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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 3/30/12

April 02
00:43 2012

Welcome 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:
401k Plan Sponsor Warning: DOL May Sacrifice Fee Purity for Fee Transparency,” (, March 27, 2012). A simple example shows how liability can increase when using 12b-1 and revenue sharing fees.

Compliance – This Explains Everything!:
OK, OK, now we get it. The reason why we’ve been blasted with talking points dissing the 401k is because we need to reduce the tax on salary deferral in order to pay down the deficit. Hmm, doesn’t that sound strangely akin to sacrificing a secure and empowered retirement just to pay today’s bills? There’s got to be a better way.
Tax reform could shrink 401k balances, EBRI says,” (Pensions & Investments, March 20, 2012) This explains everything. The current attacks on 401k plans may be a way to get people to accept higher taxes of a form that would discourage 401k (and possibly other) salary deferrals.
Allow E-Disclosures, Retirement Plan Coalition Urges DOL,” (AdvisorOne, March 28, 2012) We may be jaded but what does it matter if disclosures that aren’t read anyway are sent in e-mails that are never opened? Besides, studies show disclosures not only fail, they have an effect opposite that which was originally intended.
Tax reform fails to protect retirement savings,” (BenefitsPro, March 29, 2012) The bad news here is that Paul Ryan, representing the Republican side of the ledger, has copied the Democrats’ proposal to eliminate tax incentives for retirement plans. Once again, Washington shows its short-sightedness.
Waiting for the crackdown: DOL retirement plan enforcement to increase,” (BenefitsPro, March 29, 2012) Warning, the DOL has just add 100 to its enforcement staff.

Fiduciary – Fun While it Lasted:
Well there goes that hopey-changey thing we were all counting on. It looks like the whole world wants to sell out the purity of the Fiduciary Standard just because an unregulated business has been allowed to grow over that last two decades. Kinda makes you wonder if it’s worth it trying to be a good guy.
DOL big: Wait will be worth it for fiduciary rule re-proposal,” (InvestmentNews, March 25, 2012) So here it is, the DOL is admitting it wants everyone to act like a fiduciary but it “recognizes small 401k plans are sold” and we need to have 12b-1 fees to accomplish that. Furthermore, the DOL feels Multiple-Employer Plans are more risky than the abusiveness of 12b-1 fees.
Is the DOL about to define fiduciary down?” (BenefitsPro, March 29, 2012) The DOL wants to broaden the fiduciary rule while at the same time adding to the exemptions. We guess if you want to call yourself a law abiding citizen if we agree to provide an exemption for any felony convictions, go ahead.
CFP Board, FPA, NAPFA and Others Submit New Fiduciary Roadmap to SEC,” (On Wall Street, March 30, 2012) Well, that about makes it official. If the Consumer Federation of America wants to overturn 8 centuries of trust law, then it shall be done.

Fees – Tell Me If This Hurts:
Really. It doesn’t matter. We’re still too depressed about losing the argument on the fiduciary standard.
Fee disclosure rules: The devil is in the details,” (BenefitsPro, March 23, 2012) Fred Reish, among others, provide some interesting insights, especially pertaining to alternative investments.

Investments – The Music Goes ’round and ’round:
Internet mutual funds don’t work? Go to stable value funds. Stable value funds don’t work? Go to TDFs. TDFs don’t work? Go to commodities. Commodities don’t work? Well, don’t worry about that, you’re already in the poor house.
TDFs See Significant Growth in 401k Sector,” (, March 23, 2012) Experts expect TDF assets to quadruple in the next five years.
Why bother with target-date funds?” (Reuters, March 26, 2012) The article suggests investors might be better off investing in index funds directly. Truth be told, they’d be better off investing in any number of other types of funds – active and passive.
Some employees want out of TDFs and into self-directed IRAs,” (Employee Benefits News, March 29, 2012) Read the article and cringe. Folks want to invest in real estate, gold and even a herd of cattle. The DOL better take another look at allowable investments for IRAs.

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.
Smaller 401k plan advisers losing fight to stay afloat,” (InvestmentNews, March 25, 2012)
401k Strategies Even the Lazy Can Love: ASPPA Summit,” (AdvisorOne, March 26, 2012)
Does an IRA Still Make Sense?” (, March 28, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Structuring the IPS for 401k plans

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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