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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/14/12

September 17
00:07 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 Walt Disney Showed Us What the Fiduciary Duty of Loyalty Means to Investors,” (, September 12, 2012). Everything you need to know about a fiduciary’s Duty of Loyalty you can learn by watching Old Yeller.

Compliance – The Power of Newsprint:
Times were, you could rely on certain newspapers to provide a level of clarity far beyond that of your typical traveling salesman – and galaxies ahead of what you might expect to hear from the regulars down at the corner hang-out. Nowadays, there’s only one good use for newsprint, one that no other replacement has yet to be be identified: wiping off Windex® to clean windows.
DOL guidance on brokerage windows adds clarity,” (BenefitsPro, September 10, 2012) This is a pretty good overview of the brokerage window controversy. As others have said, the article points out clarity does not necessarily mean safety – either for the investor or the fiduciary.
Should the 401k Be Reformed or Replaced?” (New York Times, September 11, 2012) We don’t often cite New York Times articles because the reporting there just isn’t what it used to be. Every so often, though, we need to point this out explicitly. Take a look at the opening of this article and, if you know anything at all about fiduciary responsibility, the fallacy of the retired couple stymied by the market crash of 2008-2009 will stick out like a sore thumb. Specifically, why would they be paying current expenses from an equity-based account rather than a stable value account? Any fiduciary worth his salt tells clients – especially retired clients – to keep about 2 years of expense in money markets, precisely to avoid being victimized by a market crash like we saw a few years back. This is just the first few paragraphs of this article. The length of the article only compounds the author’s naiveté – he even references the flawed Demos study as “evidence” the 401k plan has problems. Oh, and don’t forget to read John Bogle, who, coincidentally, just published a new book, spew his stale comments. We’d say he’s way past his “sell-by” date if you weren’t such a great salesman.

Fiduciary – Breaks Beating a Team Up Against It :
“Boys. I haven’t a thing to say. Played a great game. All of you. Great game. I guess we just can’t expect to win ’em all… I’m going to tell you something I’ve kept to myself for years. None of you ever knew George Gipp…”
Tougher Dodd-Frank fiduciary standard for brokers runs aground,” (InvestmentNews, September 10, 2012) More of the same-old, same-old about the SEC not following through. The article does error in laying blame solely at the feet of the Republicans. Sure, they were the first to question the SEC’s actions, but the Democrats later joined them in one of the few bi-partisan initiatives we’ve seen in years.
Vanguard’s Bogle to SEC’s Schapiro: Include Institutional Advisors in Fiduciary Rule,” (AdvisorOne, September 11, 2012) Looks like Bogle goes off the reservation here, introducing an unrelated topic about mutual funds. He makes it sound like they’re aren’t held up as fiduciaries, although the article later explains, quite specifically, where the laws say they are. Probably not on Knut’s list of talking points.
Bogle calls on institutional money managers to heed fiduciary duty,” (InvestmentNews, September 11, 2012) Wow, reading this article really shows the damage that’s been done by Bogle’s off topic comments. Although it’s not clear, but possibly to promote his new book, Bogle displays his usual holier-than-thou arrogance against all mutual funds not beginning with the word “Vanguard” and, in doing so, steals the headline from Knut Rostad’s hard fought efforts. Feeling sorry for Knut right about now. Too bad. On paper, adding Bogle to his list of luminaries seemed like a no-brainer.
Advocates Step Up Campaign for Uniform Fiduciary Standard,” (On Wall Street, September 11, 2012) There we go! Third time’s a charm. This is the headline Knut was looking for. And the article provides excellent coverage of the meeting with the SEC, too, with nary a mention of you-know-who.
A Fiduciary September to Remember,” (BenefitsPro, September 12, 2012) Come one, come all! Everyone into the pu-ell!
Standards deviation: Universal fiduciary proposal a goner,” (InvestmentNews, September 14, 2012) And by “a goner” they mean in regulatory purgatory. Advocates claim industry opponents effectively stalled any effort and, given Mary Shapiro’s bungling of the effort from the get go, many fear the Fiduciary Standard is tied too closely to her persona. And nobody’s willing to touch that with a ten foot pole.

Fees – The Skinny on the Deal:
Expect to see more articles from the mainstream press as the participants statements start coming out.
Study: 401k fee disclosure leaves small firms puzzled,” (Reuters, September 11, 2012) OK, OK, we hear you. Disclosure without benchmark comparisons is just a random set of words.
Fidelity 401k Price-Fixing Scheme Cost Retirement Savers Plenty,” (Forbes, September 12, 2012) This goes well beyond the little dipsy-doodle between the competing divisions and gets right to the heart of the platform. It’s unclear if this impacts all divisions or just certain ones. It also begs the question, is it ever possible to serve two masters at the same time? It also resurfaces a continuing question: why do institutional clients get mutual fund fee breaks that retail investors don’t? Weren’t the economies-of-scale inherent in the mutual fund structure supposed to benefit all, regardless of race, color, creed and tax bracket?
Maximize Your Retirement Savings – Tips on Using the Fee and Investment Information From Your Retirement Plan,” (Employee Benefits Security Administration, September 13, 2012) Read it here and weep, folks, straight from the horse’s mouth. The DOL presents the definitive guide for participants to coincide with the new 404(a)-5 participant disclosures coming out now. As if to emphasize the point, the tip sheet leads with “Performance Data” and “Benchmarks,” not with “Fees and Expenses.” In fact, in the summary, it explicitly states: “Don’t consider fees in a vacuum – they are one part of a bigger picture including investment risk and returns and the extent and quality of the services provided.” ‘nuf said.

Investments – An Oldie But a Goodie:
Remember these? Funny how some never learn from the past.
Company stock fading from 401k plans, but still used by participants,” (Pensions & Investments, September 10, 2012) Why company stock in retirement plans is a bad idea: Color Tile, Enron, Global Crossing, the list is endless. Why company stock in retirement plans is a good idea: Mitt Romney’s IRA.

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.
The Return of 401k Plans to Workers,” (Philadelphia Inquirer, September 9, 2012)
Retirement savings: How much is enough?” (MarketWatch, September 12, 2012)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Financial Fraud – Tips to Protect Yourselffi360 Blog: Fiduciary Links: September is the month for fiduciariesThe Chicago Financial Planner: Employee Benefits Open Enrollment – Make Good Choices
DailyFinance: Too Many 401k and IRA Investors Know Too Little About Their FeesThe Chicago Financial Planner: Lehman goes Bankrupt – Where Were You?ERISA Lawyer Blog: Second Circuit Rules That Trustees of a Multiemployer Pension Plan Are Not Fiduciaries, Under ERISA, When They Amend The PlanERISA & Employee Benefits Litigation Blog: Sixth Circuit Affirms Decision Finding Entities With Any Control Over Funds Are Fiduciaries

Hot Tips from Popular Web Resources:
SEI: SEI Quick Poll: Pension Plan Sponsors Combat Volatility And Low Interest Rates; Many Prefer Not To TerminateWinston & Strawn LLP: Securities Law Trap for 401k Plan FiduciariesHuman Resource Executive Online: The DOL’s Move to Increase ERISA Audits

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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