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

December 17
00:15 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:
401k Fee Disclosure: What 6 Months Tells Us,” (, December 11, 2012). A warning is not the same as protection.

Compliance – By the time you read this…:
…it may have already happened. But it’s doubtful.
Retirement industry coalition supports incentives for retirement plans,” (BenefitsPro, December 10, 2012) The rebel alliance strikes back!
Senators: Don’t futz with retirement savings plans,” (InvestmentNews, December 10, 2012) It appears the Empire has some cracks.
Employer-Sponsored 401k Plans Would Drop ‘Significantly’ if Tax Treatment Curtailed: Study,” (AdvisorOne, December 11, 2012) Did we need a study to tell us what when history has already spoken? (The last time retirement savings tax incentives were cut in 1986 caused a mass extinction in retirement plans.) On the other hand, this gives IBM employees something a lot more important to worry about.
Proposal could ease distributing assets of abandoned 401k plans,” (Pensions & Investments, December 11, 2012) The headline is kind of confusing. This is really about the DOL making it easier for workers to get access to their retirement funds after a company goes bankrupt.
A plan that forces you to save for retirement,” (MarketWatch, December 12, 2012) Robert Powell tells the story of an Australian idea that sounds remarkable similar to “401k 2.0,” published two years ago on December 7, 2010 in Looks like he found something worth following up on.

Fiduciary – What is “is”?:
If you can’t win the argument, try changing the definition of what “winning” means. It worked for Charlie Sheen.
FINRA Clarifies Suitability Terms,” (Financial Planning, December 11, 2012) So this is what a world without a fiduciary looks like.

Fees – Why Taxing the Rich Won’t Work:
If you’ve got enough, you can buy your way out of anything. And the more any regulation encourages you to do that, the more you tend to look out for Number One, and not even try to allow someone else to piggyback on your largess.
Best 401k plans take fees into consideration,” (Reuters, December 11, 2012) And they’re big enough to be able to do something about it. This is Brightscope’s annual “top 30” list.
Top-ranked 401k plans take fees into consideration,” (BenefitsPro, December 11, 2012) Different take on the same story as above. Kudos to Brightscope’s PR department.
The missing link of 401k fee disclosure,” (BenefitsPro, December 12, 2012) “To serve man,…?” It’s a cookbook! Oh, wait, that’s a different story. Not only does this article reveal the missing link (as if you didn’t already know), it also reveals what may be severe non-compliance on the part of a big company and a big service provider.

Investments – Democracy and Mutual Funds:
Winston Churchill once said, “It has been said that democracy is the worst form of government except all the others that have been tried.” Same goes for mutual funds in 401k plans, at least as far as the average investor is concerned (the pros might disagree, but plan sponsors would rather dis them than employees).
Cerulli: Fees, flexibility could cut into mutual funds’ 401k dominance,” (Pensions & Investments, December 13, 2012) First, this is not news. Any veteran knows individually managed portfolios and common trust funds have long been cheaper, more flexible alternatives to mutual funds. Second, the reason why mutual funds replaced these alternative investments has not changed: mutual funds remain the only consistently regulated investment product that can easily be unitized for daily valuation. Third, if this is the trend, look for smaller plans to pay higher fees as only large plans will have the leverage to negotiate and, with a universal investment vehicle like a mutual fund to piggyback off of, smaller plans will have to fund for themselves, sans any cost reducing leverage.

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.
IBM Draws Flak for Change to 401k Plan,” (Bloomberg, December 7, 2012)
Callan: Markets boost average DC plan balance by 4.4%,” (Pensions & Investments, December 10, 2012)
More Workers Saving for Retirement – But Not Enough,” (Wall Street Journal, December 10, 2012)
Retirement fears rise among older workers,” (MarketWatch, December 10, 2012)
Clients kind of blue over IBM’s 401k surprise,” (InvestmentNews, December 11, 2012)
Will 401k plans keep getting worse?” (, December 11, 2012)
Is a December 401k match really a present?” (BenefitsPro, December 11, 2012)
Millennial 401k participation dependent on auto-enrollment,” (BenefitsPro, December 14, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Challenges Facing Advisors in Retirement Planning |
The Chicago Financial Planner: A Look Back |
fi360 Blog: Solving a Retirement Crisis: It’s as Simple as 123(4) |
The Chicago Financial Planner: Friday Finance Links December 14, 2012 |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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