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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/17/13

May 20
00:12 2013

1020805_25983300_Trending_Topics_2013.05.20_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:
401k Plan Sponsors, Star Trek and Fiduciary Duty,” (, May 14, 2013). Star Trek’s Fiduciary Rule: The needs of the many (or the client) outweigh the needs of the one (or the fiduciary). Perhaps the DOL and SEC can gain insight from Gene Roddenberry’s masterpiece.

Compliance – Is Washington the best source for Fiduciary regulation?:
If the IRS can go political, why not the DOL or the SEC? Perhaps it’s best if we let the markets and the courts decide.
Requiring employers to provide retirement income estimates under consideration,” (The Washington Post, May 11, 2013) Let’s say this upfront: Is this the deal the DOL worked out with the insurance companies in exchange for expanding the reach of the fiduciary standard? Why do we ask? Because the only constituency this can possible help is the one consisting solely of annuity salesmen. This idea hurts plan sponsors by placing a dangerous unknown liability upon their shoulders (because of all the assumptions any calculation will require). It also hurts plan investors. Any off-the-shelf solution lacks the power to added the needed customization to make this of any value to investors. As a result, it will undoubtedly lead some investors to a fall sense of security until they discover – probably too late – the broad assumptions do not fit their specific situation.
IRS to Focus on Safe Harbor 401k Plans, Other Concerns Highlighted in Questionnaire,” (Bloomberg, May 14, 2013) Basically, if you’re an employer with less than 100 employees and have more than one retirement plan, the IRS wants you! You might not be doing anything illegal, but advanced profiling techniques developed by the agency suggests you’re a suspect nonetheless. There was no indication in the article whether chances for an audit are increased if you are also a card-carrying Republican.
International Retirement Plans Offer Insight to Aid America’s System,” (New York Times, May 14, 2013) Ah, but what price freedom? In America, we value the freedom of the individual. That means we have the freedom to fail, not to march lock-step along a pre-determined path. Some ideas presented here are good, but some only sound good. Beware the promise of eternal bliss, for it’s a Faustian bargain at best.
Lessons From Australia’s Retirement System,” (, May 14, 2013) The key take away here: people save more when the government forces them to; and, Australia will be adopting a fiduciary standard this summer.
Phyllis Borzi: The 2013 IA 25 Extended Profile,” (AdvisorOne, May 15, 2013) The news out of this is that the new Fiduciary Rule will once again merely be a proposal and that public comment will be asked for.
House bill seen slowing DOL’s fiduciary push,” (InvestmentNews, May 15, 2013) This is no sure thing, but it clearly shows at least some members of Congress are worried the DOL will propose a stricter Fiduciary Rule than industry lobbyists prefer. The House proposal is scheduled to come up in committee next week.
6 Reasons a 401k is Better Than a Pension,” (, May 15, 2013) Here’s a quick slap in the face for those who don’t remember what it was really like when America was awash in pensions. We’ll emphasize one that just came up this week – a husband had to make a choice to include his wife in his pension. To do so, he immediately takes a 50% cut in benefits. You don’t see that in 401k plans.

Fiduciary – What is a ‘Fiduciary’?:
While the DOL and the SEC fiddle at the behest of powerful politicians and their lobbyist masters, even popular culture has begun to get into the act (pun intended) of showing the world what it means to be a fiduciary.
Three Shades Of Fiduciary,” (Financial Advisor, May 15, 2013) It’s all about the ERISA Rule of 3’s (as in 3(21) , 3(38) and a dash of 3(16)). It’s not new, but it’s a good review for those who have forgotten.
Star Trek Into Darkness premiere and the problem with ‘fiduciary’,” (BenefitsPro, May 16, 2013) If being a fiduciary is all about building trust, what happens when no one trusts the word fiduciary?
Seventh Circuit addresses whether financial service provider is ERISA fiduciary,” (Employee Benefit News, May 17, 2013) This is a long and confusion article. It seems to be about something important, but it’s less than clear what – if any conclusions there are.

Fees – How’s that Hopee Changee thing working out for you?:
Almost a full year into 408(b)-2 and we just don’t see the kind of fee-bashing articles with the regularity we saw at this time last year. In fact, we don’t see any fee articles are all. Why is that?

Investments – Be Prepared. Be Very Prepared:
There’s a strange feeling in the air. It’s almost as if there’s a storm coming. We don’t know what kind of storm, be the tenor of these articles suggests something’s just not right.
Beware of Target-Date Funds,” (AdvisorOne, April 29, 2013) Don’t know how this one slipped through the cracks, but we found it. The author leads with this statement: “I think any advisor who recommends or sells a TDF is out of their mind” (and buy “sell” he’s using the mutual fund definition of the word most people usually associate with the word “buy”). He then proceeds to list his reasons. Oddly, he seems to focus on weaker reasons when there are stronger reasons to be had. You be the judge.
Stock Market Volatility Myth,” (Financial Planning, May 13, 2013) After exposing this myth, the author then goes out to present a series of behaviors that explains this myth and more. An excellent overview of some of the key elements of behavioral finance – a subject all 401k plan sponsors, service providers, regulators and investors should all be intimately familiar with.
Active ETFs will make it easier to beat an index,” (InvestmentNews, May 14, 2013) The authors logic is based on the idea these ETF will have lower fees because “12(b)-1 fees, sales load charges and fees to get on different mutual fund platforms” will be eliminated. Hmm, couldn’t you just buy a mutual fund that does the same?
EBRI: Low interest rates could ding retirement plans,” (Employee Benefit Adviser, May 14, 2013) Yes, yes, yes, we all know it’s true. But it has been said since 2009 and investors have become numb to its message. Luckily for them, interest rates won’t rise in earnest until the economy improves. We mean really improves, not the political mumbo jumbo we hear out of Washington (latest estimates now say we won’t match 2007 “actual employed” numbers until sometime in 2014). Real economic improvement means blowing past those numbers, not merely equaling them.
Warning: How the Bond Bubble Will Secretly Sabotage Your Retirement,” (Money Morning, May 14, 2013) They say imitation is the greatest form of flattery. We’ve flattered others. This time they return the favor.

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.
A looming threat employers face from 401k plan loan defaults,” (Pensions & Investments, May 13, 2013)
Unlike Boomers, Millennials appear to be super savers,” (USA Today, May 13, 2013)
Retirement Income Summit 2013 Why the 4 percent rule shouldn’t be a rule,” (InvestmentNews, May 14, 2013)
Recession Not Entirely at Fault for Retirement Crisis,” (Financial Planning, May 14, 2013)
Biggest Retirement Threat? It’s Not Running Out Of Money,” (Financial Advisor, May 15, 2013)
Five Retirement Myths Worth Changing,” (Forbes, May 15, 2013)
Some Americans Withdrawing IRA Money Too Fast, Survey Says,” (Financial Advisor, May 15, 2013)
8 habits of highly effective retirees,” (MarketWatch, May 15, 2013)
Government Employees Postponing Retirement,” (, May 15, 2013)
401k Sponsors Take To Social Media,” (Financial Advisor, May 15, 2013)
How to reduce employee cravings for 401k loans,” (Employee Benefit News, May 15, 2013)
What Should You Say to Reluctant Retirees?” (, May 16, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: Have you considered an advisory council?Scholarly Financial Planner: On the Future Size of Investment Advisory Firms Under a Fiduciary Standard |
Fred Reish: Fiduciary Obligation to Select Appropriate Share Classes |
Scholarly Financial Planner: What Would Adam Smith Say About the Fiduciary Standard? |
The Chicago Financial Planner: Investing: Even Indexing Takes Work |
Scholarly Financial Planner: How to Choose a Financial/Investment Advisor: A Checklist for Consumers |
ERISA Lawyer Blog: IRS Waives 60-Day Deadline For IRA Rollover | More or Less? |

Hot Tips from Popular Web Resources:
NAPA Net: Sponsors Connecting to Providers via Web, Social Media |
NAPA Net: Case of the Week: Defining an ERISA Investment Advice Fiduciary |
NAPA Net: Reish Warns of New ERISA Litigation Threat  |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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