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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/13/12

July 16
00:16 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:
How 401k Plan Sponsors Can Best Teach Employees to Quit Emphasizing Income,” (, July 10, 2012). The false promise of “safety” may lure unsuspecting 401k investors into the most dangerous trap they’ll never see – until it’s too late.

Compliance – “I’m not dead, yet”:
Whoops! It looks like the news of the death of corporate pensions has been greatly exaggerated. Oh well, too bad for those companies.
Companies still on the hook for pensions, Fitch says,” (BenefitsPro, July 11, 2012) So the coffin on corporate defined benefit plans remains nailed shut. Long live the defined contribution plan!

Fiduciary – Will Industry Beat Government Regulators?:
Again? It’s long been said the fiduciary standard would ultimately be decided by the market. It’s beginning to look that way.
New FINRA suitability rule worries B-Ds,” (InvestmentNews, July 9, 2012) As quoted in the article, at least a few think FINRA is anticipating being the SRO for RIAs, so it’s showing it can monitor the fiduciary standard by redefining the suitability standard to look more like the fiduciary standard. This would appear on its face to be a more broad umbrella than if the SEC adopted it for advice relationships only.
Ready or Not, Here Comes FINRA’s New Rules on Suitability,” (Financial Planning, July 9, 2012) This is a good summary of the new rule.
FINRA’s New Suitability Rules: Half a Loaf, but…,” (AdvisorOne, July 11, 2012) Apparently, the complaints about FINRA’s new rules are just as revealing as the rules themselves.
The Times Editorial, Fiduciary Duty and the Levitt Rule,” (AdvisorOne, July 13, 2012) A must read article from Knut Rostad on some very topical doings.

Fees – Continuing Fallout:
We can go on like this forever, and we probably will.
401k Fees: Bad News, Good News,” (SmartMoney, July 9, 2012) Here’s the key take away: The GAO reports the average administrative fee – that’s the fee that does NOT include investment management fees or mutual fund expense ratios – to a small plan is 1.33%. This compares to 0.15% for large plans.
For 401k Plans, Size Matters,” (SmartMoney, July 10, 2012) A companion piece to above with better examples.
10 useful Web links on 401k fees,” (BenefitsPro, July 11, 2012) Just what it says.
Get ahead of the curve on 401k disclosures,” (BenefitsPro, July 11, 2012) Some insider views on the new regulations.
3 ways to explain 401k fees to participants,” (BenefitsPro, July 12, 2012) Unfortunately, the author’s second point continues to repeat the naïve and misleading view that one can compare the fees of index funds with actively managed funds. Ironically, she reveals the truth when she admits these fees are already accounted for in the fund’s performance, but then she restates they old myth nonetheless.

Investments – The music goes ‘round and ‘round…:
Here’s another thing we’ll be talking about forever.
Target-Date Funds: What’s the Best Design?” (Wall Street Journal, July 8, 2012) This article is all about the confusion with TDFs. It assumes the general idea of TDFs is simple, but the competing strategies befuddle investors.
Target-Date Funds: How Well Do They Explain Strategies?” (Wall Street Journal, July 9, 2012) In this companion piece, the WSJ calls for increased disclosure on the part of TDFs to better help investors determine which one is best for them.

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.
Why Americans won’t day-trade their 401k Plans,” (Reuters, July 9, 2012)
Wall Streeters Lose $2 Billion in 401k Bet on Own Firms,” (Bloomberg, July 9, 2012)
Common mistakes plan sponsors make,” (BenefitsPro, July 12, 2012)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 401k Fee Disclosure and the American Funds
fi360 Blog: Fiduciary Links: Are new suitability rules bridging the gap between suitability and fiduciary?FiduciaryPath: Investors: How to Find an Advisor Who Must Put YOUR Interests First!The Chicago Financial Planner: Some “Light” Friday Financial Reading

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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