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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/10/12

August 13
00:10 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:
The Role and Responsibilities of the Individual Trustee,” (, August 7, 2012). A blunt assessment of what being a fiduciary really means. If this doesn’t scare you…

Compliance – Tick, Tick, Tick…:
Today is the tomorrow you put off yesterday. Welcome to your nightmare.
Today’s Retirees First to Pay More Into Social Security Than They’ll Get Back,” (AARP, August 6, 2012) Ah, remember the 1980’s – new wave, yuppies and collecting the most toys before you die – when we had a real chance to reform social security? Remember how we instead punted the ball, saying, “Not to worry, the thing’ll stay solvent well into the next century.” Hello. It’s the next century. And the first shoe of “well into it” has just dropped.
Maryland pension report bashes Wall Street results,” (BenefitsPro, August 7, 2012) When you don’t like the message, shoot the messenger. Or at least blame someone else. Far be it for government officials to ever assume it might be their fault. What would Harry Truman say?
GM pension underfunding up 15.4% in 12 months,” (Pensions & Investments, August, 2, 2012) This shouldn’t surprise you. After all, GM is just another government run entity. Why shouldn’t its pension plan be in that same shape as any other public pension plan?
Legal constraints on state pension cuts open to debate, research shows,” (Pensions & Investments, August 7, 2012) If anyone ever had doubt why public pension plans (or any pension plan) is nothing more than a Ponzi Scheme, they should read this. The burden of the “fix” must, by law, be placed on newer workers. Kinda makes you think of another use of the work “fix.”
San Diego’s Switch to DC Plan Can Move Forward,” (, August 7, 2012) The court has ruled that, since the referendum to move the municipal pension plan to a defined contribution plan came as a result of a private citizen initiative – and not through the actions of elected officials – the normal negotiation process with union officials could be bypassed. Interesting, this government of, for and by the people thing. Maybe we should try more of it.

Fiduciary – Come again?:
I know you know you know that I know you know I know…
The unspoken fear of every 401k plan sponsor,” (BenefitsPro, August 9, 2012) Sure, it makes sense sometimes to be frightened at not knowing what you know you should know, but there’s only one thing that should really worry you: not knowing what you don’t know you should know.

Fees – They Know You Don’t Know or Care:
Which is precisely what they’re counting on.
Research, AdvisorOne to Cast Light on Murky Fee Disclosures,” (BenefitsPro, August 8, 2012) This won’t be ready until January, but it should be a real doozy when it comes out.
401k participants don’t try to understand disclosures,” (BenefitsPro, August 8, 2012) This is news? Perhaps not, but it’s a reality some service providers are relying on.

Investments – An Olympian Effort:
With all the originality of a tape delay of a sports event whose outcome was reported on the internet hours ago, we see yet more retreads coming sporting only a new exterior paint job.
Stable Value Funds: Cloudy in a Transparent World,” (Barrons, August 6, 2012) There are a lot better ways to get burned chasing yield, but Barron’s has decided to “out” stable value funds. This higher yielding non-funds (technically, they’re not mutual funds so they’ve never had the same disclosure requirements of mutual funds) have grown by more than 50% in total 401k assets since 2007 and now rival mutual funds as the “safe” bucket of choice. Isn’t this why we had the 2006 Pension Protection Act in the first place?
ETFs Prepping 401k Offensive — For Better or Worse,” (CNBC, August 6, 2012) The title says all you’ll need to know about this topic. Of course, if you want to look inside, you’ll find phrases like “more choice” and “low cost” and “just what the regulators want” thrown about as if they might actually mean something. Other than representing chic marketing terms to help some financial juggernaut meet its asset aggregation goals, these phrase have as much to do with the reality of 401k investing as, say, “Modern Portfolio Theory” – uh, wait! let’s not show our hand too soon.

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.
Are retirees better off than we think? Data says yes,” (InvestmentNews, August 6, 2012)
Three new 401k plan success metrics,” (BenefitsPro, August 7, 2012)
Young Adults Have Rosy Retirement Goals but Lack Preparation,” (AdvisorOne, August 6, 2012)
Post Retirement Replacement Income Falls Over Time,” (, August 7, 2012)
Plan participants unsure of future retirement needs,” (Employee Benefit News, August 9, 2012)
Conquering Retirement; Savings Plans for the Self-Employed,” (Wall Street Journal, August 10, 2012)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Target Date Funds – A Look under the Hoodfi360 Blog: Fiduciary Links: Is 80% healthy the same thing as “healthy”?The Pension Protection Act Blog: A 401k Participant’s Tale of 404(a)(5) Fee Disclosurefi360 Blog: Moench presumption revisited

Hot Tips from Popular Web Resources:
Perkins Coie: Responsible Plan Fiduciaries: Formalize Response to Service Provider Fee A Look at 401k Plan Fees

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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