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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 3/1/13

March 04
00:04 2013

1020805_25983300_Trending_Topics_2013.03.04_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:
Yet Another Independent Study Highlights High Conflict-of-Interest Cost to Retirement Investors,” (, February 26, 2013). If all these researchers consistently show investors make less money going through brokers, why are brokers still in business?

Compliance – When they said “sequester,” I didn’t know they meant…:
…to take away my retirement plan. But, really, don’t you think a thousand minds in Washington can better spend you’re hard earned money than you – with your feeble non-government issued brain – can. Oh, and don’t worry. They’re working on getting rid of the “non” in that brain thing.
Capping Top Earners’ 401k Benefit Seen as Cost Cutter,” (Bloomberg, February 25, 2013) Those filthy rich are at it again. This time they’re saving too much money in their retirement plans. Fear not, dear class war mongerer, the omnipotent government is here to save the day to, once again, propose a way to further penalize the successful by cutting their ability to save for retirement. Not that Social Security will make up for it. Not that the smarter ones among these successful won’t change their behavior (which might, ironically, include no longer offering retirement plans to anyone). But the government lives in a snapshot-in-time reality, where people act the same no matter what policy changes take place.
Limiting 401k Subsidies: Smart Deficit Reduction or Dumb Double Taxation?” (AdvisorOne, February 26, 2013) Here’s a broader look at the proposal outlined in the above article. Notice the difference between this industry publication versus the more mass media publication above. For the full response from the ASPPA, see “Popular Web Resources” listings below.
What the DOL Has in Store,” (, February 26, 2013) If this list is to be believed, the DOL is finally going to get rid of controversial prohibited transaction exemptions for any entity offering advice. It will, however, provide leeway for brokers and insurance companies to sell their products without acting in a fiduciary capacity. That’s OK as long as the public knows those same brokers and insurance companies are not also providing advice with those hamburgers.
In hunt for revenue, Washington eyes 401k tax breaks,” (Employee Benefit News, February 27, 2013) Problem: Americans don’t have enough to retire. Obvious Solution: Make it easier for Americans to save for retirement. Washington Solution: Make it more difficult for Americans to save for retirement. Any questions?

Fiduciary – Did polyester put “giddyup” in SEC’s gait?:
Like the sands of time, these are the years – no, months – no, days – no, hours of our lives. The big news is the last item. The SEC wants has formally begun a comment period on the “cost” of the Fiduciary Standard. Of course, this leave one to wonder if this comment period will also allow for thoughts on the “cost” of not having a Fiduciary Standard?
SEC commissioners keep tweaking Fiduciary Duty cost request,” (InvestmentNews, February 22, 2013) The article describes the edit process as a line-by-line merry-go-round of small changes. The question: Is this merely a delaying tactic, or is actual progress being made?
Fidelity expert: More companies look to shed – not just reduce – retirement liability,” (Employee Benefit Adviser, February 26, 2013) Relax sports fans, the plans that plan sponsors are looking to dump are defined benefit plans, not defined contribution. Collaboration
3 Issues That Will Dominate DOL Fiduciary Debate,” (AdvisorOne, February 28, 2013) Here they are: What prohibited transactions won’t be prohibited; whether, like all other offering advice, those offering IRA advice need to maintain a fiduciary standard; and, whether the rollover itself – normally considered a sales action – represents a fiduciary act. Any compromise on the first two will water down the effectiveness of the rule. The third “issue,” being a non-fiduciary issue (i.e., like the decision hire an adviser), probably is being thrown in to give the brokers a “victory” to claim. Nice move on the part of the DOL, if it works.
SEC Issues Public Comment Request on Fiduciary Rule,” (AdvisorOne, March 1, 2013) Whoa! That was fast. Let’s see what happens.

Fees – What did Sylvester say…:
…when he opened his 401k statement? “I tawt I taw a 12b-1 fee! I did! I did! I did see a 12b-1 fee!” Whereupon, Tweetie whalloped him on the crown of his head with a 38 ounce baseball bat for stealing the bird’s famous line. This always leave one to wonder: Just how does a 2 oz. baby bird with T-Rex-like wings-for-arms manage to lift up and swing a 38 ounce baseball bat?
Eighty-sixing 12(b)-1 fees won’t help IRA holders: Researchers,” (InvestmentNews, February 22, 2013) Actually, it will, according to the researchers quoted in the article. They just happen to – rightly or wrongly – feel other things will have a greater impact on saving fees. The researchers mention the negative impact of performance, but focus only on fees.
401k Plan Fees Decline in 2012,” (Bank Investment Consultant, February 25, 2013) This based on the new 401k Averages Book. Of interest, though, is this tidbit. Small plans pay almost 50% more for target date funds than large plans. Why?
Understanding Your Retirement Fees,” (, February 26, 2013) This is a good overview of the variety of fees associated with retirement plans. It’s a perfect introductory piece for both plan sponsors and plan participants alike.
Little reaction to 401k fee disclosure,” (USA Today, February 28, 2013) Yet another analysis that show plan participants are likely not reading their new fee disclosure information. So, why is “disclosure” the cure-all to everything that ails the financial service industry? There is an ounce of good news, though, according to the article. All this talk of disclosure has forced at least some plan sponsors to pay attention.

Investments – Sequester the investor:
It just doesn’t matter. You can’t win for losing. Nothing is free. It’s just up to you: Do you want to pay him now or pay him later?
A new 401k success formula: Low cost plus advice,” (Reuters, February 28, 2013) Don’t be fooled by this headline, this article is really about individual investment advice. It quotes one figure at 45 basis points (on top of all other fund expenses) for plans offering individual investment advice. To justify this added fee, platform providers are offering only low cost index funds on the plan’s menu. Ouch. So you not pay a professional portfolio manager to select investments and instead pay a financial planner to tell you how to allocate your assets. We can’t wait to see the study that ultimate slams this formula.

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.
How much is too much?” (BenefitsPro, February 21, 2013)
Tax law changes could negatively impact retirement accounts in 2013,” (BenefitsPro, February 22, 2013)
401k balances no cause for celebration,” (MarketWatch, February 27, 2013)
How Much Should I Contribute to My 401k?” (, February 28, 2013)
Greasing the skids on 401k rollovers,” (Employee Benefit Adviser, March 1, 2013)
Safe harbor 401k can help executives,” (Employee Benefit Adviser, March 1, 2013)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: The Tension Between Personal Responsibility and Paternalism – and the Issue of Fiduciary Standards |
Scholarly Financial Planner: Registered Investment Advisers: A New Paradigm for Regulation and Enforcement |
RetirementRevised: Why boomer retirement balance sheets are a mess |
The Chicago Financial Planner: Small Business Retirement Plans – SEP-IRA vs. Solo 401(k) |
fi360 Blog: Fiduciary Links: 3rd annual SurveyBusiness of Benefits: The Dueling Fiduciary Shadows of 12b-1 Fees |
The Chicago Financial Planner: Do Index Funds Reduce Investment Risk? |
fi360 Blog: The Next Step to a Uniform Fiduciary Standard |
ERISA Lawyer Blog: Seventh Circuit Rules That Owners Of An Employer Withdrawing From A Multiemployer Pension Plan Are Responsible For The Employer’s Withdrawal Liability | Impact “Ed” |
Boston ERISA Law Blog: Valuation and Appraisal Risks for ESOP Fiduciaries |
The Chicago Financial Planner: Friday Finance Links March 1, 2013 – Sequester Day 1 Edition |

Hot Tips from Popular Web Resources:
ASPPA Newsroom: Brookings Proposes Double Tax on 401k Contributions |
EBSA News Brief: Judge orders owner of A.B.D. Tank & Pump Co. to restore $2.8 million to worker retirement plan following US Labor Department investigation |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA


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