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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/26/13

July 29
00:03 2013

1020805_25983300_Trending_Topics_2013.07.29_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 Tamar Frankel: DOL Should Return to ERISA’s Original Definition of Fiduciary,” (, July 23, 2013). The DOL changed the original ERISA definition of Fiduciary to exempt marginal players. Those players are no longer marginal.

Compliance – The Fram Man Cometh:
It’s amazing how much truth exists in classic television commercials. Alka Seltzer’s “I can’t believe I ate the whole thing” remains a fitting mantra for the now obese “Pepsi Generation.” But the most relevant one comes from the Fram oil filter salesman. If you don’t remember that one, read on.
Don’t Tell Detroit ‘I Told You So’,” (ThinkAdvisor, July 19, 2013) If you want to see why Detroit (and other Blue State bastions) got the way it did, read this apology (and I’m talking in the Greek sense). The author places politics over economics, admonishing fiscal conservative to “cool it” because they (says the author) are in the political minority. If this isn’t what psychologists call “enabling,” we don’t know what is. The author event admits the unions traded economically impossible promises for votes, yet he wishes to give them a pass? It’s time to learn actions have consequences. All those sweet deals came at a price. And today is the tomorrow you never thought would come yesterday. Now the price must be paid. And it won’t be sweet.
Teamsters pension plan stuck in crisis,” (BenefitsPro, July 22, 2013) Just goes to show that pension problems are not limited to government pensions. The Teamsters liabilities are more than double their assets. And they can’t tax with unlimited ferocity. We think.
Judge Orders Detroit’s Bankruptcy Be Withdrawn,” (, July 22, 2013) Whoa! Talk about conflict-of-interest! Can a government employee – in this case a judge – rule on a case where there may be a vested interest – in this case keeping Michigan public employee pensions from suffering the way normal pension plans suffer during a bankruptcy? And by normal, we don’t mean the autoworkers at GM and Chrysler.
Honor vs. obligation,” (BenefitsPro, July 22, 2013) The author asks an intriguing question: Who’s rights prevail: the public employees’ retirement plan or the bondholders? Usually, bondholders would prevail over equity holders and secured bond holders would prevail over unsecured bond holders (again, skip the auto bailout on this). This bodes ill for the public employee unions and their pensions. But the law of bankruptcy is untested in municipal matters. More interesting, what if you looked at it this way: Whose rights prevail? The retirees who depend on public employee pension plans or the retirees who bought the bonds that supported the public employee pension plans? Either way, this is what a Ponzi Scheme gets you.
Pension deficits get renewed scrutiny after Detroit bankruptcy,” (Employee Benefit News, July 25, 2013) Look, folks, we don’t have a choice. It’s either “pay me now or pay me later,” but either way, someone’s gonna have to pay. If only there was a way to get payment from those who benefited from this SNAFU the most…

Fiduciary – WWSBD?:
As in “What would Sponge Bob do?” We’re imagining the faux-Jacques Cousteau voice saying “three years later.” Of course, this only begs the question: What comes first? The SEC’s fiduciary standard “no less stringent” than that imposed on Registered Investment Advisers or a Krusty Krab Pizza?
Dodd-Frank, where are you?” (InvestmentNews, July 21, 2013) An interesting story idea that ends up quite vapid. Only for those who haven’t been paying attention for the last three years. Then again, maybe not even those people.
SEC Fiduciary Rule Unlikely in Dodd-Frank’s Third Year of Life,” (ThinkAdvisor, July 22, 2013) This one’s much better, with quotes from the usual suspects. It’s a good read for all.
8 things to know about fiduciary liability,” (BenefitsPro, July 22, 2013) This is a good primer for brokers who expect to be operating under the fiduciary rules of registered investment advisers and a good review for registered investment advisers already operating under those same fiduciary rules.

Fees – On the Importance of Being Disclosed:
We give up. It just doesn’t matter. Maybe things have gotten so bed, they don’t care, either. Maybe their trust in the financial industry is so strained; they expect to get ripped off. Whose fault is that? The financial industry.
Plan Sponsors Can Reset Disclosure Date,” (, July 22, 2013) This has to do with the required fee and performance comparison chart. Plan sponsors can delay it into 2014 if they want, provided certain provisions are met. The real question is, as with all other fee disclosures – does it really matter?
Improve Your Plan Or Else,” (, July 22, 2013) More fallout from the infamous “Yale” letter. Fred Reish calls it a “teachable moment,” but who’s the teacher and what are we learning?
High Fees, Poor Choices Vex 401k Participants, Study Says,” (Financial Advisor, July 24, 2013) Here’s the dope on the so-called “Yale” study (in fact, there were two authors, only one of which works at Yale). The article is sparse and doesn’t mention the controversy behind the study. It even cites BrightScope as a source of the data, something BrightScope has denied. Kinda makes you wonder what’s really going on.
‘Orphans’ cost plan sponsors billions,” (BenefitsPro, July 24, 2013) Not only is this a question regarding the costs incurred by the plan sponsor and the remaining employees, but there’s also the generally higher cost ex-employees pay by remaining in the 401k plan.
It’s time to reboot 408(b)(2),” (BenefitsPro, July 25, 2013) Some say it’s already been done with the recent OMB filing of the DOL.
DOL changes timing of required employer 401k and 403(b) disclosures,” (Employee Benefit Adviser, July 26, 2013) A year’s reprieve for those not yet with the program.
401k fee alerts go largely unnoticed,” (MarketWatch, July 26, 2013) According to EBRI, investors have barely reacted to fee disclosures. We guess this means it doesn’t matter if the DOL delays the timing, then.

Investments – There are no investment ideas, investment philosophies or investment disciplines…:
There are only investment products. And you’re wondering what the investing public doesn’t trust in the financial industry?
Self-Directed Brokerage Accounts in Retirement Plans: Generally a Bad Idea,” (Employee Benefit Adviser, July 24, 2013) For a menu option that, at least according to the article, impacts only 1% of retirement investors, it sure gets more than its share of press coverage. Unfortunately for this option, most of it, like this article, is negative.
Beware of High Yielding Annuities,” (, July 25, 2013) Not that that stopped anyone from chasing yield in such luminaries as Madoff, etc… Face it. People are greedy. That’s how they taken advantage of. This is a great article that should be required reading. If only we can then require understanding.
Income Replacement Needs New Thinking for Retirees,” (Employee Benefit Adviser, July 26, 2013) This is an annuity promotional piece in the guise of an article. Oh, well, at least it also exposes the folly of target date funds.

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.
Retirement across America: Lessons learned,” (Employee Benefit News, July 19, 2013)
Claim that 401k Plans Beat Defined Benefit Plans Stirs Controversy,” (Institutional Investor, July 22, 2013)
GAO: Retirement outlook grim for small-business workers,” (BenefitsPro, July 23, 2013)
Appeals Court Holds Post-Nup Doesn’t Waive Spousal Rights To 401k,” (On Wall Street, July 24, 2013)
DOL Resolves Case of Illegal Pension Transactions,” (, July 24, 2013)
Roth 401k Plans Catch on With Young, Less Wealthy,” (On Wall Street, July 24, 2013)
More Small Businesses Offering Retirement Plans,” (, July 24, 2013)
Retirement Plan Investigated for Alleged ERISA Violations,” (, July 25, 2013)
This isn’t the worst time to be a retiree (not even close),” (Buffalo Business First, July 26, 2013)

Wisdom from Some of Our Favorite Blogs:
The Trust Advisor: Why Worrying About Detroit is a Waste of Time |
Boston ERISA Law Blog: The Lessons of Detroit for Private Sector Retirement Plans |
fi360: Fiduciary Links: A proposal for a new way to identify |
Proskauer’s ERISA Practice Center Blog: Department of Labor Provides Relief From Required Annual Fee Disclosure |
ERISA Lawyer Blog: Employee Benefits-IRS Provides Guidance On Contribution Limit |
Fred Reish: Mass Mailing to Plan Sponsors About Excess Fund Fees |
Fred Reish: DOL Proposed Regulation Sent to OMB |
The Trust Advisor: 6 Signs Your Financial Planner is Bad |
ERISA Lawyer Blog: EBSA Extends Time For Furnishing The Comparative Charts Required By Disclosure Rules. |
fi360: The Value in Participant Education  |
Pension Risk Matters: 401k Fee Letter to Trustees |
ERISA Lawyer Blog: DOL Provides Guidance On Whether Revenue Sharing Payments Are “Plan Assets” | Foregone “Conclusions” |
The Trust Advisor: What to Consider Before Partnering with a §3(38) Investment Fiduciary |

Hot Tips from Popular Web Resources:
NAPA Net: FINRA Weighs in on IRA Fee Disclosure |
NAPA Net: State Retirement Coverage Dwarfs Private Industry |
NAPA Net: Shift Away from Traditional Pensions Creates Unintended Consequences |
NAPA Net: Congressional Update: Multiple Employer Plans, New DOL Secretary |
NAPA Net: Yale Responds |
NAPA Net: Legal Precedents Still Challenge Fiduciary Standard |
NAPA Net: Judge Blocks Challenges to Detroit’s Bankruptcy |
NAPA Net: The Five Big Lies of Retirement Planning |
NAPA Net: Learning to Live With 404a-5 Participant Fee Disclosures |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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