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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 4/13/12

April 16
00:17 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:
Stunning Academic Study May Cause DOL to Retain Original Proposal for Fiduciary Definition,” (, April 10, 2012). To the extent regulation improves efficiencies; there will always be winners and losers.  Those who don’t benefit will always oppose the change.

Compliance – P.T. Barnum Would Be Proud:
It was either the “there’s a sucker born every minute” motif or the “the definition of insanity is trying the same thing over and over and expecting different results” motif. The latter is a lampoon of our elected officials and the former is a “tribute” to the voters who got us in this situation.
A New Chapter of Pension Plan Woes,” (Kiplinger, April 9, 2012) It looks like the confluence of demographics and a bad economic are revealing the ultimate legal Ponzi Scheme. Not really. That would be Social Security, and that revelation may be coming later. This is really about a lot of little legal Ponzi Schemes. Low interest rates, no growth, fewer new employees and too many more retirees are all converging to squeeze the financial blood out of pensions. How much longer until be smell more BO (as in “Bail Out”) as a result?
Publicly run pensions invite trouble,” (USA TODAY, April 10, 2012) File this under “Let’s take a really bad idea (see above article) and make it exponentially worse.” Politically this makes sense as it further ties self-interest into voting constituencies. Economically it’s a ticking time bomb of a disaster.

Fiduciary – Did that Sound Just Come from the Fan?:
H-E-double-toothpicks just broke loose as not one, but two different academic studies provide empirical proof the fiduciary standard is better for the economy. Perhaps the regulators should be demanding an economic justification for not adopting a universal fiduciary standard. Oh, wait, they did. Twice. And the “data” held no water.
Oliver Wyman Releases Data to DOL on IRA Fiduciary Costs,” (AdvisorOne, April 5, 2012) The article doesn’t talk about the data. It only restates the conclusions. Too bad.
Will the fiduciary rule crush IRA holders?” (BenefitsPro, April 6, 2012) The article’s claim of a “new” report is really the re-release of the much asked for data of the 2011 Oliver Wyman that first initially claimed the fiduciary rule would hurt IRA holders.
Fierce Opposition to Labor Department’s Fiduciary Proposal,” (AdvisorOne, April 10, 2012) The author of this article is President of FSI, one of the leading opponents of the DOL’s proposal. Unfortunately for him and Congress, they don’t have empirical support for their opinions (see this week’s Lead Story above). All it shows is what we already know, DOL opponents have a ton of lobbying cash and Congress is all too willing to accept it and abandon reason.
Advisors Often Work Against Clients’ Interests, Study Says,” (Financial Advisor, April 11, 2012) Ouch! Another empirical study (this one by a Harvard researcher) concluding non-fiduciaries put their own interests ahead of their clients’ interests. Are these studies enough to trump PAC money in Congress? Of course, there is a problem in that this study starts to mix its metaphors by implying passively managed funds are better only because their fees are lower than actively managed funds.
Show Me the Data: A Dose of Reality in Fiduciary Debate,” (AdvisorOne, April 11, 2012) Bob Clark uses the same study also featured in this week’s story to ask the brokerage industry to provide data supporting its conclusions. It’s not clear if this was written before the industry produced the data from the Wyman IRA Study or because the industry released it.
Broker ploy headed for Titanic fiduciary iceberg?” (BenefitsPro, April 12, 2012) The brokerage industry gets caught rearranging deck chairs with its belated release of the data from last year’s Wyman study.

Fees – It’s the Pre-Season:
Everyone is honing their skills as we get ready for opening day this July 1st.
Thrown some curves, service providers finally ‘ahead of the curve’ for 401k disclosures,” (InvestmentNews, April 9, 2012) It is what it is. The Fee Disclosure Rule is finally in a happy place.
5 fee disclosure steps for plan sponsors,” (BenefitsPro, April 11, 2012) A handy dandy resource for 401k plan sponsors.
Providing clarity to your 401k participants: A story of disclosure,” (BenefitsPro, April 12, 2012) Same old, same old. This article rehashes some tired thoughts, with special emphasis on an electronic form of disclosure.

Investments – Outing Everyone:
To make room for the impending alternative investments craze, we must first kill the current fads as well as some baseline assumptions. Take a look at the list below. Looks like we’re off to a good start.
Target-Date Retirement Funds Offer a Strategy Spectrum,” (New York Times, April 8, 2012) More lazy reporting from the Gray Lady. While the article does offer an appropriate metaphor citing the similarity between TDFs and all-in-one (a.k.a cheaper, easier and lesser quality) stereo systems, it then repeats the tired mantra that passive beats active. It’s funny how we get so many of these reports during periods when passive is beating active but never see the reverse written during the other half of the periods where active is beating passive.
PIMCO survey: Target-date funds good for small plans, too,” (Pensions & Investments, April 9, 2012) Oddly, the article is referring to asset allocation models, not TDFs the way we’ve come to know them. Perhaps “target-date fund” is becoming like “xerox,” “kleenex” and “google” – brand names that have become generic terms.
Target date funds lack alternatives,” (InvestmentNews, April 8, 2012) Hmm, wasn’t real estate the “alternative” investment five years ago? How’d that work out?
Stable Value Funds Receive Increased Scrutiny,” (AdvisorOne, April 6, 2012) Could these bastions of 401k safety really be unsafe? Sure. There’s no such thing as a free lunch. Besides, on average there’s probably still too much retirement money invested in them, despite the 2006 PPA.
ETFs Face 401k Hurdles,” (ETF Trends, April 10, 2012) A good review of what the real problems are with putting ETFs in 401k plans.
Stable value 2.0, fewer investor guarantees,” (Reuters, April 11, 2012) These are not your father’s Stable Value funds, which is probably a good thing. Why entice retirement investors into investment that won’t get them where they need to be?
Stable-value funds remain core asset class for 401k participants,” (Employee Benefits News, April 12, 2012) This article outlines the primary problem with stable value funds – they’re still too popular, despite the 2006 PPA. About half of the participants use them and they account for 20% of the retirement assets.

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.
How Delaying Retirement Can Help You,” (, April 5, 2012)
Retirement Portfolios Recovering, Investors Still Shook Up,” (Financial Planning, April 9, 2012)
Boomers Uneasy About Their Retirement,” (On Wall Street, April 10, 2012)
Company Hit for $35 Million in 401k Fee Case,” (, April 12, 2012)
Planning for retirement? Plan to live to 100,” (MarketWatch, April 12, 2012)
Everyday expenses trumping retirement savings in 2012,” (BenefitsPro, April 12, 2012)
What keeps employers up at night, are company matches backfiring & a new high for retirement: This week in benefits,” (BenefitsPro, April 13, 2012)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: Test Resultsfi360 Blog: Fiduciary Links: SIFMA’s fiduciary comments a matter of interpretation

Hot Tips from Popular Web Resources:
Securian: Four Suggested Focus Areas to Complete a Prudent Fiduciary Review for the Selection and Monitoring of Target Date FundsCenter for Retirement Research: How Important Is Asset Allocation To Financial Security In Retirement?

Miss anything? Feel free to add a comment below.

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About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Altegris
    Altegris May 07, 17:34

    Thanks for putting this post together. All of these links will keep me busy for a while.

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