Hosting an industry conference? Ask us about including it in this ticker?
What do you think of our site upgrade?

FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 1/18/13

January 22
00:03 2013

1020805_25983300_Trending_Topics_2013.01.21_stock_xchng_royalty_free_300Welcome 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:
Have Mutual Fund Rating Agencies Lost Their Mojo?” (, January 15, 2013). For retirement and retail investors alike, have mutual fund rating agencies passed their collective “use by” date? Read this controversial article and then go to later this week for the amazing follow-up story.

Compliance – Trickle, Trickle, Trickle:
That’s the sound of annoying facts spilling out into the media stream, confounding the meme of the too big to fail establishment. When will they ever learn? Yes, that goes for Peter and Paul as well as Mary, who we can reasonably blame for this whole thing.
Pension Funding Gap Widens for Big Cities,” (Wall Street Journal, January 15, 2013) How many times must we read this same headline before someone does something about it? It’s funny, this issue will probably lead to more personal hardships than all the mass murders ever will, so how can our politicians demagogue gun control in an instant while leaving our sinking finances on the back burner?
Pension Rules Drive Annuity Decision,” (, January 17, 2013) Hmm, maybe all that “401k plans need an annuity option” was a bit overblown. It turns out, when not offered a choice of a lump-sum withdrawal, 100% of pensioners annuitize. When offered the choice, only 27% annuitize. Maybe the other 73% know something the annuity advocates don’t.
More Public Pensions Made Changes After Recession,” (, January 18, 2013) If you want to read all the sad news, go ahead and read this.
Retirement Savings Accounts Draw U.S. Consumer Bureau Attention,” (Bloomberg, January 18, 2013) Well, well, well. Perhaps this is the real reason the SEC and the DOL seem to be in a hurry to get their Fiduciary Standard plans out into the public (see below). It appears yet a third government regulator is just licking its chops to justify entering the vast foray of retirement consumer services.

Fiduciary – Watch While I Pull a Rabbit Out of My…:
This is what they teach at editor’s school: Always provide the reader with just enough information, but be sure to leave an appropriate blank. That way, no matter what type of reader reads your piece, they all think it will agree with their perspective.
Advisors May Still Lose Right to Earn Commissions on IRA Advice,” (AdvisorOne, January 15, 2013) And in related topics, bank robbers may still lose right to access other people’s money, pedophiles may soon lose right to free love and rights activists continue to imply “rights” where “responsibilities” are the more appropriate term. Yes, this headline is abusive. But, unfortunately, in a world of literary naiveté, only editors know that.
SIFMA Expects Step Forward on Fiduciary Standard by March,” (Wall Street Journal, January 16, 2013) The headline misleads just a tad. It’s not that SIFMA expects to do something about the Fiduciary Standard, it’s that they expect the SEC to move forward on it. If the March timeframe is true, it’ll be faster than anyone expected and may put pressure on the timing of the DOL’s new definition of fiduciary.
SEC to Take Another Step Toward Fiduciary Rule,” (AdvisorOne, January 16, 2013) This article is a little more in depth than the one above and it paints a slightly different picture. Here, it seems SIMFA is firing a warning shot across the SEC’s bow and trying to influence their decision, which SIMFA apparently feels is trending in a direction not in their best interest.
Did E-Trade just hijack the fiduciary issue?” (BenefitsPro, January 17, 2013) The popular discount brokerage firm just ran the best pro-fiduciary commercial ever seen. The trouble is, it’s a broker and not a fiduciary. And, last time we checked, it gets fees and revenues from the securities it sells (not just brokerage commissions, but actual payments from the mutual fund companies). This isn’t fiduciary. This isn’t fiduciary at all.
SIFMA Seeking Progress on Uniform Fiduciary Standard in 1Q,” (On Wall Street, January 17, 2013) Here’s SIFMA making the best PR effort out of a bad (for them) thing. This face says they want a Uniform Fiduciary Standard. See earlier articles for what their other face is saying.

Fees – If Europe Thinks this is a Good Idea…:
Not to worry. Every once in a while we get things right that are worth repeating. File this lesson under: “U.S. Constitution.”
New code forces disclosure of UK pension charges,” (Reuters, January 11, 2013) A week late and a dollar short, but we thought you might be interested in seeing how the rest of the world follows us.

Investments – It was the Best of Plans:
Sometimes an idea works, but not in the way intended. And sometimes, you have to first take small steps in the wrong direction just to get off the couch.
The 4 Percent Rule: Static Decisions In A Dynamic World,” (Financial Advisor, January 15, 2013) The article brings up a common complaint about the 4% (or 5%) withdrawal rule for retirees – it assumes a static environment in a dynamic reality. For example, if we suffer another 2008/2009 episode and the market drops 50%, that 4% withdrawal rate will not be enough to fund the retiree’s lifestyle. Ironically, the complaint only exposes the problem of trying to apply statistical models to the real world. In fact, a managed portfolio is not a single entity (unless it’s a mutual fund), but a collection of individual securities. So, in the case of a retiree, a full two-years of withdrawals (at a minimum) should be kept in cash. Two years is generally long enough to ride out a market crash. Again, for example, most actively managed portfolios had regained everything they lost by 2010/2011 (they were ahead of the market because for the most part they lost less than the market).
Why you can’t avoid dumb 401k mistakes,” (MarketWatch, January 16, 2013) Robert Powell offers an excellent interpretation of a recent study. Although the study is flawed in some aspects, Powell is able to use its conclusions to help redirect plan sponsors and participants from making the most typical investment decision making errors. Read it.
Target-Date Mutual Funds Help Young Workers Set Up Smart 401k Plans,” (TIME, January 18, 2013) Well, sometimes doing a good thing for a bad reason is still doing a good thing. Get them used to saving first. Then they can worry about how to invest right.

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.
Retired PSCA president David Wray discusses his legacy,” (Employee Benefit News, January 14, 2013)
401k breaches undermining retirement security for millions,” (The Washington Post, January 14, 2013)
Full-Retirement Age May Be Worst Time For Singles To Start Social Security,” (Financial Advisor, January 15, 2013)
Are DC Plan Sponsors Funding Retirement,” (, January 15, 2013)
401k Plans Have $70 Billion Problem: Report,” (AdvisorOne, January 16, 2013)
Retirement self-sabotage,” (BenefitsPro, January 17, 2013)
Participant Recession Activity Hurt Retirement Savings,” (, January 17, 2013)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 3 Financial Products to Consider Avoiding |
fi360 Blog: Fiduciary Links: FINRA Proposed Regulatory Notice 13-02 and how far does disclosure need to go | 10 Steps 401k Plan Sponsors Should Take This Year |
The Chicago Financial Planner: Mutual Funds and Alabama Football – Does Past Performance Matter? |
fi360 Blog: Have you tested your disaster recovery plan lately? |
The Chicago Financial Planner: Friday Finance Links January 18, 2013 |

Hot Tips from Popular Web Resources:
Mercer: Ten steps that Defined Contribution plan sponsors |
Retirement Town Hall: Defined benefits’ 2012 year in review |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


No Comments Yet!

There are no comments at the moment, do you want to add one?

Write a comment

Only registered users can comment. Login is sponsored by…

Order Your 401k Fiduciary Solutions book today!

Vote in our Poll


The materials at this web site are maintained for the sole purpose of providing general information about fiduciary law, tax accounting and investments and do not under any circumstances constitute legal, accounting or investment advice. You should not act or refrain from acting based on these materials without first obtaining the advice of an appropriate professional. Please carefully read the terms and conditions for using this site. This website contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that may be provided by or through such websites.