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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/7/13

June 10
00:24 2013

1020805_25983300_Trending_Topics_2013.06.10_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:
Adding Categories: A Sample of a New and Improved 401k Investment Option Menu,” (, June 6, 2013). How you can reduce choice without necessarily reducing choice. This is the third of a three part series covering the trend among plan sponsors to increase employee participant and savings rates by reducing choice overload. The first two articles were: “4 Proven Strategies to Reduce Choice Overload in 401k Plans,” (, June 4, 2013) and “How Plan Sponsors Can Restructure a 401k Investment Menu to Increase Participation,” (, June 5, 2013).

Compliance – If not Healthcare, why not Retirement?:
If they’re good enough to cure what ails you, then, heck, why not let ‘em sit on your nest egg until it’s ready to hatch. Look how well the government is doing this for its own workers. Wait, that’s you footing the bill. For their mistakes. Well, then, who’s going to foot the bill when they make mistakes with your money?
New competitor in the retirement plan market: state government,” (BenefitsPro, June 6, 2013) This is so silly we’re almost embarrassed to ask these two very obvious questions: 1) Since states seemed to have done such a great job bankrupting themselves managing (or, more appropriately, failing to manage) their own employees retirement assets, why would anyone trust them to manage private retirement accounts? For that matter, what regulator would approve them as an adviser given their poor track record? 2) And speaking of regulators, if the government manages private retirement accounts, who will regulate the regulators? After the IRS fiasco, we’re thinking most people want smaller, less powerful, less intrusive government. This proposal seems to be swimming upstream.

Fiduciary – So Talked the Talking Heads…:
The more they talk, the more one starts to worry what the eventual action will bring. Look at us! We’re still confident there will be some action! Hopeful? Or just naïve?
Bullard’s Blistering Critique of House Fiduciary Plan Offers Way Forward,” (AdvisorOne, June 4, 2013) Well, it might have been blistering but it was way too theoretical. There are much more practical ways to define those who wish sabotage the right to find fiduciary facilities.
DOL’s Borzi: Fiduciary Redraft Out a Couple of Months After July,” (AdvisorOne, June 4, 2013) No doubt Borzi received the latest newsletter asking readers to enter a free, friendly office pool guessing when the DOL and SEC will each come out with their new fiduciary rules. If you want to enter, you can go to our Survey Monkey survey and add your guess.
Don’t Flub Fiduciary Rule, Groups Urge SEC,” (AdvisorOne, June 5, 2013) Hmm, let’s see. One on hand, we have four non-profit associations fighting for the good of thousands and thousands of otherwise innocent investors representing thousands and thousands of potential votes to our elected legislators. On the other hand, we have industry lobbyists with the ability to wave millions and millions of PAC money in the face of those same legislators. Who do you think wins?
Groups Warn SEC Against Watered-Down Fiduciary Standard,” (On Wall Street, June 5, 2013) More coverage of the same story.
Historic Moment as Planner Groups Voice Clear Support for Fiduciary Standard,” (AdvisorOne, June 6, 2013) Yet another take on the same story.
Schwab’s Clark to SEC: Don’t Link Fiduciary and Harmonization,” (AdvisorOne, June 6, 2013) Interesting take on this, one that we haven’t seen before. All the talk about harmonization has focused on brokers being under the same regulatory regime as RIAs. This article suggests the real problem might be the other way around. What if harmonization means RIAs must adapt broker rules? Is that even a possibility? Is that even a correct way to view the regulatory environment? If brokers have more rigorous oversight, is it because they are not (theoretically) giving investment advice, but merely just selling securities? And, if this is the case, why would you treat advisers like salesmen when they’re not?

Fees – Oops.:
Face it. Disclosure doesn’t work. No matter how hard you huff, how hard you puff, how hard you try to blow the house down, the bricks of apathy are just too solid to budge. Some refuse to acknowledge the physical properties of basic construction materials. We call those people “Washington.”
Effects of Fee Disclosure on Participants,” (NAPA Net, June 6, 2013) If you still aren’t convinced this whole fee disclosure thing wasn’t a massive #FAIL, consider this: According to the study outlined in this article, more than half of 401k participants didn’t even bother looking at the fee disclosure, only about half of those that did (less than a quarter of the total 401k participant population) actually read the disclosure “carefully” and, finally, a mere 1% of the all 401k participants complained to their company about fees. Are fees really that better? What do you think?

Investments – A Funny Thing Happened on the Way to Allocating My Assets:
Investment sales professionals will always sell investments to people who view themselves as retirement investors. Not that there’s anything wrong with that. It’s just what they do. Fiduciary advisers design plans for the best interests of people who view themselves as retirement savers. Guess who’s more likely to like a more comfortable retirement?
The Intelligent Investor: How Funky Is Your 401k?” (Wall Street Journal, May 31, 2013) This is an excellent article and should be required reading for all 401k plan sponsors. Investment bubbles are a terrible thing to watch, impossible to predict with precise timing, but almost always foreseeable. This is an example of one.
The 100% Stock Solution,” (Wall Street Journal, June 1, 2013) Here’s something that makes sense, especially for younger folks. Find an asset class that outperforms all others over the long haul and invest just in that asset class. It works great until age requires you to begin transition from 100% stock to some stock/bond asset allocation. But, dear employee, take heart. There’s any number of professionals willing to help guide you through this transition in a way that takes your own personal situation into account. (Hint: One size does NOT fit all.)
Hurdles Still Too High for ETFs in 401k plans,” (Financial Planning, June 5, 2013) This is really more about the recordkeeping issues and stems from the late 1980’s when recordkeepers convinced plan sponsors to move from individually managed portfolio options to mutual funds. Using mutual funds, which feature just one price that comes at the end of the trading day, makes it easier to handle the recordkeeping. Securities whose price changes every day, like stocks, bonds and ETFs, require unitized accounting. This was a pain in the neck for recordkeepers in the 1980s and, apparently, remains so.
Behavioral finance techniques really work in 401k Plans,” (LifeHealthPro, June 6, 2013) This really isn’t about investments, but that’s the point. This is about what to do instead of worrying about investments. This is about designing a 401k plan that actually improves the chances of people retiring with the money they need. You see, that’s what 401k plans are really all about. They’re not at all about investments. But a good fiduciary already knows 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.
Services to Help You Tap Your 401k,” (Wall Street Journal, June 1, 2013)
Scorecard sees 401k participation improving,” (Employee Benefit News, June 3, 2013)
401k restructuring a boon to participants,” (Pensions & Investments, June 3, 2013)
DOL Okays Process for Abandoned Plans,” (, June 3, 2013)
‘Phased retirement’ adds to allure of federal jobs,” (BenefitsPro, June 5, 2013)
Survey Reveals Worries About Retirement,” (, June 5, 2013)
To retire securely, save like an Aussie,” (MarketWatch, June 6, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: David Swensen is a Popular Source of Inspiration |
The Chicago Financial Planner: Winning The Retirement Gamble: Step 2 Where Do I Stand? |
ERISA Lawyer Blog: Second Circuit Rules That Plaintiffs Need Not Exhaust Administrative Remedies To Seek Declaration Of Their Rights To Benefits Under ERISA |
Squared Away Blog: Nobel Winners Are Unsure Investors |
The Chicago Financial Planner: Pens, Trinkets, and Mutual Funds | “Drawing” Board? |

Hot Tips from Popular Web Resources:
NAPA Net: Is it Time to Reevaluate Participant Self-Direction? |
NAPA Net: FAQs on 401k plans from ICI |
NAPA Net: (Un) Realistic Expectations |
NAPA Net: Academics Propose Safe Haven Incubator to Spur 401k Innovation |
NAPA Net: Managed 401k Accounts See Surge in Assets |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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