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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/20/13

September 23
00:04 2013

1020805_25983300_Trending_Topics_2013.09.23_stock_xchng_royalty_free_300Welcome to FiduciaryNews.com 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:
How Investment Theory Explains 401k Plan Sponsors’ Evolving Fiduciary Duties,” (FiduciaryNews.com, September 17, 2013). A three-ring circus might get you excited but, face it, would you rather spend time trying to solve Rubik’s Cube or eating wedding cake?

Compliance – Does the Government Add Value – or Extract Value?:
There is something absolutely Byzantine about government – all government. And by “Byzantine” we mean medieval. Why is it that the private organization (well, the successful ones, at least) have adopted evolved models while governments still wallow in the organizational morass of feudalism? No wonder the average person has no trust in government.
Morningstar: State Pensions Complex, Lack Transparency,” (ThinkAdvisor, September 17, 2013) The article blames the fuzzy accounting that leaves too much unaccounted for. It doesn’t explain the real reason for it, but we all know what that is.
Now, how much would you pay?” (BenefitsPro, September 19, 2013) An excellent analysis that shows the “$9 billion savings” in capping retirement contributions as promoted in the White House’s budget proposal doesn’t stand up to mathematical scrutiny. The reason? As always, politicians use “static” scoring measuring (i.e., where the assumption is changes in government rules will not lead to changes in peoples’ behaviors) while the real world works with dynamic scoring (i.e., where people do, in fact, change their behavior in response to changes in government rules).

Fiduciary – Yes, Virginia, There is Such a Thing as “Fiduciary Duty”:
It doesn’t matter what lobbyists say or even convince the government to say about the definition of “fiduciary” and the “fiduciary standard.” There’s something so absolutely common sense about that no politician can ruin it.
Plaintiffs join lawsuit against Fidelity on profit-sharing plan,” (InvestmentNews, September 15, 2013) This is a classic conflict-of-interest case involving Fidelity having the power to select their own funds over competitor funds and actually selecting their own funds. In fact, of the 170 funds they selected, all of them were Fidelity funds. Coincidence?
All fiduciary support services are not the same,” (Employee Benefit Adviser, September 15, 2013) Need a refresher on the DOL’s mandated fiduciary duties of a plan sponsor? Want to know what you get for outsourcing to an adviser? This article sums it up neatly and concisely.
The Sleazy Side of 401k Plans,” (USNews.com, September 19, 2013) If you missed all the articles six months ago about the study that shows how conflicts-of-interest can cost plans, here’s another (albeit) late entry into the fray.

Fees – It’s Good, But It Needs to Be Better:
Some believe the new 401k Fee Disclosure Rule has led to honest bidding wars. Phyllis Borzi is smarter than that. She recognizes a sham when she sees one. And, right now, she sees one occurring to circumvent the intent of the new 401k Fee Disclosure Rule.
Borzi: DC providers need to do better job on fee disclosure,” (Pensions & Investments, September 12, 2013) Apparently, the DOL doesn’t like the idea of vendors giving plan sponsors a core dump of data and calling it disclosure.
Bidding wars in the 401k world,” (BenefitsPro, September 17, 2013) What makes this article interesting is that it focuses on recordkeeping and administrative fees. These are the commodity services of the 401k business (although quality is paramount, it needs to be assumed because, unlike picking investment options, failure is not an option when it comes to recordkeeping and administration).

Investments – Do They Matter:
Think about it. Investment, which have received 90% of the attention since the inception of 401k plans, might simply have been the tail that wags the dog. Yep. 401k plans are a lot more than investment options. It’s about time folks start admitting it.
Renewed debate arises over 401k performance,” (BenefitsPro, September 19, 2013) Following a similar trend in recent headlines, this article is really about retirement readiness, not investment performance. For fun, you might want to compare the beginning of this article with the beginning of this several weeks old article published in FiduciaryNews.com: Do Common Benchmarks Mislead the 401k Fiduciary? (August 27, 2013)
How did 401k plans get so hard?” (BenefitsPro, September 19, 2013) Interesting take on how the evolution of investment theory may have been responsible for low 401k participation rates – and may also be the salvation for increasing those very same rates.

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.
Workers Keep Pushing Back Expected Retirement Age,” (Employee Benefit Adviser, September 16, 2013)
Bogle’s retirement ‘disaster’ unlikely to occur,” (Employee Benefit News, September 17, 2013)
Investors Underestimating Retirement Income Needs,” (PLANSPONSOR, September 17, 2013)
5 ‘No’s’ for Your 401k,” (USNews.com, September 17, 2013)
Industries with the Best 401k Plans,” (PLANSPONSOR, September 17, 2013)
Fidelity faces class-action over its own plan,” (BenefitsPro, September 18, 2013)
The 4% Rule Doesn’t Line Up With New Reality,” (Financial Planning, September 19, 2013)
Why you shouldn’t contribute to your 401k,” (MarketWatch.com, September 19, 2013)
Encouragement to Retire Was Not Age Discrimination,” (PLANSPONSOR, September 17, 2013)
District court grants trial-by-jury to ERISA plaintiff,” (Employee Benefit News, September 20, 2013)
Must-Do’s During Open Enrollment,” (USNews.com, September 20, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: At 5-Year Mark of Lehman Bankruptcy, SEC Still Under Close Hill Scrutiny |
Boston ERISA Law Blog: CalPERS and Passive Investing: A Couple of Thoughts |
Fred Reish: Responsible Plan Fiduciaries and Disclosure Issues |
Chicago Financial Planner: Reverse Mortgages – The Basics |
The Trust Advisor: Personal Financial Management Face-To-Face With Wealth Management |
ERISA Lawyer Blog: Third Circuit Rules That Fidelity Did Not Violate ERISA By Charging A Fee For Reviewing Domestic Relations Orders |
ebri.org: Future Tense? |

Hot Tips from Popular Web Resources:
NAPA Net: Borzi on Disclosure, Lifetime Income Illustrations and Fiduciary Rule |
NAPA Net: EBRI’s Expected Retirement Age Continues to Rise |
NAPA Net: Beware the ‘Lehmann Effect’ on 5-Year Returns |
NAPA Net: Plan Advisors Storm Capitol Hill |
NAPA Net: Iwry Touts Auto-IRAs at NAPA DC Fly-in Forum |

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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