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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/24/13

May 28
00:33 2013

1020805_25983300_Trending_Topics_2013.05.27_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:
Exclusive Interview with CFA’s Barbara Roper: Why a Fiduciary Standard Helps All Investors and 401k Plan Sponsors,” (, May 21, 2013). America’s leading investor advocate explains why we need a fiduciary standard and why we should have never been having this debate in the first place!

Compliance – Will More Talk Lead to More Action?:
Boy it seems like we’re hearing a lot of talk coming out of Washington about a variety of retirement related issues. Maybe it’s good their talking. Maybe they think that’s all they need to do. Let’s hope so. After all, talking about bad policies is a lot less damaging than actually implementing bad policies.
Pensions Are Top Income Source for Wealthier U.S. Retirees,” (Gallup, May 21, 2013) OK, let’s do the math here, folks. For the most part, the oldest 401k plans are roughly 30 years old. That means the earliest retirees (assuming a retirement age of 65) that would have been able to invest in a 401k their entire working career won’t retire until another 14 years. By then, we should expect the (dying) pension plan to be a considerably smaller portion of the average retiree’s income. Sadly, this survey shows Social Security represents 61% of retirement for all retirees, and that’s the real story.
Should U.S. Pay Workers to Delay Social Security?” (Wall Street Journal, May 21, 2013) This is about giving workers a lump sum paying in exchange for further delaying retirement. Supposedly, this is revenue neutral while at the same time capping long-term liabilities by de-annuitizing Social Security. Ironically, Washington continues to insist on “annuitizing” 401k plans.
Transforming your 401k into steady income,” (Reuters, May 21, 2013) And, as if on cue… We hate to think the regulators’ sudden push in the area might have any influence on how to redefine the Fiduciary Rule, but we wouldn’t put it past them. Annuity sales insurance companies are among the biggest detractors when it comes to a uniform fiduciary standard? Why? Because they currently fail to qualify as a fiduciary due to a labyrinth of self-dealing conflicts of interest.
Regulators Are Coming,” (, May 23, 2013) Here’s comments from Fred Reish explaining how the DOL will be on a mission to make sure all fiduciaries acknowledge their duties.

Fiduciary – Billy Joel Fans Rise in DC:
“Slow down, you move too fast…” sing the minions of industry lobbyists, a.k.a. some of our favorite Congressmen. This could only mean the regulators hope to defy those big banks, brokers and insurance companies desperately seeking to maintain their old business models, whether or not they actually serve the best interests of their clients.
SEC’s Walter Calls for Uniform Fiduciary Standard for Investment Industry,” (On Wall Street, May 20, 2013) The current head of the SEC “called a fiduciary standard a ‘gold standard’ because it would require the same level of service from both brokers and investment advisors.” Sounds good. Here’s the bad news. Even she admits, it won’t happen under her leadership. Her term is slated to end at the end of the year – not enough time for the industry to fight back – er – “weigh in” as required by Dodd-Frank.
SEC’s Walter Says No Fiduciary Standard Rules This Year,” (, May 20, 2013) Same story, same source, different take.
Is it time to dump ‘fiduciary’?” (BenefitsPro, May 23, 2013) Face it, fiduciary fans, the word is just not plebian enough to work in the milieu of Madison Avenue. The question is: “If not ‘fiduciary’, then what?”
House Panel Weighs Bill to Slow SEC’s Fiduciary Rule,” (OnWallStreet, May 23, 2012) The proposals assume non-fiduciaries are innocent until proven guilty of harming investors. That seems fair. It also shows the ignorance of the House. But we can live with that, as long as they are being honest in their contention that evidence of guilt should and will lead to a universal fiduciary standard. This might be the case of the financial industry lobbyists outsmarting themselves. As it stands, they might get away with a “fiduciary” standard that allows self-dealing exemptions. The current academic evidence (presumably what the House is asking for) definitively proves it is precisely such self-dealing that harms investors.
Fiduciary rule, long postponed, faces more delays, lobbying,” (Reuters, May 23, 2013) Seems like the industry thinks that it’s losing the debate with regulators. That would be the only reason why they’ve increased their lobbying efforts and even convinced Congress to propose a law which would prevent the regulators from outlawing highway robbery – er – proposing a new Fiduciary Rule.
DOL Announces Two Fiduciary Seminars,” (, May 23, 2013) Great news for those many folks in Louisville, Kentucky and Overland Park, Kansas. Looks like the old Santa Fe will be having a lot of train passengers this summer!

Fees – Channeling Your Inner Rolling Stone:
“You can’t always get what you pay for, but if you try, you can pay for what you get…” or something to that effect. Remember sports fans, it’s not about getting the lowest fee, it’s about getting the best value for the investor. If you think you can get above average value for a below average fee, then you might be interested in purchasing a certain piece of transportation architecture spanning the East River from Manhattan to Brooklyn.
The Price of Everything: What’s the Value of Sound Advice?” (AdvisorOne, May 20, 2013) While this really focuses on yet another attempt by the brokerage industry to circumvent the fiduciary standard, it raises an interesting question as to the relevance of “fees.” In this sense, it is similar to the DOL’s view on fees: they should be comparable to the service received. In other words, rather than wanting people to pay the lowest fees (and thus receive the lowest service), in the best of all possible worlds, the DOL would like to see folks paying above average fees and receiving above average service.
Plan sponsors focus on fee disclosure rules,” (BenefitsPro, May 22, 2013) The article confirms what many have suspected: 401k participants have had little interest in the fee disclosures they’ve received, slamming another nail into the coffin known as “disclosure effectiveness.” Almost 9 out of 10 plan sponsors, though, want to focus on fee disclosure as the “front-burner issue” for the year. Maybe they know something the average employee doesn’t.

Investments – The Stuff that Bubbles are Made of:
It happens with amazing and unbelievable regularity, often at the top of frothy markets. It’s usually a “new” type of investment or investment class. It takes the Street by storm, promising ever higher returns when normal equities appear stretched to their limits. It’s the “perfect” answer for every investor, especially those most hurt by the last down turn. And then, just as the Sun rises from the East every morning, the inevitable happens. But not before the profiteers have made their hay, leaving the wary consumer alone to finally understand the meaning of caveat emptor.
A Nervy Approach to Retirement Saving,” (Wall Street Journal, May 17, 2013) This article addresses the current fad to legally get around the rules regarding IRAs and invest in unregulated investments. It’s highly risky for both the IRA holder and the custodian/trustee.

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.
Early Boomers May Be Last Generation on Track to Retire Well,” (AdvisorOne, May 16, 2013)
Lump sum pension payouts gaining in popularity,” (BenefitsPro, May 17, 2013)
Retirement Readiness: Employee Responsibilities,” (Employee Benefit Adviser, May 20, 2013)
Small business owner retirement plans, the bad and the good,” (Employee Benefit Adviser, May 20, 2013)
I failed my 401k,” (BenefitsPro, May 21, 2013)
Clark—Seventh Circuit Case Questions Inherited Retirement Plan Protection in Bankruptcy,” (, May 21, 2013)
Average U.S. 401k balance tops $80,000, up 75 percent since 2009,” (Reuters, May 23, 2013)
What Should I Do With My Old 401k?” (, May 23, 2013)

Wisdom from Some of Our Favorite Blogs:
Center for Retirement Research: Few Boomers Catch Up on 401k Saving |
Scholarly Financial Planner: Common Sense Redux: The Legal and Economic Imperative Behind the DOL/EBSA’S “Definition of Fiduciary” Re-proposed Rule |
Scholarly Financial Planner: Musings: “Custodial Support Services Agreements,” RIAs, and Properly Managing Conflicts of Interest |
Retirement Plan Blog: Fiduciary, Benjamin, Fiduciary |
Boston ERISA Law Blog: Player Safety and the Absence of Guaranteed Contracts in the NFL |
ERISA Lawyer Blog: Sixth Circuit Holds That State-Law Claim For Tortious Interference With A Contract Is Not Completely Preempted By ERISA |
fi360: Fiduciary Links: Mary Jo White’s Honeymoon Short-lived? |
fi360: A Brief History of the Prudent Practices  |
Boston ERISA Law Blog: Do You Know a Governmental Plan When You See It? |
The Chicago Financial Planner: Should You Tap Your 401k to Buy Real Estate? |
The Trust Advisor: U.S. Trust Study Finds Wealthy Americans Underinvested And Unprepared |
Scholarly Financial Planner: Why American Business Should Support the Bona Fide Fiduciary Standard of Conduct for Investment Advice |
Boston ERISA Law Blog: ESOPs, Appraisers and Fiduciary Liability |
Proskauer’s ERISA Practice Center Blog: Sixth Circuit: Plan Fiduciary Reasonably Relied On Benefit Calculations In Communicating To Participant |
The Chicago Financial Planner: Your Stockbroker is Not Your Friend | “Like” Minded? |

Hot Tips from Popular Web Resources:
NAPA Net: Helping Your Plan Sponsor Clients Avoid Prohibited Transactions |
fi360: Prudent Practices Update |
NAPA Net: Late Boomers and Gen Xer’s at Risk in Retirement, Pew Warns |
NAPA Net: Guess Work? |
NAPA Net: FINRA’s CEO Weighs in on Uniform Fiduciary Rule |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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