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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 4/20/12

April 23
00:08 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:
Is Dual Registration the Cause of Opposition to the Fiduciary Standard?” (, April 17, 2012). In this first installment of a three part series, we explore whether a Clinton-era misguided quid pro quo, ultimately approved during the Bush administration, lead to the house of cards we see today? The second installment, “Will Broker Evolution Obviate the Fiduciary Standard Debate?” postulates if the anti-fiduciary standard tirade may merely be the tired last gasps of a once thriving business model.

Compliance – We Dodged a Bullet:
Who knows why they started talking about balancing their deficit on the backs of the nation’s retirees, but, in the end, it was all talk. And we don’t even have gridlock to thank for it.
Bad government accounting may lead to bad retirement policy,” (BenefitsPro, April 16, 2012) A major industry group releases a study showing how government calculations are flawed. But you already knew that. Of course, in Washington, as the title suggests, garbage in, garbage out. But you already knew that, too.
Financial Impact of Living Longer Worse Than Pension Plans Think,” (AdvisorOne, April 16, 2012) Finally, empirical evidence that proves Social Security is a Ponzi scheme.
Unintended Consequences Lurk in Retirement Overhaul: Lawmakers, Experts,” (AdvisorOne, April 17, 2012) Smarter heads throw water on the bipartisan fire to trash the 401k.
Retirement savings tax breaks safe — for now,” (Investment News, April 17, 2012) After it’s all said and done, the folly of a proposal was done (as in “stick a fork in it”).
Three Myths and a Fact About Public Pension Systems,” (Virtual-Strategy Magazine, April 17, 2012) Good article that explains why those who aren’t worried about our crippled public pension system aren’t worried and why they should be.
Experts testify tax code changes could cripple retirement savings,” (Employee Benefits News, April 18, 2012) Translation: Washington must prove it can figure out its own pocketbook before it invades the wallets of others.

Fiduciary – The Debate Heats Up:
Are we seeing the beginnings of a concerted effort on the part of every-day financial writers to expose the anti-fiduciary folly of the big brokers? Who knows, if the politicians can be turned on the crazy retirement idea (see above), they might be turned on their silly opposition to the fiduciary standard.
The Fiduciary Debate: Should You Care?” (, April 18, 2012) Roger Wohlner does a fine job explaining the issue in terms even the great unwashed could appreciate.
Universal Fiduciary Advice Will Shut Out Middle-Class Clients,” (AdvisorOne, April 18, 2012) Louis Harvey, chief executive of consulting firm Dalbar and self-proclaimed “separatist” when it comes to the fiduciary standard, says, despite a new Finke/Langdon study finding otherwise, the fiduciary standard will prevent all but the wealthy from obtaining investment advice. Why? Because he says so. The reporter should have asked better questions.
Motion: That Serving a Client’s Best Interests Needn’t Be Complicated,” (AdvisorOne, April 17, 2012) Bob Clark uses his bully pulpit to skewer a Finke/Langdon naysayer in his usually effective manner. It’s not Louis Harvey, but it might have been more interesting if Bob had interviewed Lou for the above article.
This might be the best fiduciary standard solution,” (BenefitsPro, April 19, 2012) Ironically, the legacy of the Merrill Rule might be the extinction of the Merrill species.

Fees – The Future Rears its Ugly Head:
With fee disclosure, plan sponsors no longer have any place to hide. Ignorance can no longer be used as an excuse. Now it’s an admission of guilt and just as punishable.
Another worst-case scenario for fee disclosure,” (BenefitsPro, April 19, 2012) A good review and assessment of the potential fallout from the much celebrated Tussey v. ABB, Inc. case where Fidelity’s hidden revenue sharing fees landed it, the plan sponsor and the individuals on the plan’s oversight committee into trouble to the tune of $35.2 million.
Wells Fargo: Slight effects foreseen from fee disclosure rules,” (Pensions & Investments, April 19, 2012) How could one predict the effects of an unseen menace? This survey may have been premature. Just ask those 401k plan sponsors using (at least for now) Hartford’s annuities.

Investments – The King is Dead! Long Live the King!:
OK, that might be a little premature, but it seems like an idea that began almost two decades ago, and one long accepted by academia, may finally be embraced by the industry.
Asset Allocation Has ‘Minor’ Role in Retirement Planning,” (AdvisorOne, April 16, 2012) A new paper released by the Center for Retirement Research at Boston College highlights one of the biggest problem facing any investment theory – it’s insular nation. By focusing only on investments, these theories face to account for outside factors that can more easily and more reliably allow people to achieve their targeted goals.
Is modern portfolio theory bunk?” (InvestmentNews, April 19, 2012) The second article in three days questioning our hallowed beliefs? Indeed, as the picture accompanying this article shows, the world must be turned upside down. Unfortunately, this are really only attacks MPT’s definition of risk. Granted, it’s the cornerstone of the theory, but defining risk is only the beginning…

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.
Young People Are Loading Up on Stocks,” (TheStreet, April 13, 2012)
Appeals Court Affirms US Steel Did Not Violate ERISA,” (PLANSPONSOR Magazine, April 16, 2012)
Court Agrees With Participants and DOL Regarding Pre-Suit Demand Under ERISA,” (Bloomberg, April 17, 2012)
Confidence in Retirement Savings Drops Slightly,” (PLANSPONSOR Magazine, April 17, 2012)
ConAgra Foods Will Not Pay in Fiduciary Suit,” (PLANSPONSOR Magazine, April 18, 2012)
Half of Plan Sponsors Fail to Measure Employees Retirement Progress,” (PLANSPONSOR Magazine, April 19, 2012)
Gen Y faces retirement as a go-it-alone affair,” (, April 19, 2012)

Wisdom from Some of Our Favorite Blogs:
ERISA Lawyer Blog: District Court Rules That Plan Fiduciaries Are Liable For .9 Million For Breaches Of DutyThe Pension Protection Act Blog: ERISA Stock Drop Lawsuit Against BP Over Gulf Oil Spill May Be Back from the Dead
fi360 Blog: Fiduciary Links: New SRO Bill draft on the horizon?The Pension Protection Act Blog: 401k Excessive Fees Lawsuit Against John Hancock Will Go Onfi360 Blog: Court Finds a Neglected IPS can be CostlyThe Pension Protection Act Blog: Treasury Official Discusses Annuities for 401k Plans

Hot Tips from Popular Web Resources:
Thomson Reuters/EBIA: Failure to Monitor Revenue Sharing and Negotiate Rebates for Recordkeeping Fees Violated Governing Documents and Fiduciary DutiesSmart Business: The unforgiving compliance clock of new 401k rules
Business of Benefits: Meaningful MEP MinutiaeJustia ERISA Opinion Summaries: Santomenno v. John Hancock Life Ins. Co.

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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