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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/17/12

August 20
00:23 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:
New Study Reveals Three 401k Strategies More Important than Asset Allocation,” (, August 14, 2012). Has the traditional 401k world – everything from how investments are sold to whether fees really matter – just turned on its head?

Compliance – Coming Soon to a Headline Near You…:
…The Great Pension Crisis. They knew this day would come, but cared only about winning elections. And when they saw they couldn’t turn back, they doubled down on their bet. After all, it’s for the children.
How Safe Is Your American Dream?” (US News and World Report, August 16, 2012) As the article states, “pension plans are the dinosaurs of today.” It then explains why.
Underperforming Mass. pension fund hands out big bonuses,” (BenefitsPro, August 16, 2012) So, let’s get this straight. There’s a big public outcry when private companies pay big bonuses from private money to CEOs in companies that underperform, but there’s deafening silent when public funds are used for bonuses to public employees (or firms hired by public employees) who underperform. You gotta love Amerika.
Cash-strapped US pension funds ditch stocks for alternatives,” (Reuters, August 16, 2012) Let’s see, they’re riskier, they have higher fees… Does anyone smell the desperation of the S&L industry from 1990?

Fiduciary – Is this the Cavalry?:
With the regulators in their “deer-in-the-headlights” mode, could the market itself be the answer to the uniform fiduciary standard. Regulations are one thing. We can debate those. Market reality, on the other hand, is not debatable. It’s measured by only one thing: sales.
Glass Half Full: Why Knut Rostad Remains Optimistic on Fiduciary,” (AdvisorOne, August 15, 2012) This is a great read. Knut’s comments are on point and quite interesting.
Earnest fiduciaries prove their prudence,” (Employee Benefit News, August 17, 2012) The article points out the rules and regulations of retirement plans are now so complex, it is no longer reasonable to expect the typical plan sponsor to administer to the plan without outside help.

Fees – Simple News for Simpletons:
No, not “Simpsons” – at least that would mean it’s funny – but “Simpletons.” And maybe not “for” but “by” – or maybe both. If we’re so concerned about employee education, why aren’t we equally concerned about educating journalists, since that’s where most employees get their education.
En Route: 401k Fee Disclosures,” (Financial Planning, August 14, 2012) Here’s a piece that focuses not on what 401k plan sponsors are seeing (i.e., 408(2)(b)), but what 401k participants will see (i.e., 405(a)(5)).
4 Ways to Improve Your 401k Plan With New Transparency Rules,” (ABC News, August 15, 2012) If you’re the type that cringes every time you see a major media outlet offering a 401k fee report, then, rest assured, your cringe will not go unjustified. Ah, but where to begin? Should it be the familiar mass media meme that inaccurately states lower fees are better (even the DOL has warned against taking this simplistic approach)? Should it be the dangerous (if you’re a fiduciary) statement that participants should question fees if they’re not receiving investment advice (the DOL issued specific rules in December 2011 on offering personal advice and most of the fees will have nothing to do with this relatively new service)? Need we go on?
Can Index Funds Fix Your 401k Fee Problem?” (US News and World Report, August 15, 2012) Hmm, maybe we ought to introduce a rating system on these articles – the Cringe Rating. There was a time when US News and World Report reliable went against the main stream media grain (OK, so that was back in the 1980’s). As this article proves, the once staid magazine has unfortunately joined the ranks. This article is precisely what the DOL warned against doing when it finalized its individual advice rule in December 2001. But, as John Ford once said, “When facts get in the way of legend, print the legend.”
Many Participants Do Not Understand Fees,” (PLANSPONSOR, August 15, 2012) Here’s a counter-point to the above two articles. This piece shows the difference between an uninformed reporter (in the case of the above articles) and an experienced reporter. This article correctly explains the potential negative consequences of picking investments based just on fees.
Your Takeaway for New 401k Fee Disclosures,” (US News and World Report, August 15, 2012) Here’s the exception that proves the rule. A good overview of the impact of “Round 1” and “Round 2” of the twin fee disclosure rules.

Investments – Are We Aiming Correctly?:
For all the talk about educating employees, perhaps the first thing to teach them is caveat emptor, since its exceedingly obvious it long ago stopped being about investment discipline and now is only about selling widgets – er – investment products.
Custom-Target Dates to Reach $218B: Cerulli,” (Financial Planning, August 13, 2012) If you’re a 401k plan sponsor, be sure to read this. Not because it contains any important content, but because it gives you a feel for how investment salesmen think. It’s all about the sizzle, which means employees can lose their stake.
Model Portfolio Guidance Should Not Be Ignored,” (, August 16, 2012) Fred Reish highlights the implications of the DOL’s recent ruling and wonders if the salient points won’t slip through the cracks.

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.
Retirement Plan Participants Guess at Savings Goals,” (AdvisorOne, August 13, 2012)
Hope for 401k Savers?” (SmartMoney, August 14, 2012)
Prepare 401k Participants For Retirement,” (Financial Advisor, August 14, 2012)
What are the best retirement calculators?” (CBS News, August 15, 2012)
What do best 401ks do differently?” (Employee Benefit News, August 15, 2012)
11 reasons to leave your 401k behind,” (MarketWatch, August 16, 2012)
The great asset allocation hoax (Part Deux),” (BenefitsPro, August 16, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Bachus editorial shows SRO debate not overThe Chicago Financial Planner: How much is Financial Advice Worth?
The Chicago Financial Planner: Index Funds: Know What You Are Buying

Hot Tips from Popular Web Resources:
Solutions Law Press: Employers & Plan Fiduciaries Reminded To Confirm Credentials & Bonding For Internal Staff, Plan Fiduciaries & Vendors Dealing With Baby boomer pension troubles

Miss anything? Feel free to add a comment below.


About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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