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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 11/9/12

November 12
00:26 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:
A Better Way to Help 401k Investors Choose Among Options,” (, November 6, 2012). Before you even consider investment style, identify your time requirement.

Compliance – Well, Isn’t That Special:
If you read only one of the articles below, make it the one from the Washington Post. It’s an eye-opener. The bottom-line: If pensions were to really work for everyone, they’d be an unaffordable money pit for corporations (or any other entity). To solve this financial dilemma, old style pensions were designed to only work for an elite few, not the masses.
Dan Walters: Bankruptcy filings by California cities may rein in pensions,” (The Sacramento Bee, November 5, 2012) That would seem to make sense, but, of course, it all depends on the judge. And you can bet the public unions have their lawyers geared up for the fight.
Democrats, Republicans sound off on retirement,” (BenefitsPro, November 5, 2012) As you might except, the donkeys stubbornly stick to giving people benefits while the elephants haven’t forgotten the lessons of Ponzi and are more likely to want people to take personal responsibility for their own retirement.
Retirement industry reacts to election results,” (BenefitsPro, November 7, 2012) Well, at least two react.
Shrinking number of traditional pensions may not be all bad,” (The Washington Post, November 7, 2012) Good point. Pensions never quite worked out as advertised. They were great for the highly compensated who spent their entire career for the same company, but not so great for most others. For example, according to the article, in 1975 nine out of ten were covered by a pension, but only two in ten ever received any benefit. File this under, “be careful what you wish for.”
What do election results mean for your 401k?” (BenefitsPro, November 7, 2012) Bottom-line: Same old, same old. Same old threats, same old promises. The greater impact may be an even slower recovery, which impacts underlying investments.

Fiduciary – This Ain’t Rocket Science:
So why do some of the smartest people in the world pretend it is and still don’t get it?
Bogle: Fiduciary Duty Comes Down to ‘Simple Mathematics,’” (AdvisorOne, November 8, 2012) Any fiduciary advocate would appreciate Bogle’s effort, but, gosh, it might just be better if he sticks to what he’s really good at – selling his funds. Oh. Wait. That’s what he’s doing. To say “fiduciary duty” comes done to “low fees” and “disclosure” is to admit you don’t know what “fiduciary duty” is all about. We know what the DOL says about low fees and investments (“they are but one factor and maybe not the most important one”), but, disclosure? That’s like calling Willie Sutton a “fiduciary” because he fully disclosed to the teller that he was robbing the bank. (For those too young to remember Willie Sutton, substitute the name “Bernie Madoff” and you can get the picture.)

Fees – See, I told you so:
What was it that Bogle was just saying about disclosure?
Participant Behavior Unchanged by Fee Disclosure,” (, November 8, 2012) And this surprises who? The article suggests either people aren’t reading their disclosure statement or that aren’t surprised by it. Which would you guess? Somewhere Daylian Cain is laughing.

Investments – Walk Before You Run…:
… and crawl before you walk. The trouble is, some things just seem a lot easier than they are, and some things are easier than we make them out to be.
What 401k plan sponsors must ask their employees,” (BenefitsPro, November 7, 2012) What time is it? It may not seem like an investment question, but timing is the most important question every 401k investor must answer first and foremost, before getting into the sexier stuff.

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.
Young adults worry about retirement, Pew finds,” (West Virginia State Journal, November 5, 2012)
Retirement Distributions and Lifetime Income,” (, November 7, 2012)
Fidelity Says 401k Balances Reached Highest Level, (Bloomberg, November 7, 2012)
Finally … some good news on the 401k,” (BenefitsPro, November 8, 2012)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Does it Matter Who’s Managing Your Mutual Fund?
fi360 Blog: Fiduciary Links: Election week and the Fiscal Cliff 
Boston ERISA Law Blog: Notes on The John Marshall Law Review’s Special Edition on “The Past, Present, and Future of Supreme Court Jurisprudence on ERISA”
The Chicago Financial Planner: Post-Election Financial Advice? Try the 1% Solution 

Hot Tips from Popular Web Resources:
Calpensions: Pension reform: Will LA make 401k plans a trend?

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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