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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/8/13

February 11
00:03 2013

1020805_25983300_Trending_Topics_2013.02.11_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:
7 Simple Saving Secrets Every 401k Investor Should Know,” (, February 4, 2013). You’d never get me to admit they’d work,… until they did. Here’s a more personal take on the standard list article, one that fiduciaries can feel free to share with plan participants.

Compliance – Don’t Tread on Me:
It seems there are two themes that continually emerge when we review the philosophy of retirement savings. Both are politically incorrect by today’s mainstream media standards, but were politically correct by our Founding Fathers. The first is “Leave me be and I can take care of myself, thank you very much.” The second is “A corporate body – whether a business or a government – should be limited because it can’t be counted on to successfully execute broader demands.” This is why 401k plans are so popular and pension plans are in so much trouble.
ICI survey: Americans back tax breaks for retirement savings,” (InvestmentNews, February 6, 2013) It is unfortunate this survey was conducted by the Investment Company Institute (the “ICI”). The ICI stands for mutual funds, and mutual fund companies have been the prime beneficiary of the growth of the 401k savings vehicle (although it didn’t start that way). Still, for what it’s worth, the ICI’s survey says Americans don’t want the government messing with, what many believe to be, the successful retirement savings formula of 401k plans, IRA and high contribution caps. It would be nice if, say, Gallup or some other independent market research firm took it upon themselves to conduct a similar survey to verify these results.
Pension Plans Unlikely to Achieve Return Targets,” (, February 6, 2013) Here’s what the article doesn’t tell you. It’s because yields are so low the fixed income portion of the typical pension plan asset allocation isn’t producing what the actuarial assumptions assumed. It gets worse. Once rates start going up, this portion of the pension’s portfolio is go down. Ouch.
Proposal to change Florida state pensions to 401k plan moves forward,” (Tampa Bay Times, February 8, 2013) “Another one bites the dust (or gets closer to) – duhn! duhn! duhn!” Some parts of the world move in one direction (see, Illinois) and others move in the right direction.

Fiduciary – “A long habit of not thinking a thing wrong, gives it a superficial appearance of being right”:
In case you don’t recognize it, the source of this quote is from introduction of Thomas Paine’s Common Sense – the 1776 pamphlet that rocked the Colonies and inspired the greatest revolution (to date) in all human history. From its simple adages comes forth a solid and consistent philosophy – one we apparently forget over time. Since 1215 those brought up in the tradition of Western Civilization (at least) have known the importance of establishing a law of Trusts. This law prevented trustees from engaging in certain activities. Eight Centuries is a long time. We’ve now experienced at least a generation of not thinking the thing wrong. That still doesn’t make it right.
Breach of Trust by 401k Trustees?” (AdvisorOne, February 4, 2013) Can anyone serve two masters with equal loyalty? Apparently not. Kudos to this reporter for being the first to break the story. Others followed, as you can see below.
Do Trustees from Mutual Funds Play Favorites?,” (, February 6, 2013) Sometimes it’s politically incorrect to state the common sense of reality. In these cases, we have to fall back to scientific surveys to give us cover. Here’s the common sense of reality: Trustees affiliated with investment products are less likely to remove them from a plan when they under performance. Here’s the conclusion of the study: Same thing. Read it and weep. Actually, they would have done better reading the Magna Carta, when this obvious conflict-of-interest was first exposed and prohibited. That’s where we get the phrase “prohibited transaction” from. It’s trust law, folks. Trust law.
Improving the Plan Sponsor-Trustee Relationship,” (, February 6, 2013) This is all about due diligence. It’s really a precursor to the DOL’s new Fiduciary Rule, coming to a 401k plan near you later this year.
Is A Rollover A Fiduciary Act?” (AdvisorOne, February 6, 2013) Nope, not the act of the rollover itself. And not if you’re merely acting as a broker buying and selling of securities under the direction of the client. On the other hand, if you’re providing investment advice, then yes, you’re a fiduciary. Well, you are if you’re a Registered Investment Adviser acting under the Investment Advisers Act of 1940 you are. If you’re exempt from operating under the 40 Act, well, that’s the sticky-wicket we’re in.
Participants sue Fidelity for ‘fiduciary self-dealing’,” (Pensions & Investments, February 7, 2013) The article doesn’t mention whether the fiduciary who hired the fiduciary accused of “fiduciary self-dealing” was also named in the suit. This is not the first time Fidelity has been involved in 401k shenanigans. It will be interested to see how this one turns out.

Fees – The Dagger in the Cloak:
While it appears there are no stories linked to this particular topic, review some of the other articles cited on this page. You won’t have to dig too deep to discover the thread running through many of theme: fees. Self-dealing fees. Hidden fees. High fees. But – “Shhh!” – be careful not to alarm the masses with such knowledge.

Investments – Of Style and Principle:
Thomas Jefferson once said, “In matters of style, swim with the current; in matters of principle, stand like a rock.” If you want people to think you’re cool, wear the trendiest of clothes. If you want people to think you’re smart, stick to convention. We see this in investments all the time. The coolest get most of the media face time because they know the chic – think Apple in September 2012. The smartest get the best returns because they shun the chic – think Apple in September 2012. So it is with individual stocks. So it is with individual asset classes. So it is with individual investment products.
Pension Funds Cut Back on Commodity Indexes,” (Wall Street Journal, February 5, 2013) This is a cautionary tale that should be converted into a case study for all retirement investors to learn from. As usually happens, by the time most begin to invest into the latest “hot” fad, it’s too late. That investment then fails to live up to its expectations. This is what happened here. Remember the wisdom of Ben “The Tortoise” Graham: Slow and Steady Wins the Race.
New reasons for mutual fund buyers to beware,” (Wall Street Journal, February 5, 2013) If you have ever doubted the need for a uniform fiduciary standard, read this article. Get your friends to read it. Get your regulators to read it. It all goes back to trust law, folks. Trust law. Remember that.

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.
Rethinking savings plans as struggling Americans raid 401k plans,” (Reuters, February 5, 2013)
LIMRA: Gens X & Y blase about retirement saving,” (Employee Benefit Adviser, February 5, 2013)
Should You Switch to a Roth 401k?” (, February 6, 2013)
Retirement Basics: IRA or 401k?” (, February 6, 2013)
Fidelity accused of taking improper fees in lawsuit suit,” (The Boston Globe, February 7, 2013)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Dow 14,000 – Big Deal or Just a Number? |
fi360 Blog: Fiduciary Links: An IPS can Demonstrate Reasonable Diligence |
The Trusted Advisor: Advisers Seek to Redefine Risk |
The Chicago Financial Planner: 4 Signs of a Lousy 401k Plan |
Pension Risk Matters: Fiduciary Duty is More Than Numbers |
The Chicago Financial Planner: Friday Finance Links February 8, 2013 – Blizzard Edition |
The Trust Advisor: Suze Orman’s Take On Financial Planners |
ERISA & Employee Benefits Litigation Blog: Another Indication of Skepticism Towards “Stock Drop” Cases – District Court Requires Evidence that Alleged Breach of Fiduciary Duty Caused Plaintiffs’ Loss at Pleading Stage |

Hot Tips from Popular Web Resources: Preserving Tax Incentives for 401ks | Missed Behaviors |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Roger @ The Chicago Financial Planner
    Roger @ The Chicago Financial Planner February 11, 09:47

    Thanks as always including my posts. The “Lousy 401(k)” post has gotten a lot of readership.

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