduciary – Pulling Defeat from the Jaws of Victory:
This week we learn the big brokerage firms have quietly been training their reps to become “fiduciaries” just as the DOL leads with a stiff upper lip claiming it will soon reveal the new fiduciary rule. A victory for fiduciary advocates? Likely not, as, in the same breath, the DOL hints it might allow “fiduciaries” to be exempt from normally prohibited transactions.
Goldman flap drives home fiduciary issue,” (InvestmentNews, March 18, 2012) We’ve said this before and we’ll say it again: “Gambling? There’s gambling in this casino? I’m shocked!”
DOL big: 12(b)-1 fees, revenue sharing part of the fiduciary package,” (InvestmentNews, March 19, 2012) This doesn’t look good for the fiduciary purists. Exemptions are the camel’s nose under the tent.
U.S. Labor Dept not deterred in fiduciary rule proposal,” (Reuters, March 19, 2012) Don’t get too excited folks. From the early reports, it looks like fiduciary advocates have merely won the battle at the cost of the war.
SIFMA presses for single fiduciary standard for retail stockbrokers,” (InvestmentNews, March 20, 2012) More delaying tactics from the folks who won’t reveal their sources.
Labor Department not deterred on fiduciary rule proposal,” (Employee Benefit News, March 21, 2012) The DOL remains strong against the stiff opposition of those industry players with a vested interest in avoiding being deemed a fiduciary. Perhaps the smiles of investors and providers willing to act as a fiduciary that the wind beneath the sails of the DOL.
Lawmakers Grill DOL’s Solis on Fiduciary Duty Redraft,” (AdvisorOne, March 21, 2012) Again the DOL stands firm by not committing to wait for the do-nothing SEC, whom politicians seem to have in the palm of their collective hands. Even more interesting, Solis promises the new rule will deal with current prohibited transaction exemptions surrounding revenue sharing and 12(b)-1 fees.
Piling On Goldman While Obscuring the Big Truth,” (AdvisorOne, March 21, 2012) Knut Rostad opines on the matter of Goldman with this article. He points out something most important. Despite the hews and cries from the press, Goldman was doing nothing illegal. That’s the difference between the suitability standard and the fiduciary standard.
Advisors ‘Energized’ Over Fee Disclosure, Fiduciary Rules: ASPPA’s Graff,” (AdvisorOne, March 21, 2012) Remember, these are “or” advisors, not “er” advisers. The former are afraid. The latter are salivating. But the bigger story might be, again, confirmation that the brokerage industry is gearing up for the expected fiduciary rule.

Fees – The War Rages On:
As the industry struggles with itself to decide who to blame for high fees, a new figure lurks in the shadows, wondering if this thing called a “401k” is all worth it?
401k Fee Disclosure Rules ‘Good for Participants,’ Labor Official Says at ASPPA Summit,” (AdvisorOne, March 20, 2012) Here’s the bigger news. The DOL expects to extend this rule to rollovers and to issue rules on both revenue sharing and 12(b)-1 fees. Stay tuned.
Fee disclosure regs crank up scrutiny on advisers,” (InvestmentNews, March 20, 2012) So, investment advisers are concerned they’re fees may be questioned. Only if they’re way out of whack, as well they should be.
Which Is Cheaper to Run: 401k Plans or Social Security?” (SmartMoney, March 21, 2012) Yet another hit piece on 401k plans this week. Who’s talking points are these anyway? This article offers the apples-to-oranges comparison between the cost of running 401k plans (estimated) and the costs of running Social Security (as provided by the government). Besides not having good data, the analysis fails to look at opportunity costs which can best be answered by this question: Who do you trust more to handle your retirement money: you or the government?
Heading (uneasily) into the final stretch of fee disclosure,” (BenefitsPro, March 22, 2012) A rundown of everything we don’t know about how fee disclosure will actually work.

Investments – The World Turns…:
…but can 401k plan sponsors catch up? Too made many old ideas have grown stale and, it turns out, too many new ideas have hidden dangers. Stay aware, stay very aware.
For 401k advisers, time to shelve old benchmarks,” (InvestmentNews, March 19, 2012) It’s not about the investments anymore. Actually, it should have never been about that, but you know what they say, the sizzle sells.
Fears Grow that ETFs Make, not Mirror, Market Volatility,” (Institutional Investor, March 21, 2012) Let’s make one thing crystal clear, here. They’re talking about index funds. The ETF is merely the vehicle. The index fund is the bullet.
Experts make case for maintaining stable-value funds in retirement plans,” (Employee Benefit News, March 22, 2012) It’s always good to have a steady eddy to park your assets in while you’re trying to figure out what to do with the rest of your life.
What’s missing from your 401k investment policy statement?” (BenefitsPro, March 22, 2012) If you haven’t looked at your investment policy statement recently, you better read this.

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.
Stronger retirement plan design can increase savings rates, participant confidence,” (Employee Benefit News, March 19, 2012)
How many 401k plans are there?” (BenefitsPro, March 20, 2012)
Plan Sponsors not Sold on Benefits of Bundling,” (, March 21, 2012)
Even Millionaires Unsure How to Save For Retirement,” (Financial Planning, March 22, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Is your technology platform ready for a fiduciary standard?
Chicago Financial Planner: Why Are You Running Your Company’s 401k Plan?

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Joe
    Joe May 04, 15:35

    Been enjoying the series on benchmarking. Was wondering if the 3rd article, I believe entitled “What is the best way 401k plan sponsors can benchmark their plans? was published yet. If so, would you send me it please.

    Thank you,

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