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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/8/12

June 11
00:24 2012

Welcome to FiduciaryNews.com 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:
Second Look at Headline Grabbing 401k Fee Survey Reveals Major Questions,” (FiduciaryNews.com, June 5, 2012). In the rush to get the headline, did the mass media just do a grave disservice to 401k plan sponsors and investors?

Compliance – Push-me-Pull-ya on Retirement Plans:
It will be interesting to see, now that the major ballet initiatives involving government pension plans went down to stunning defeat, if the “401k is bad” meme of the mainstream media dies down.
Labor Department stands firm on self-directed brokerage account guidance,” (Pensions & Investments, June 1, 2012) The DOL doesn’t buckle to industry pressure. Score another victory for behavior finance.
It’s time they shared pension pain,” (Indianapolis Star, June 4, 2012) The “they” referred to here means Washington politicians, who often “retire” with pensions far exceeding those of mortal men, a.k.a., their constituents. Funny, we thought the Founding Fathers wanted our reps to be citizen legislators. For them, politics was a civic duty we’d all take turns at, not a career.
Governor Walker’s Victory Spells Doom For Public Sector Unions,” (Forbes, June 5, 2012) This could have major implications in public pensions and the move towards defined contribution plans.
California voters overwhelmingly support retirement benefit cuts,” (BenefitsPro, June 6, 2012) Not one, but two big cities – San Diego and San Jose – pull a Wisconsin and vote to cut public employee retirement benefits. Is this blue state going red (or at least shading purple)?
Unions lost big in Wisconsin showdown,” (BenefitsPro, June 6, 2012) More on the fallout caused by Wisconsin’s failed recall election and the impact it might have on public employee retirement plans.
California pension cuts may have ripple effect,” (BenefitsPro, June 7, 2012) As you read about the political ripple effect in this article, think about the corresponding ripple effect in the retirement industry. As the electorate moves away from the retirement Ponzi scheme known as the pension plan, maybe we’ll start seeing some real reform in the 401k regulations that actually encourages greater savings and lowers the fiduciary risk to 401k plan sponsors.

Fiduciary – What did Dante say about the Hypocrites?:
Forget Dante, given all the double-speak maybe George Orwell is the more appropriate literary reference.
Does Raymond James Support the Fiduciary Standard … in Practice?” (AdvisorOne, June 4, 2012) Knut Rostad asks the questions that need to be asked after executives from the brokerage giant make a claim to supporting the fiduciary standard but then say there is no existing standard.

Fees – The WBA ain’t got nothin’ on this one:
With the upcoming Great 2012 401k Fee War turn into a slug-fest or fizzle out once everyone’s true colors are revealed? It’s too early to tell, but the controversial Demos white paper echoes in the media for another week.
ASPPA takes issue with white paper on 401k fees,” (BenefitsPro, June 5, 2012) The ASPPA feels the Demos report incorrectly assumed trading costs were equal to the fund’s expense ratio.
Will New Regs Solve 401k Fee Mystery?” (SmartMoney, June 6, 2012) It’s not the size of the fee that matters, it’s what they are, how they are deducted and what value they add.
The Fight Over 401k Fees,” (AdvisorOne, June 8, 2012) More on the disagreement between the ASPPA and the “liberal think-tank” Demos regarding the latter’s controversial white paper.

Investments – The Next Great Battle:
Mark it on your calendars. Once we call a truce on all things “F” in the 401k world (i.e., “Fees” and “Fiduciary”), the battleground will return to investments. Will it be in terms of Modern Portfolio Theory and a rehash of the active vs. passive debate (perhaps in the guise of “low-cost” ETFs)? Or will Behavioral Finance finally become the trope with the question of choice taking the lead? Stay tuned. Same Bat Time. Same Bat Channel.
Apple Makes The Move to All-ETF Retirement Plans,” (MarketWatch, June 6, 2012) Which just goes to prove just because you might be good at technological innovation and marketing doesn’t mean you know about investments.
Did DOL just set the upper limit on 401k options?” (BenefitsPro, June 6, 2012) A footnote in the DOL’s FAQ on 408(b)(2) sets the industry afire by implying 401k plans sponsors may have increased fiduciary liability by offering too many options. The DOL seems to be responding to both the plan sponsor’s fiduciary duty and behavioral studies that suggest too much choice is a bad thing.
Time to let your retirement fly out the window?” (Reuters, June 7, 2012) More on the above story, this time from the brokers point of view. Apparently, brokers don’t like the DOL enforcing the fiduciary standard and/or they like the idea of too much choice confusing clients.
Four Ways Mutual Funds Hurt Your Retirement,” (Forbes, June 7, 2012) Please note this article is cited as a blog associated with Forbes and not necessarily a published article. We note this because, given the content, it doesn’t appear this blog has gone through any journalistic editing. For example, with a title that focused on retirement, why would one of the four reasons be “tax inefficiency”? We’re not sure about the other data and, quite frankly, unless Forbes pays us, we’re not going to do their editorial vetting for them.
Callan: DC plan investments return 8.7% in Q1,” (Pensions & Investments, June 7, 2012) More significantly, DB plans only returned 6.8%. Maybe all those alleged 401k fees are actually worth something!
Is Portfolio Theory Dead? Markowitz Stands His Ground,” (AdvisorOne, June 8, 2012) Believe it or not, behavioral finance explains why Markowitz still believes, and why MPT probably won’t really die until the generation of advisers who first used it in the 1980’s retires.

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.
401k plans Down Nearly 3% in May,” (SmartMoney, June 1, 2012)
Roth 401k vs. a traditional 401k? No contest,” (InvestmentNews, June 5, 2012)
Chrysler’s chief says no to pension buyouts,” (BenefitsPro, June 5, 2012)
Mutual fund industry defends 401k plans,” (LA Times, June 7, 2012)
David Callahan: A Perfect Failure: Why the 401k Has Been a Flop,” (Huffington Post, June 7, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Week of fierce criticism a prelude to SRO bill hearingfi360 Blog: Focus of SRO Hearing Shifts to Regulatory ‘Fatigue,’ SRO Burden for Small AdvisorsThe Chicago Financial Planner: Time to Let it Go

Hot Tips from Popular Web Resources:
ICI: The Future of Retirement and the Strengths of the 401k System

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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