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

October 15
00:11 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. Lead Story:
A 401k Must Read: Mutual Fund Expense Ratio Myth Busted,” (, October 9, 2012). This may rock the world of the unsuspecting. Before proceeding, fasten your seatbelts and place your trays in the upright position.

Compliance – Doomed to Repeat:
We don’t get it. Given everything we know about pension plans, why do we continue to believe they’re the answer to anything? Sure, the idea of a guaranteed annualized payment sounds perfectly delicious to almost everyone, but how many really get there and at what cost to society?
Have you scheduled your 401k’s annual check-up?” (BenefitsPro, October 9, 2012) With the new fee disclosure requirements, the time might be right to update the documents, procedures and processes of your 401k plan.
The triumphant return of the DB plan?” (BenefitsPro, October 12, 2012) As soon as interest rates go up… and at least until they go down again.

Fiduciary – Down the Think Tank Memory Hole:
It used to be people talked seriously about this thing called the “Fiduciary Standard.” Now they just talk about talking about it. It’s a shame. It was just a good idea.
DOL Fiduciary Regulations May Be Revived,” (Financial Advisor, October 8, 2012) Or they may not. This article really doesn’t say anything that hasn’t been said before.
Can Advisors Have ‘Zero’ Conflicts of Interest? The Legal and Regulatory Record,” (AdvisorOne, October 9, 2012) Whoa! If you needed to learn all the legal aspects of the history of “fiduciary,” then you must read this article. It’s pretty cool. Especially if you’re a CFP.
SEC seeks to extend principal trading rule — yet again,” (InvestmentNews, October 11, 2012) Yes, this is a fiduciary issue. Any time the SEC allows dual registered RIAs to make principal trades you have a fiduciary conflict. That the SEC allows says more about their (mis)understand of the fiduciary implications of the 40 Act than anything else. Lobbyists. Is there anything they can’t do?

Fees – The Law of Unintended Consequences:
So we get to finally see all those 401k fees they warned us about (or do we?). The early returns may suggest it might have been better not to have let the genie out of the bottle. Give it time, folks. Patience is a virtue.
‘Plain English’ on 401k Fees? More Like Gibberish,” (Wall Street Journal, October 9, 2012) The venerable Journal come late to this party, but the blood test metaphor is pretty good.
Busting the myth of mutual fund expense ratios,”(BenefitsPro, October 10, 2012) A follow up to the lead story above asking why such myths exist.
Class warfare in your 401k,”(MarketWatch, October 11, 2012) Don’t know what to make of this story. Apparently, the implication of cutting fees, specifically, of moving from asset based fees to flat per participant fees, means larger balance employees (i.e., the “wealthy”) are paying the same amount of fees as smaller balance employees (i.e., the “99%”). So, it seems, if a plan sponsor cuts fees for everyone, it’s not “fair” if the wealthy don’t pay more. BTW, this only applies to record-keeping fees, not investment management fees.

Investments – The Truth Shall Set You Fee:
Amazing. Just a few years ago admitting the truth about index funds would have had you tarred and feathered.
Are index funds better than managed funds?” (BenefitsPro, October 10, 2012) The answer: No. Two heads are better than one. It’s best to use index funds as sector plays within the context of a broader, actively managed portfolio.

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 assets more important than ever,” (BenefitsPro, October 5, 2012)
Joint 401k/HSA savers have bigger balances,” (BenefitsPro, October 5, 2012)
401k plan design important for increasing employee investments,” (BenefitsPro, October 5, 2012)
Pay off the debt, or save in a 401k?” (BenefitsPro, October 9, 2012)
Report says upping starting contribution increases secure retirement,” (Employee Benefit Adviser, October 9, 2012)
Even mid-level investors don’t have a formal retirement plan,” (BenefitsPro, October 10, 2012)
Are You Making the Most of Your 401k?” (, October 10, 2012)
Savers, at Last…,” (, October 11, 2012)
Pool a 401k, and save the future?” (BenefitsPro, October 12, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: How will November Affect the Fiduciary Debate?The Chicago Financial Planner: American Funds Growth – A Fallen Star?

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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