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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/25/12

May 29
01:15 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:
Will Plan Sponsors Leave the Under 30 Crowd Doomed to Repeat 401k History?” (, May 22, 2012). Government policy and the hoi polloi might be leading 401k plan sponsors to disaster. Why?

Compliance – Something that worked!:
We often ridicule government policies for being late to the show or too reliant on fads, but here’s a reason to like the 2006 Pension Protection Act. Too bad the same government that gave us auto-enrollment also threw all those auto-enrollers under the auto-bus.
401k Participation Rate Higher with Auto Features,” (, May 21, 2012) Ya think?

Fiduciary – Something that won’t work:
From the department of “It all depends on what you’re meaning of ‘is’ is” comes more verbal shenanigans. This is just getting too painful to watch, but we don’t know what’s worse – those executives who believe they can pull off a fast one, or those regulators who might actually believe those executives.
Time to Embrace Fiduciary Standard, Dick Averitt Tell Raymond James Financial Services Conference,” (Financial Planning, May 21, 2012) The headline inspires, but the devil is in the details. Is Averitt, the incoming Chairman of Raymond James, speaking of the “no less rigorous than the 40 Act” fiduciary standard or the watered down version?
Fiduciary Duty: Best Practices for Fulfilling Suitability Obligations,” (AdvisorOne, May 24, 2012) Here’s a clear example of an author with a spectacular resume that really doesn’t “get” fiduciary. By introducing the term “suitability” and by using examples from the brokerage industry, we can immediately see he fails to properly distinguish between the meaning of fiduciary duty and the intent of merely complying with suitability standards. The fiduciary duty often entails going against the client’s wishes, so collecting documents of, for example, a client’s risk tolerance, is sending the wrong message to the client.
Raymond James’ Curtis Voices Qualified Support for Fiduciary Standard,” (AdvisorOne, May 24, 2012) Read Curtis’s comments and you’ll begin to see how far we’ve fallen off the track. You can almost pinpoint the time when the derailment occurred – when non-RIA’s (a.k.a. “dual registrants”) come to fore.

Fees – Something that will eventually work:
But not before there’s pain. Terrible, agonizing pain.
GAO: Half of 401k plan execs don’t know what fees they pay,” (Pensions & Investments, May 23, 2012) Not that this surprises anyone.

Investments – Somethings that will never work:
By relying on investment fads with will never work, employees might be finding they might have to work – a lot longer than expected!
Savings Fall Short for Most Retirees,” (Wall Street Journal, May 19, 2012) Despite the title, this is really an investment article, and the most (accidentally) telling reason why annuities in 401k plans are bound to fail.
Will 401k fee disclosure boost index funds?” (InvestmentNews, May 21, 2012) Despite the warnings of such industry luminaries are Fred Reish and even the specific admonition of the Department of Labor against using the new fee disclosure rule to advocate investing in index funds, this article goes ahead and uses the new fee disclosure rule to advocate investing in index funds anyway.
403(b) plans using target-date funds reaches 72%, survey says,” (Pensions & Investments, May 22, 2012) The lemmings who believe there’s safety in numbers are running too fast to see the cliff.
Fund Families Frown On SEC Proposal For Target-Date Funds,” (, May, 24, 2012) Top mutual fund families like Fidelity and Vanguard, don’t like the SEC telling them to tell potential shareholders what they will get with their target date funds. Is it because even they don’t know?

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.
Consolidating IRAs; 401k Withdrawal Questions,” (Financial Planning, May 21, 2012)
BofA Merrill Lynch Sees Positive 401k Savings Trends In Q1,” (On Wall Street, May 21, 2012)
Amid financial downturn, Leviton kicks 401k plan into high gear,” (Employee Benefit News, May 21, 2012)
Is retirement dead?” (BenefitsPro, May 21, 2012)
Company 401k gets 98% participation; can you guess the company?” (Employee Benefit News, May 21, 2012)
DOL Recovers Retirement Plan Assets for Participants,” (PLANSPONSOR Magazine, May 21, 2012)
JPMorgan sued over employee retirement plan losses,” (Chicago Tribune, May 22, 2012)
Companies vow to keep DB plans for new hires,” (BenefitsPro, May 23, 2012)
When it comes to retirement investing, never trust anyone under 30,” (BenefitsPro, May 23, 2012)
Advisers ducking crucial retirement issue: MIT prof,” (InvestmentNews, May 24, 2012)

Wisdom from Some of Our Favorite Blogs:
401kBasics: @401kBasics Plan Sponsor Quick Tips: Fee Disclosure Resources
fi360 Blog: Fiduciary Links: Be ready to be the chosen advisor

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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