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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/15/12

June 18
00:17 2012

Welcome to FiduciaryNews.comTrending 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:
Experts Sound Off on DOL’s 401k MEP Advisory Opinion,” (FiduciaryNews.com, June 12, 2012). Did the DOL just cut off the best chance for small businesses to offer low cost retirement plans to their employees?

Compliance – Chipping Away at the Rock of Ages:
Used to be a time when folks thought they could simply cruise through their working years and find a pot of gold at the end of the retirement rainbow. And it was true until we discovered the downside of the Ponzi scheme pension plans really are. Either we run out of taxpayers, in the case of government funded taxes, or we run out of profits in the case of aging businesses. In both cases, the folks at the tail end of the scheme have the unfortunate awareness of who actually paid for their elder co-workers pension.
Public pension reform can’t come soon enough,” (Arizona Daily Sun, June 10, 2012) This article presents a great overview of the source of the problem as well as hinting a possible solution.
Funded status of corporate pensions lowest since 2007,” (BenefitsPro, June 11, 2012) Low interest rates and poor recent stock returns have conspired to place private pensions at a funding rate of only 70%. While their promised annuity looks good on paper, in practice there remains considerable risk in relying on pensions.
Tennessee cities pulling out of state pension plan,” (Kingsport Times-News, June 11, 2012) Cash-strapped cities find even a good pension plan still costs too much for them.
OECD says governments need to raise retirement age,” (LA Times, June 12, 2012) This article is primarily aimed at European countries, whose retirement age is 60 for public employees, although it might be instructive to the United States. Even though, according to the article, the U.S.’s reliance mostly on private pensions means about 16% less than its European counterparts, many U.S. public employees can retire well before 60.
DOL Enforcement Roundup: Two Accused of Misusing Pension Funds,” (AdvisorOne, June 15, 2012) This involves a breach of fiduciary duty.

Fiduciary – Prometheus Unwound:
If we were to unwind the real fees investors pay, would they be free to realize the practical value of fiduciary? It all may hinge on the ability of the good and right to market themselves. Ironically, would a fiduciary sell the sizzle? That could be the problem.
Fees and Fiduciary: Good Business, Bad Marketing, Pt. 1,” (AdvisorOne, June 15, 2012) Would you believe “fee-only” generates a negative response among consumers while “no-fee” generates a positive.

Fees – That’s My Fee:
As we approach our date with fee disclosure destiny, all the usual suspects are lining up to stake their claim.
‘Aha’ moment on 401k fees coming in November,” (Reuters, June 11, 2012) The date is based on the idea that the third quarter statements will be the first statements subject to the DOL’s new Fee Disclosure Rule, which becomes effective for participant reporting on August 30, 2012.
Your Boss Doesn’t Understand Your 401k Plan’s Fees Either,” (DailyFinance, June 14, 2012) Using BrightScope data, the GOA finds plans over $100 million pay about 1% while those under $10 million pay about 2%. Oh, yeah, and they found an employer who was paying sixteen times more than he thought for recordkeeping fees because he didn’t realize what revenue sharing was.
401k disclosure may spark market shake-up,” (BenefitsPro, June 15, 2012) More ominous clouds for service providers more than one standard deviation above the fee mean.

Investments – The Avengers’ Advantage:
The similarity between ideal investment options and superheroes can be summed up in this: They’re both fantasy.
Should You Trust Your Retirement To A Target Date Fund?” (Forbes, June 6, 2012) Just another hit piece on your favorite DOL sanctioned investment option.
A shift to retirement readiness occurring in 401k plans,” (InvestmentNews, June 10, 2012) Interesting take on whether “working longer” is an option as companies decide to pare back older, higher salaried, workers. To encourage enrollment, companies are considering auto-enrollment and, ironically, stable value funds and annuities – they very investment the law that created auto-enrollment (2006 Pension Protection Act) was designed to discourage.

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 I survived a DOL 401k audit,” (Employee Benefit News, June 11, 2012)
Here’s how to take control of your 401k,” (MarketWatch, June 11, 2012)
Workers closing the gap in retirement savings,” (BenefitsPro, June 12, 2012)
Higher default rate equals higher participation, research finds,” (Pensions & Investments, June 13, 2012)
Cost of Retirement: 11 Years’ Pay,” (AdvisorOne, June 14, 2012)
Male Boomers Plan to Work in Rather Than Plan for Retirement: IRI Survey,” (On Wall Street, June 14, 2012)
50 percent of Americans not looking forward to retirement,” (BenefitsPro, June 14, 2012)
Take a look at a study in retirement reality,” (Chicago Tribune, June 15, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: SRO bill hearing is over – stay tuned for further developmentsPension Risk Matters: New Focus of ERISA Fee LitigationNational Center for Policy Analysis: Is the Path to Retirement Just Pure Luck? (Part I)Pension Pulse: Fast Times in Pensionland?

Hot Tips from Popular Web Resources:
Plan Sponsor Council of America: Fee Hit Piece — Why Transparency is ImportantHR Policy Association: Report Finds Significant Proxy Advisory Firm Influence Over Investor Say on Pay, Governance VotesMorningstar: Case Shines Spotlight on Bundled Retirement Plans

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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