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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/29/12

July 02
00:34 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:
Zen and the Art of Fee Disclosure: What 401k Plan Sponsors Can Expect from 408(b)(2) Service Provider Disclosures,” (, June 26, 2012). If a fee falls disclosed in the forest, will it make a sound a 401k plan participant can hear?

Compliance – The Long Goodbye:
While politicians fiddle, public pensions continue to erode our fiscal health and threaten to bring down all with them as they meet their ultimate end.
Stockton, California files for bankruptcy,” (Reuters, June 28, 2012) And the biggest creditor is… The California Retirement System.
New Jersey pension funds cut investment return assumptions,” (Pensions & Investments, June 28, 2012) Don’t get too excited, the cut was only from 8.25% to 7.95%.
Lawmakers Appeal to Department of Labor to Coordinate With SEC,” (Financial Planning, June 29, 2012) We’ve always thought the failure to communicate lies with two parties, not just one. Apparently, 33 Democrat politicians feel it’s all the DOL’s fault.
Congress passes pension changes in highway package,” (Pensions & Investments, June 29, 2012) Congress bestows funding relief in exchange for high PBGC premiums.

Fiduciary – The Lost Cause:
It appears the DOL is willing to bank on a risky election before taking another step into the pool. Why must politics always trump logic?
U.S. Labor Dept. in data tussle over fiduciary rule,” (Reuters, June 22, 2012) Interesting take on the ongoing battle of wits between the DOL and the large brokerage industry. Apparently, after convincing the Congress the DOL needs “more data” to justify its proposed new fiduciary rule, the industry then refused to give the data “because it was too hard to compile.” But it was evidently not hard enough to compile for a controversial survey that supported the brokers’ position. When data mining hinted flaws in that survey, and the DOL asked for the data again, this time the industry expressed concern about “client confidentiality.” Looks like some lawyers are getting paid big bucks.
Gentlemen’s Agreement: RIAs and Reps Agree on More Than Some Would Have Us Believe,” (AdvisorOne, June 27, 2012) Bob Clark tackles a comment on the Fiduciary Survey results recently released.
Now it’s the Democrats’ turn to razz the DOL’s fiduciary proposal,” (InvestmentNews, June 27, 2012) Well, they’ve been doing this for awhile.

Fees – The Disappearing Dime Trick:
You’d think the new Fee Disclosure Rule will reveal the magician’s trick of hidden fees, but, presto! That fee is still hidden while being disclosed at the same time.
New Disclosure Rule Lets You See What Your 401k Costs…Sort of,” (Wall Street Journal, June 24, 2012) Standard article warning the implementation of the upcoming Fee Disclosure Rule may not deliver the data as cleanly and as clearly as desired.
With 401k disclosure, some fees still hidden,” (MarketWatch, June 25, 2012) Just in case you get a pay-wall looking at the above article (we didn’t), this is the same article from the Wall Street Journal’s free site.
Is your 401k ripping you off?” (Fortune, June 25, 2012) This is the problem with print media and, especially, large media – because of the lead times involved, stories are written based on a “hot” report from six weeks ago. Problem is, the “hot” report was discredited five weeks ago. Oops! It gets worse with this article. Playing off the theme of “expensive” mutual funds, the author features an index fund provider charging 31 basis points. The article shows compares this favorably to typical (albeit actively managed) 401k mutual fund expense ratios. Unfortunately, the article fails to make the less favorable comparison to other index funds that charge only a third of what the featured index fund provider charges. Double oops!
Fortune’s Assessment of Industry Stance on 401k Fees Is Misguided,” (ICI, June 25, 2012) Normally this would go into the “Popular Web Resources” section down below, but this is a direct response to the article above. Oddly, even the ICI doesn’t address the second point in the above paragraph.
How high fees for mutual funds whack retirees,” (Reuters, June 26, 2012) Is this “bad reporting” week? Here’s another story making the same stale argument that even the DOL no longer buys into. Actually, if you get to the end, you’ll see this article is just a covert marketing piece for Vanguard’s index funds. ‘nuf said.
If a 401k fee is disclosed in a forest (of paper)…,” (BenefitsPro, June 27, 2012) Some will see a forest, others will see a shrubbery. Guess which option 401k plan sponsors prefer?
Beyond retirement plan disclosure,” (BenefitsPro, June 28, 2012) A good overview of the ramifications of 408(b)(2).

Investments – Mixed Market = Mixed Messages:
Investing really isn’t as hard as it seems, it’s only written that way in a myriad of laws, marketing literature and the popular press.
Vanguard Says More 401k Participants Choosing Managed Funds,” (Financial Advisor Magazine, June 27, 2012) Don’t get too excited. Vanguard counts Target Date Funds, which usually consist of portfolios of index funds, as a “managed” fund.
Rising Stock Market Helps Lift Retirement Assets in Q1,” (Financial Planning, June 27, 2012) Why is this news?
Equities Lose 401k Participant Assets in May,” (, June 28, 2012) A bullish sign?

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.
7 equations to build a secure retirement,” (MarketWatch, June 27, 2012)
Kraft settles litigation alleging 401k mismanagement,” (Pensions & Investments, June 27, 2012)
How to Engage Younger Employees in Retirement Saving,” (PLANSPONSOR Magazine, June 28, 2012)
Vanguard Says More 401k Participants Turning to Professionals for Help,” (Financial Planning, June 27, 2012)

Wisdom from Some of Our Favorite Blogs:
Chicago Financial Planner: The GM Pension Do Over – Cadillac or Chevy?fi360 Blog: Fiduciary Links: “Fiduciary” and the marketing problemBusiness of Benefits: A 408(b)(2) Checklist for Reviewing the Non-Registered Group Annuity Contract 408(b)(2) Disclosure
Pension Risk Matters: CFO Liability and Pension Plan Governance and Risk Management
Pension Risk Matters: New RFP Template to Select and Monitor 401k Plan VendorsPozek On Pension: What You Thought You Knew About Revenue Sharing

Hot Tips from Popular Web Resources:
Investment Company Institute: Quarterly Retirement Market Data, First Quarter 2012U.S. Census: Quarterly Survey of Public PensionsGoverning: The Very Public Private-Sector Retirement ProblemBenefitsLink: PEO MEPs after Advisory Opinion 2012-04A

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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