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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/11/12

May 14
00:36 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:
New 408(b)(2) ‘Guide’: Not Necessarily What 401k Plan Sponsors Hoped” (, May 8, 2012). 401k plan sponsors may discover the Fee Disclosure Rule may be more hazardous than healthy.

Compliance – Scooby Doo Doings:
You can almost her old man Johnson crying in anger, “I would have gotten to retire in comfort if it wasn’t for that meddling government.” When it comes to politicians, if it’s alive, tax it, if it’s dead, subsidize it.
N.Y. state pension chief hammers at 401k option,” (Pensions & Investments, May 8, 2012) This is an intra-Democrat spat, so both sides are free to opine without charges of partisan bias. So, here we go: Isn’t this a clear conflict of interest considering the NY State pension chief stands to lose power should individuals be given the right to make their own investments? Maybe this is another area we need to enforce a fiduciary standard. And that doesn’t even address his use of tired and untrue arguments against the enumerated successes that have spawned from the existence of 401k plans.
Balancing the Budget With Retirement Savings?” (Wall Street Journal, May 9, 2012) Here’s a recap of what’s been going on earlier in Washington, although it seems like this line of thinking has hit a dry hole.

Fiduciary – Where are the Grown Ups?:
Let’s put this in easy-to-understand terms. If the industry, the politicians and the regulators were all little kids arguing over the fiduciary standard, by now mommy and/or daddy would have stepped in and laid done the law.
2012 Fiduciary Findings Pt. 2: How Advisors Feel About Effects of Fiduciary Standard,” (AdvisorOne, May 6, 2012) In a surprise, most investment advisors and advisers prefer both the Fiduciary Standard and the DOL’s new definition of fiduciary. This would include both RIA’s and, here’s the surprise, dual-registrants.
When Your 401k Provider Doesn’t Vote Your Interests,” (Bloomberg, May 7, 2012) This has to do with the voting of company stock and assumes voting against employees means failing to meet your fiduciary duty. Ironically, if it helps improve the growth of the ex-employees retirement assets, it is exactly what you’re supposed to do to meet your fiduciary duty.
The Pregnancy Test: Can a Broker Be a Little Bit Fiduciary?” (AdvisorOne, May 8, 2012) Bob Clark is his usually entertainingly snarky self, showing no unwillingness to tell it like it is.
Worst-Case Scenario Is Diluted Fiduciary Standard: TD’s Nally,” (AdvisorOne, May 10, 2012) Unfortunately, that is the extent the topic is covered in the article, which focused more ink on other items.

Fees – Surprise, Surprise, Surpise:
We’ve used this headline before, but in memory of Goober we’ll use his cousin’s signature phrase to once again declare the Fee Disclosure Rule is not your father’s DOL. They mean business, this time, and 401k plan sponsors as well as their service providers should be paying attention.
DOL issues Q&A guidance on fee disclosure rules,” (BenefitsPro, May 8, 2012) Here’s a good overview of the new fact sheet.
3 reasons to fear 408(b)(2),” (BenefitsPro, May 10, 2012) This goes a little bit beyond the FAQ and offers some good insights for the three different groups impacted by the DOL’s new Fee Disclosure Rule: 401k plan sponsors, 401k service providers and 401k participants.

Investments – Separation of Church and State:
Take a look at these headlines and conclude for yourself, but it appears we need to fundamentally alter the way we deliver investment advice. It’s not about the advice anymore. It’s about the products. And when we place products as the top priority, we’re focusing on sales, not advice.
BlackRock, Harvard: Retirees Don’t Know What They Want, but It Might Be Annuities,” (Retirement Report, May 8, 2012) When surveyed, retirees overwhelmingly said they wanted both an income stream and control over their assets. Apparently, some financial product purveyors and some academics think only annuities can provide a steady income stream. They therefore conclude retirees are contradicting themselves. Maybe all retirees want is enough savings to control their assets so those assets can provide a steady stream of income.
Pace of target-date growth slows in 2011, says Morningstar,” (Pensions & Investments, May 8, 2012) This makes sense as the bulk of the growth came from the DOL’s pre-mature blessing and the subsequent slow-down comes from the reality that TDF’s might not be what everyone thought they were.
ETFs land in 401k plans, 529 college savings plans,” (USATODAY, May 10, 2012) Perfect timing as we’re almost at the end of the fuse.
Indexed target date funds hitting the mark with plan sponsors,” (InvestmentNews, May 10, 2012) Or are they? (See two stories above.) The truth is, if one rotten apple rots slower than another rotten apple, you should still be eating oranges.

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.
Baby Boomers Sacrifice Retirement for Kids—Again,” (AdvisorOne, May 1, 2012)
American Airlines, PBGC strike deal on pension plans’ freeze,” (Pensions & Investments, May 7, 2012)
Nearly Half of Americans Not Saving for Retirement,” (PLANSPONSOR Magazine, May 9, 2012)
Retirees Provide Insight for Retirement Planning Success,” (PLANSPONSOR Magazine, May 10, 2012)
Research finds employers, employees have different perspectives on retirement readiness,” (Employee Benefit News, May 10, 2012)
LIMRA: 49 percent of Americans not saving for retirement,” (BenefitsPro, May 10, 2012)
Practice retirement before leaping into leisure,” (MarketWatch, May 11, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: 408(b)(2) Rules are Really about Plan Sponsor Fiduciary Obligations

Hot Tips from Popular Web Resources:
DOL: Field Assistance Bulletin 2012-02 408(b)(2) FAQ Guide

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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