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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/2/13

August 05
00:03 2013

1020805_25983300_Trending_Topics_2013.08.05_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:
Compounding: The 401k Equivalent of Cruise Control,” (, July 30, 2013). Tax-deferred compounding is the retirement saver’s silent partner on the journey to retirement success.

Compliance – A Blaring Case of the Obvious:
Imagine a theory that can be mathematically proven with undying consistency. Imagine such a theory being used to commit a crime that is outlawed. Now imagine that same theory, under a different name, marketed and endorsed by the government as a viable solution to long-term retirement needs. Call it a Ponzi Scheme. Call it a pension plan. Either way, it’s a racket. Enter at your own risk.
ASPPA Asks DOL to Improve Form 5500,” (, July 31, 2013) Sounds like a perfect solution to the problem of hodge-podge fee disclosure – require uniform and consistent reporting on the 5500 form. Is there a better alternative?
The hunt for a pension crisis fix,” (BenefitsPro, July 31, 2013) This is a fairly comprehensive article outlining the various ways states have sought to thwart the pension crisis.
Company pensions in peril as shortfalls hit record,” (CNBC, July 31, 2013) This shouldn’t surprise anyone. This always happens in poor economies. It’s one of the reasons corporate retirement plan sponsors have shifted away from defined benefit to defined contribution plans. The latter are actually safer for retirees.
Public pension plan calculations under fire,” (BenefitsPro, August 1, 2013) Now they’re just piling on. In addition to all the corruption, scandal, etc… involving public pensions, now we questioning their accounting techniques. Why? Because does anyone really expect a 7-8% annualized return over the long haul in a balanced portfolio? Not when the GDP is barely getting along at around 1%.
Record Underfunding Found for S&P 500 Pensions,” (, August 2, 2013) Twelve straight years of return rates in pensions can’t help.

Fiduciary – Wake Up and Go To Sleep:
It’s too easy to say Ben Franklin was wrong, but we will. We don’t have a republic “if we can keep it.” We have the Three Stooges, and they keep on delivering the same frustrating hilarity exactly as those old black-and-white reruns do.
Yale Professor’s Fiduciary Threat Has Retirement Execs Fuming,” (ThinkAdvisor, July 29, 2013) Here’s the deal. The data is based on 2009 filings. There are thousands of 2011 and 2012 filings currently available. Why didn’t the researchers use more up-to-date data? Indeed, why rely any pre-2012 data in the first place? Once fee disclosure came out in 2012, didn’t all plan sponsors dump their high priced bundled service providers?
White says SEC is moving on fiduciary but other rules to come first,” (InvestmentNews, July 30, 2013) Apparently, some other rules have been waiting around longer than three years. Just kidding. But, hey, crowdfunding is the topic de jour and, well, we just can’t leave topic de jour’s sitting around all day. After all, the fiduciary standard is so passé…
SEC’s White Pushing to Finish Fiduciary Proposal ‘Quickly’,” (ThinkAdvisor, July 30, 2013) Same Congressional Hearing, same witness, different reporter, different take. It turns out, while White classifies other issues as “front burner” issues, she does have separate teams working on everything. Presumably, that includes the fiduciary standard.

Fees – Back to the Egg:
Why do supposedly smart people keep making the same mistakes?
What Should 401k Plans Cost? What Do They Cost?” (ThinkAdvisor, July 30, 2013) The usually spot-on Bob Clark pulls a Machiavelli in this article, reaching a correct conclusion albeit via a sordid road of questionable data. Read and judge for yourself.

Investments – Back to the Future:
“Man does not invest by risk tolerance alone,” is a step in the right direction. More importantly, the correct rule, which should be memorized by all elementary school math students, is “risk tolerance has nothing to do with reaching your investment goal.”
Risk Tolerance Questionnaire Failure,” (Financial Advisor, July 31, 2013) This was covered in years ago, so it’s good to see others in the industry catching up.
True Active Management Works,” (Employee Benefit Adviser, July 31, 2013) The author offers a rather intriguing idea. He suggests it’s the closet indexers posing as active managers that are the true reason why it appears passive outperforms active. In theory, and the author presents both anecdotal and academic evidence that this may work, if you remove those closet indexers from the “active” mutual fund rolls, you’ll find funds that will outperform their respective index benchmarks.

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.
Supercharging the 401k,” (BenefitsPro, July 29, 2013)
Jump seen in small businesses offering 401k plans,” (BenefitsPro, July 29, 2013)
3 Ways You Aren’t Making the Most of Your 401k,” (USNews, July 30, 2013)
Appeals court holds prenup doesn t waive spousal rights to 401k,” (Employee Benefit News, July 31, 2013)
Seven Reasons Plan Sponsors Need Retirement Plan Advisors,” (ThinkAdvisor, July 31, 2013)
401k advocate gets 17 years for stealing client cash,” (InvestmentNews, July 31, 2013)
Employees Continue to Save for Retirement,” (, July 31, 2013)
PreRetirees Expressing Retirement Confidence,” (, August 1, 2013)
401k Loans Drain Retirement Dollars,” (Financial Advisor, August, 1, 2013)
Loan Takers Save Less,” (, August 1, 2013)
PPACA could drive boomer retirement,” (BenefitsPro, August 1, 2013)
Fiduciaries Removed from Kentucky Pension Plans,” (, August 1, 2013)
John Hancock Cleared of Wrongdoing in Excessive Fee Case,” (, August 1, 2013)
Physicians Have Retirement Concerns,” (, August 2, 2013)
Surviving and Avoiding DOL Service Provider Investigations,” (, August 2, 2013)
Court Orders Ill Company to Restore Plan Assets,” (, August 2, 2013)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: SEC vs. Capital Gains Research Bureau Misconstrued: Much More Than Disclosure of a Conflict of Interest Is Required |
Boston ERISA Law Blog: Futility Is Not in the Eye of the Beholder, But Depends on the Facts |
The Chicago Financial Planner: Is My Pension Safe? |
fi360: Fiduciary Links: Survey Paints Unflattering Portrait of Financial Services Leadership |
The Trusted Advisor: More Investors Seek ‘Independent’ Advisers—But ‘Independent’ Has Multiple Meanings |
ERISA Lawyer Blog: Employee Benefits-IRS Provides Guidance On SEP Eligibility Requirements |
Pension Risk Matters: Pension Liability Price Tag For Private Equity Funds and Their Investors |
The Trusted Advisor: Fiduciary Standards For Advisors |
Proskauer’s ERISA Practice Center Blog: No Fiduciary Status For 401k Plan Service Provider |
Proskauer’s ERISA Practice Center Blog: Private Investment Funds May Be Liable For Portfolio Company’s Underfunded Pension Liabilities Under First Circuit Ruling |
Proskauer’s ERISA Practice Center Blog: Seventh Circuit: Insurance Companies Are Proper Defendants In Suits For ERISA Benefits |
The Chicago Financial Planner: Stock Market Highs, Bond Market Woes | “Upside” Potential |
ERISA Lawyer Blog: Eighth Circuit Upholds Ruling That Antenuptial Agreement Did Not Waive Former Spouse’s Rights To Death Benefits Under A 401k Plan |
Proskauer’s ERISA Practice Center Blog: First Post-Windsor ERISA Decision |
Proskauer’s ERISA Practice Center Blog: No Fiduciary Status For 401k Plan Service Provider |

Hot Tips from Popular Web Resources:
NAPA Net: The High Price of Fee Disclosure |
NAPA Net: ERISA Lawsuit Dismissed; John Hancock was not a Fiduciary |
NAPA Net: Case of the Week: Fiduciary Standard for Managers of State Retirement Plans |
NAPA Net: Deeper Dives on 404a-5 and 408b-2 Disclosures |
NAPA Net: DB Plans Outpaced DCs by 3% in 2011 |
NAPA Net: IRA Balances Surge |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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