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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/4/12

May 07
00:46 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:
Thoughts on Attending My First fi360 Conference” (, May 1, 2012). I was sad when it was over. It was like saying goodbye to old friends. I wanted to stay and keep talking. Oh well, there’s always next year…

Compliance – The Coming Thing(s):
“Here come the feds! Here come the feds! You better watch out, ‘cuz here come the feds!” (with apologies to Flip Wilson).
Labor Dept. ramps up 401k plan provider exams,” (Employee Benefit News, April 25, 2012) Even without the change in the fiduciary rule, nothing can stop the DOL from targeting providers with a conflict of interest.
Feds target 401k service companies,” (The Columbus Dispatch, April 30, 2012) Here’s how the DOL’s initiative plays out in middle-America.
Facing Bankruptcy, Providence, R.I., Curbs Pensions,” (Financial Advisor, May 1, 2012) This despite getting $31 million in voluntary payments from Brown University (in lieu of taxes).
Chapter 11 case could trigger wave of public-pension fund bankruptcies,” (Pensions & Investments, May 1, 2012) Public workers have filed suit to prevent a municipal bankruptcy that would cut their retirement benefits. Hmm, could this be a way to solve the government debt crisis? If so, you can kiss Social Security good bye.

Fiduciary – Why aren’t Political Officials Returning our Calls?:
Could it be because the facts don’t support the sounds coming from their mouths (or their press secretaries’ fingertips)?
Sen. McCaskill to EBSA: Reopen Fiduciary Dialogue,” (AdvisorOne, April 27, 2012) The Democrat Senator is Chairman of the Subcommittee on Contracting Oversight and takes the industry’s side against the DOL. Ironically, on April 30th her website features this headline: “McCaskill Applauds New Rules Against ‘Cramming’ Phone Bills With Hidden Fees.” Apparently, what’s good for brokers is not good for phone companies.
Cost analysis could end DOL proposal,” (InvestmentNews, April 29, 2012) Another story based on an aggressive stance from a Republican Senator claiming the fiduciary standard would cost money.
Protect retirement assets from self-serving advisers,” (InvestmentNews, April 29, 2012) A very extensive counterpoint to the above article. In a nutshell, if you pay $5.00 cash does it cost you more than paying $5.00 with a check?
FPA Leaders Talk About Diversity, Fiduciary Rules,” (AdvisorOne, May 2, 2012) FPA’s president Paul Auslander, FPA’s is quoted saying the fiduciary duty is “compensation neutral” because all providers face conflicts of interest. That right there, folks, is the very definition of the difference between someone with only broker experience and someone with trust experience. It’s a sad day for the FPA.
Put your advisor to the fiduciary test,” (BenefitsPro, May 2, 2012) Perhaps it’s a bit overly simplified (only due to the length restriction of an article, no doubt), but it’s a good start.
How to not act like a pension plan fiduciary,” (BenefitsPro, May 2, 2012) This is a rather interesting idea. Is it a breach of fiduciary duty to vote “No” on a proxy as opposed to selling the security?
Fiduciary Standard: Assessing SIFMA’s Peculiar Definition,” (AdvisorOne, May 4, 2012) Bob Clark does his usual fine job taking down the folly of SIFMA, with a little help from Knut Rostad.

Fees – The Cat’s Out of the Bag:
Looks like plan sponsors might be clamoring for Fee Disclosure ASAP, if only to cover their little behinds. The industry, on the other hand, is grasping to justify yet another reason to defer it.
ASPPA requests ‘transitional period’ for fee disclosure regs,” (BenefitsPro, April 30, 2012) Does this really surprise anyone? It’s all because the DOL has yet to release its promised FAQ Guidelines. Here’s an idea: Go ahead with disclosure as scheduled with one guideline: All fees disclosures should be described on one page using no more than 12pt type. Additional pages will be allowed, but plan sponsors (not the vendors) will be fined by the DOL $500 per quarter for each additional page.
Will 401k Plans Abandon Revenue Sharing?” (SmartMoney, May 2, 2012) This is all about the Tussey v. ABB case. Although we’ve seen articles on this case before, the significance here is that this is the mainstream press.

Investments – Craziness Returns:
Well, not all craziness, just that on the part of professionals trying to hawk a product. At least the investors are smart enough to move out of fixed income.
The Flawed Premise of 95 Percent of 401k Plans,” (Huffington Post, May 1, 2012) Dan Solin inadvertently articulates the flawed premise of 95% of index fund investors when he incorrectly assumes passive funds always beat active funds. How quick they forget The Lost Decade.
401k Participants Move Away from Fixed Income in March,” (Plansponsor Magazine, May 2, 2012) It is what it is.
Reed plans to continue examination of ETFs,” (InvestmentNews, May 3, 2012) Glad you didn’t put them in your 401k, aren’t you?
Another Case for Annuities in 401k Plans? Cognitive Impairment,” (Registered Rep, May 4, 2012) Are you serious? Dementia as a reason for annuities? Maybe dementia is the explanation as to why people would even consider annuities. Doesn’t rolling over assets into an IRA and hiring an investment adviser with a limited power of attorney achieve the same purpose with the added benefit of having a fiduciary and paying less?

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.
Three Traps to Watch Out for When Choosing a 401k Plan,” (Forbes, April 26, 2012)
Games, mobile apps, fee calculators hot new trend in retirement tools,” (BenefitsPro, April 30, 2012)
Average 401k Balance 62% Above 2009, Fidelity Says,” (Businessweek, May 1, 2012)
Half of Eldest Boomers Were Able to Retire,” (AdvisorOne, April 30, 2012)
Fidelity reports 401k balances grew 8 percent,” (BenefitsPro, May 1, 2012)
More Mass Affluent Delay Retirement, Look to Get Back on Track,” (Financial Planning, April 30, 2012)
How do you size a 401k?” (BenefitsPro, April 30, 2012)
Ford’s pension plan payouts: The wave of the future?” (BenefitsPro, May 2, 2012)
Is 401k a Ticking Time Bomb?” (Huffington Post, May 3, 2012)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: 10% Early Penalty Exceptionfi360 Blog: Fiduciary Links: Dispatches from the fi360 Conferencefi360 Blog: SRO Proposal Leaves Fiduciary Status in Limbo

Hot Tips from Popular Web Resources:
Smart Business: How to protect your 401k plan’s fiduciary under new regulations

Miss anything? Feel free to add a comment below.



About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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