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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 12/7/12

December 10
00:58 2012

Welcome to FiduciaryNews.com 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:
Why 401k Plan Sponsors (and Investors) are Going Back to the Future,” (FiduciaryNews.com, December 4, 2012). With growing acceptance of the “one portfolio” option, do the answers 401k investors seek lie in its past?

Compliance – Listen. Do Those Sound Like Black Helicopters?:
According to economic confidence, either two-thirds of the people are paranoid or one-third of the people are wrong. Conspiracists will tell you freedom isn’t lost in a single moment, but with the slow fall of each granule of sand in the hourglass of centralized policies. In the 1980s, workers – small businessmen and employees – wrested their independence from generations of corporate servitude with tax policies aimed at serving the individual, not the institution. Are we about to sacrifice that hard fought victory on the altar of the nanny state?
Who gains most from 401k tax breaks?” (MarketWatch, December 4, 2012) We’re beginning to wonder if policy analysts aren’t abrogating their fiduciary duty by continually conducting static, rather than dynamic, analyses. Don’t they know people change behavior when the rules change? Don’t they know when they “sock it to the rich” only the middle class (who aren’t rich enough to change their behavior) gets socked? Don’t they remember the high rates of old weren’t really the effective rates since the rich could afford to get around them (and that by reducing the rates we actually generated more revenues for the government)? Don’t they remember anything? Or are they too busy with their noses in their books to pause for a moment and smell how the real world works? (Hint: It ain’t all that rosy, especially right now.)
Fiscal Cliff Could Cut 401k Contributions by 64%,” (Financial Planning, December 4, 2012) Not for nothing, but with all this Republican squirming about tax cutting, when do we start seeing the Democrats squirm about cutting benefits, which the bipartisan Simpson-Bowles Commission said was where it’s all gonna ultimately end up?
Possible Changes In Tax Treatment Of 401k Plans,” (Financial Advisor, December 5, 2012) This is starting to look scary, folks. It appears there’s a real chance they’re about to kill the goose that lays the golden nest egg.
To Avoid Fiscal Cliff, 401k Plans May Fall Off Deep End,” (AdvisorOne, December 5, 2012) More bad karma, as the industry is finally starting to pick up on something we’ve long ago identified as a trending topic. Unfortunately, it may be too late.
401k tax breaks in lawmakers’ gunsights,” (MarketWatch, December 6, 2012) Hmm, this is starting to look suspiciously like a PR campaign. How much more can you say on the subject?
Will U.S. Kick 401k Subsidies Off Cliff?” (AdvisorOne, December 6, 2012) After pooh-poohing the Harvard study of Danish employees that started it all and providing a well-considered counterpoint from an industry veteran, the article then suggests, by punting the 401k, it’s moving the ball into the court of annuity providers. Interesting. The insurance industry is well known for their PAC prowess. Could they be secretly lobbying and the source of this effective – if judged simply by the amount of ink spilled – anti-401k promotional effort?
Sen. Harkin: Fiscal ‘Slope’ Hiding ‘Retirement Deficit’ Crisis,” (AdvisorOne, December 6, 2012) This explains everything. Now we know why we’ve seen a fusillade of “kill the 401k” threats this week. It isn’t because of the fiscal cliff. It’s to justify Harkin’s crazy “Pensions-R-Us” proposal, a whacky idea he first proposed a couple years ago when states (most of them, especially Wisconsin and especially not Illinois) realized government funded pension plans were nothing more than legal Ponzi Schemes. That laughed at him then, but look who’s laughing now. If you though Obamacare was bad, just wait ‘til you see Harkin Security. Here’s a better idea: If Harkin really thinks people don’t save enough, increase the tax breaks for saving. Oh, silly us, Washington can’t think like that. It requires common sense.

Fiduciary – Regulation Can be Good:
If the government is responsible for creating an uneven playing field, should we hold the government accountable for leveling it?
SEC Will Pursue Fiduciary Rule in 2013,” (InvestmentNews, December 3, 2012) Well, isn’t that special? Since they couldn’t catch up to it in 2012, the SEC will continue to pursue the elusive “Fiduciary Rule” in 2013. Boy, that think must be pretty quick.
SEC Will Pursue Fiduciary Rule in 2013,” (AdvisorOne, December 3, 2012) Despite the similarity in titles, it really is a different story. Well, at least the words are different.
Borzi: DOL to Offer New Version of Fiduciary Rule in ‘Several Months’,” (AdvisorOne, December 7, 2012) Apparently the DOL doesn’t want the SEC to get all the headlines on this. Although Borzi promised the end result is “unbiased” advice (that’s a good thing), at the same time she says the final rule will show the DOL has listened. The question everyone wants answered, though, is “listened to whom?” We’ll know in a “several” months.

Fees – Regulation Can be Bad:
Well, at least they had good intentions, but it appears the only thing we’re learning it that disclosure doesn’t work. But, wait, haven’t we been told that already? I guess that means the only think we’re learning is that we don’t learn.
PSCA: Fee-disclosure rules have little effect on 403(b) plans, participants,” (Pensions & Investments, December 4, 2012) OK, we get that disclosure doesn’t work in the 401k world, but 403(b)’s, too? Aren’t teachers in 403(b) plans? Aren’t teachers supposed to like to read? (sigh) What is this world coming to?

Investments – Regulation Can Be Ugly:
Anytime we try to apply the rules and rigors of hard science to something that isn’t hard science, we end up with a messy soup of nothingness. It’s time to punt the whole concept of formulaic economics and concede the domain of money matters to the psychologists, not the physicists. The alternative leaves us with policies – both government and investment – that will continue to frustrate. Oh, wait. Never mind. The only thing we learn is that we don’t learn.
Mutual fund ratings not all they’re cracked up to be,” (Pensions & Investments, December 3, 2012) We all know past performance can’t guarantee future performance. We all know ratings are based on past performance (what else can they reasonably be measure by?). It makes sense ratings systems are perfect. It also makes sense, as the article says, the veracity of ratings systems mimic market cycles. What’s the point? There isn’t any. The only way to judge a portfolio manager is by his performance. His past performance. Any other measure would measure something other than his ability to manage portfolios. Sorry, SEC, but this is the way the real world works.
Financial Advisors Cling To Failed Strategies, Says Report,” (Financial Advisor, December 5, 2012) Report suggests advisors continue to cling to Modern Portfolio Theory despite two massive failures in the span of a decade. Hmmm, maybe the third time will be the charm.
J.P. Morgan: Target-date funds miss their mark,” (Employee Benefit News, December 5, 2012) Oops! It turns out the “date” is less important than the “savings contribution” and the “return.” So much for reducing things to just one number. Or for making that number be the date.
Why ‘one portfolio’ is the top choice for 401k investors,” (BenefitsPro, December 5, 2012) If you think this is about the Target Date Fund fad, take a gander. You might be pleasantly surprised.

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.
LIMRA: Even workers closest to retirement are unprepared for it,” (Employee Benefit News, December 4, 2012)
Adult peer pressure could help boost retirement nest eggs,” (BenefitsPro, December 6, 2012)
When 401k planning gets personal,” (BenefitsPro, December 6, 2012)
IBM changes 401k matches, workers fume,” (NewsObserver.com, December 6, 2012)
IBM Reins In Its 401k Program,” (Wall Street Journal, December 6, 2012)

Wisdom from Some of Our Favorite Blogs:
Pension Pulse: Pension Deficit Disorder? |
fi360 Blog: Fiduciary Links: FINRA to Consider Recruitment Compensation Disclosure Rule |
The Chicago Financial Planner: 401k Options when Leaving Your Job |
The Chicago Financial Planner: 5 Timeless 401k Investing Tips |
The Chicago Financial Planner: Friday Finance Links December 7, 2012 |

Hot Tips from Popular Web Resources:
Insurance News: Americans Adapting New Mindset For Funding Their Retirement |

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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