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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 1/11/13

January 14
00:21 2013

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:
What Will 2013 Bring to the World of 401k?” (, January 8, 2013). Two experts feel we’re on the cusp of a major milestone, two experts don’t. You’re the tie-breaker. What do you believe?

Compliance – “We’re from the government…”:
“and we’re here to help.” According to Ronald Reagan (and many others), these are the nine most feared words in the English language. Of course, every once and a while we’ve got to deal with the hand we’re dealt.
The newest IRS rule on fixing 403(b) plan mistakes,” (BenefitsPro, January 10, 2013) OK, OK, so this is inside baseball, but for some people this is really important. It involves Internal Revenue Procedure 2013-12 (a.k.a. “Rev. Proc.”) and, if you handle a 403(b) plan, you should read this.

Fiduciary – There’s More Where that Came From:
Right now, it’s like we’re one of those lotto balls bouncing back and forth inside the popcorn machine right before the vacuum cleaner randomly sucks into the tube of prosperity.
FINRA’s Broker Bonus Plan a Move Toward Fiduciary Duty,” (AdvisorOne, January 7, 2013) Here’s the deal. Apparently, FINRA thinks disclosure is all it takes to meet the Fiduciary Standard. That’s like saying a bank robber doesn’t commit a crime if he tells the teller he intends to rob the bank. As they say, “C’mon, man!”
Brokerage windows and retirement plans,” (BenefitsPro, January 7, 2013) Fred Reish explains again the compliance issues stemming from brokerage windows. This time in the form of a white paper the article links to.
Kitces on Top 3 Topics for Advisors in 2013—Topic 1: Fiduciary and SRO,” (AdvisorOne, January 8, 2013) You heard it hear second (this article came out a day after a similar story from was published). This piece, however, gets a little bit more into the politics of the matter.
More New RIAs Favor Income Flexibility Over Pure Fiduciary Model,” (Financial Planning, January 9, 2013) This isn’t news as it has been going on for more than a decade now. It is, however, a potential problem for both 401k plan sponsors – who will continue to be confused by the mixed offering of many service providers – and the service providers themselves – who will have to make a tough decision sooner or later, especially if the DOL comes through as expected.
DOL promises clarity to plan sponsors and IRA holders,” (BenefitsPro, January 9, 2013) This article explains why all those new RIAs in the above article should be worried.

Fees – The Quiet Before the Storm:
Nothing to see here. Move along.

Investments – Forget Fees, Let’s Talk Performance:
It seems like there’s an inverse relationship between stories on fees and stories on investments. We appear now to be in that portion of the cycle where investment stories are ascendant. It’s been a while, but, so far, it looks like we haven’t learned anything. Or, maybe it’s just the reporters who haven’t learned anything.
Most Actively Managed U.S. Stock Funds Missed Benchmarks Last Year,” (Wall Street Journal, January 7, 2013) After years of trailing actively managed funds, the indexes finally win one. Funny thing is, though, does anyone ever remember reading the headline that said “Most Actively Managed U.S. Stock Funds Beat Benchmarks Last Year”? I thought not. Doesn’t fit the prevailing meme.
Callan: DC plans dumping more managers for performance,” (Pensions & Investments, January 7, 2013) Is this an example of buying high and selling low or is it a realization that broker-sold funds underperform direct sold funds?
Chuck Royce: Why active management will pay off,” (InvestmentNews, January 10, 2013) Here’s the counterpoint to the article that leads this section. If you know anything about the counter-cyclicality of small cap stocks you’ll understand where Royce is coming from.
Employers hungry for returns when updating 401k menus,” (InvestmentNews, January 11, 2013) Would you bet your life’s savings on 15-20 years old data that covered only a narrow segment of the entire population, a segment so narrow it might not even apply to you? If you would, then go ahead and read this.

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.
Roth 401k switch is a good deal for younger taxpayers sitting on cash,” (InvestmentNews, January 6, 2013)
The top four trends guiding 401k pros,” (MarketWatch, January 7, 2013)
Firms offer advice on Roth 401k transfers,” (BenefitsPro, January 8, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: A Fresh Look at Nonprofit Boards and Alternative Investments |
The Chicago Financial Planner: Mutual Funds – An Investment Process is Critical |
The Institute for the Fiduciary Standard: Four More Years? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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