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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/6/12

July 09
00:15 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:
401k Plan Sponsors and the Mutual Fund Expense Ratio Wild Goose Chase,” (, July 3, 2012). Any talk of mutual fund expense ratios only diverts attention away from the true issue at hand – what are the true costs of those non-mutual fund products that make up nearly half of all 401k investments?

Compliance – More Bad News for Pensions:
The funny thing is, for all the news about California’s state deficit and municipal bankruptcies, they still found some spare change to fund a piece of high speed rail in the middle of nowhere (a.k.a. the high desert).
Pension Funding Deficits Grew 59B in 2012,” (, July 3, 2012) This despite what you read about pensions doing so well in the first quarter.
Gov. Jerry Brown, Democrats fail to reach pension reform deal,” (San Jose Mercury News, July 5, 2012) For those counting, our nation’s biggest state has unfunded pension liabilities in excess of $150 billion – that’s “billion” – an amount that exceeds the total budget of some small third world countries.
Pension fund changes hold promise,” (The Greenville News, July 7, 2012) Short-term pain will lead to long-term solvency.

Fiduciary – You say tom-a-toes, I say tom-ah-toes:
Is the other guy about to blink?
New FINRA suitability rules worry industry,” (InvestmentNews, July 5, 2012) Why? Because suitability is starting to look like the fiduciary standard. Is this a back-door to a uniform fiduciary standard?

Fees – Wait?! You Mean This Isn’t Free?:
Count ‘em. Over the next three months, we’ll be finding out just how naïve 401k plan sponsors and their investors are.
401k fee transparency rules take effect Sunday,” (Philadelphia Inquirer, June 30, 2012) What the mainstream is saying about the new rule, with some good stuff in it.
Time to shop for a new 401k?” (BenefitsPro, July 2, 2012) The answer is: not necessarily, only shop for better value, not for lower fees.
New deadline looms for retirement plan fee disclosure,” (InvestmentNews, July 2, 2012) Now that we’ve passed through the July 1st deadline, you’d think everyone would relax. However, there’s a new deadline coming: August 30, 2012. That’s the date by which as those fees disclosed on July 1st need to be passed on to plan participants. For some plan sponsors who accept “internet links” in lieu of direct disclosure: Good luck with that.
Say goodbye to hidden 401k fees,” (CNN, July 2, 2012) This is what the mass media is presenting to 401k investors – for good or bad.
Looking to limit investment costs? Read new 401k disclosures, starting with these 4 items,” (The Washington Post, July 5, 2012) Here they are: 1) Investment Costs; 2) Administrative Costs; 3) Transaction Costs; and, 4) Where to call for help or to complain. That explains it all (sarcasm off). Why not break down administrative costs? That’s the previously undisclosed category (as long as you were invested in mutual funds).

Investments – Small is Better:
We’d say “We told you so” but you already knew that anyway.
What’s on the Retirement-Plan Menu?” (AdvisorOne, June 28, 2012) Here’s a good article that will show 401k plan sponsors how service providers intend to sell investment services.
Recipe for Success: Pick 30 Stocks, Then Just Sit Back for the Next 77 Years,” (Wall Street Journal, July 5, 2012) Consistent with academic research that suggest optimal portfolio size is 30-50 stock.

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 Saving In Your 401k Might Be Horrible For You,” (Forbes, June 30, 2012)
Should You Tap Into Your Retirement Funds Early?” (, July 3, 2012)
10 keys to financial independence in retirement,” (MarketWatch, July 5, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Regulatory CooperationBusiness of Benefits: Behind 408(b)2’s Looking Glass: Parties-In-Interest, Non-CSPs and Other Complex Talesfi360 Blog: Don’t forget to monitor your “self-directed brokerage account”Pension Risk Matters: ERISA Litigation Against Service ProvidersThe Chicago Financial Planner: Should you Micromanage Your Mutual Fund Manager?

Hot Tips from Popular Web Resources:
EisnerAmper: Removing The Veil From 401k FeesIvins, Phillips & Barker: 408(b)(2) Call to Action: Plan Fiduciary Obligations after the July 1, 2012 Deadline

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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