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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 4/19/13

April 22
00:10 2013

1020805_25983300_Trending_Topics_2013.04.22_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:
The 2 Least Understood Investment Rules that Most Hurt 401k Investors,” (, April 16, 2013). Why do so many common sense notions fail to work in the investment world?

Compliance – The Empire is Struck Back:
Far, far away in a distant galaxy, a rebel alliance takes up its struggle against the dominant emperor and his minion army. Of less interest, but no less significance, a beleaguered and divided industry finally combines forces to fight the single common enemy who seeks to harm the long-term goodwill and self-sustainability of the everyday investor.
Limiting 401k tax advantage is unwise,” (InvestmentNews, April 14, 2013) Two words: Collateral Damage.
Obama budget to cap retirement deductions,” (Pensions & Investments, April 15, 2013) For those who missed the news when it originally came out last week, here’s P&I’s summary review. Nothing’s changed. It’ll make you just as mad as it did last week.
Retirement savings cap would hurt small businesses, workers,” (BenefitsPro, April 15, 2013) The author believes the law of unintended consequences means Obama’s budget, if approved, may lead to the end of the 401k. The author needs to reconsider whether this is what is actually intended.
Tax Incentives Benefit Most Retirement Plan Participants,” (, April 19, 2013) Well, ain’t this interestin’? It appears 71% of those taking advantage of retirement plan tax breaks earn less than $150K per year. Bet they didn’t know they were part of the evil “rich”?

Fiduciary – Noon will be High This July:
It’s been a long time coming but it looks like we’re going to see a showdown this summer. We can almost hear the strains of Tex Ritter just thinking about it. Is Phyllis Borzi being fitted for the Grace Kelly part?
401k rollover study triggers call for action,” (Pensions & Investments, April 15, 2013) Could it be that the marginally controversial GAO report is the straw that breaks the camel’s back and tilts regulators towards a uniform fiduciary standard and a new ERISA fiduciary rule?
SEC, DOL Must Collaborate on ‘Overlapping’ IRA Fiduciary Standards: Attorney Mason,” (AdvisorOne, April 15, 2013) Mason works for the lobbyists. ‘nuf said. But the article does us the service of also quoting David Tittsworth, executive director of the Investment Adviser Association, who is definitely not working for the lobbyists. He offers a convincing counter to Mason.
When Disclosures Do More Harm Than Good to the Client,” (AdvisorOne, April 17, 2013) Bob Clark discusses a paper by Michael Finke that reiterates why disclosure is doomed to failure. It’s a good overview for those not familiar with the problems associated with relying on disclosure.
Your ‘fiduciary IRA’ opportunity – an FAQ,” (BenefitsPro, April 18, 2013) If the DOL rules as many expect (and many investors hope for), this is the kind of article you’ll be seeing a lot of.
Fiduciary Standard Debate Expected to Heat Up This Summer,” (On Wall Street, April 19, 2013) Figure the DOL to come to the plate first as early as July, despite heated lobbying by industry groups to prevent the agency from protecting retirement investors. Next comes the SEC and perhaps a limitation on the use of the term “advisor” to fiduciaries only, (the term “adviser” is already limited to fiduciaries).

Fees – All Quiet on This Front:
Is the silence a testament to the futility of it all? Or merely tacit admission that, after all the hype, nobody cares? Or could it be the calm before the storm?

Investments – A Future we Must Go Back To:
The great thing about investing is that it goes in cycles. This means one very important thing, as long as you keep saying the same thing all the time, you’re guaranteed to be right two-times per cycle. And when things return to the old normal, it gets easier to be right. Good Job!
Value vs. Growth: Which Investing Strategy Is Better?” (Financial Planning, April 1, 2013) Here’s a refreshing article that represents old school thinking – and we mean that as a compliment. Before there was Modern Portfolio Theory to make things harder than they needed to be, there was this simple question: Value or Growth? The results of this study confirm what previous studies have said, but do so in the context of index fund investing, which may provide some clarity on when active beats passive and vice versa.
DC plans better prepared for downturns,” (Pensions & Investments, April 15, 2013) But only because they risk meeting long-term investment goals. Of course, you’d have to read between the lines to discern that reality from this otherwise rosy article. The piece celebrates the move from equities to target date funds without mentioning it was the target date funds themselves that offered the worse performance in the most recent downturn. The author also fails to mention how across-the-board the 2008/09 debacle was, with “alternative” investments bearing the brunt of the precipitous drop. Of course, claims the article, those very alternative investments are in part helping DC plans be better prepared for downturns. What alternative universe is this written in?
Why ‘safety’ should be last for 401k investors,” (BenefitsPro, April 18, 2013) Here’s the must read article for everyone concerned that 401k investors are too cautious in their investments.

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.
Big 401k Mistakes … and How You Can Avoid Them,” (Wall Street Journal, April 13, 2013)
Retirement Saving Tips for Couples – The Smarter Investor,” (, April 16, 2013)
Is there really a retirement savings crisis?” (MarketWatch, April 17, 2013)
IRAs remain a linchpin of US retirement savings, but savvy account management is often lacking,” (Minneapolis Star Tribune, April 18, 2013)
Singles swing into retirement with little savings,” (MarketWatch, April 18, 2013)
401k Borrowing Increases, Mainly By Pre-Retirees,” (On Wall Street, April 18, 2013)
Planning for Your Other Half in Retirement,” (, April 18, 2013)
3 easy ways to wreck your retirement,” (MarketWatch, April 19, 2013)
Improving Retirement Readiness for Gens X and Y,” (, April 19, 2013)
Use a Roth 401k to Boost Retirement Saving,” (, April 19, 2013)
Cash Balance Plans Could Overtake 401k Plans,” (, April 19, 2013)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 7 Steps to Spring Clean Your Portfolio |
ERISA Lawyer Blog: Seventh Circuit Finds That Insurer Is Not An ERISA Fiduciary |
Scholarly Financial Planner: It’s Time to Take Action to Combat Fraud – Examining the Use of “Advisor” or “Consultant” Title by Non-Fiduciaries in the Securities Industry; How YOU Can Help |
The Chicago Financial Planner: Friday Finance Links April 19, 2013–What a Week Edition |
Retirement Plan Blog: The 401k/403b Investment Manual: Book Review |

Hot Tips from Popular Web Resources:
ICI: IRA Rollovers Serve Investors Well |
ICI: No Accident: The Strengths of the 401k System |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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