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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/15/13

February 19
00:04 2013

1020805_25983300_Trending_Topics_2013.02.25_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:
Study: SEC Fiduciary Delay Costing Retirement Investors $1 Billion per Month,” (, February 12, 2013). Will the scandalous conclusions of this new research take the bloom off of the rose of the 401k plan? Or will the public finally demand regulators put a stop to self-dealing?

Compliance – You Audit Try This:
“Plan for the worst.” “Be prepared.” “Always expect the unexpected.” All these adages are meant to help people be ready for when the you-know-what eventually hits the fans (and it will, eventually). That’s the key to any successful compliance program. Now, if marketing would only listen…
Developing a Fiduciary File Cabinet,” (, February 14, 2013) Just like every car should have an emergency road kit, every ERISA plan should have a “DOL Audit Kit.” This article explains a bit on the particulars but focuses on meeting minutes. If you’re a plan sponsor, you’d best be advised to speak to your own ERISA attorney about this. Read the article first, though.

Fiduciary – “She’ll be Comin’ ‘round the Mountain…”:
“when she comes.” And she may very well be carrying a Uniform Fiduciary Standard with her, much to the chagrin of a certain group whose name will go unmentioned.
401k Plan Trustee Conflicts Alleged,” (, February 8, 2013) Yet another take on the University of Texas/Indiana University study that confirms what we knew all along. Catch up if you missed it last week.
Etrade commercial takes aim at fee-based advisers,” (InvestmentNews, February 10, 2013) Actually, the commercial takes aim at broker-sold funds, not at fee-based advisers, many of whom can use Etrade for their clients. The problem, as pointed out by the first commenter on this story, is that Etrade derives a substantial portion of its revenue from 12b-1 fees and revenue sharing. Oops!
What fiduciaries should be reminded of on Valentine’s Day,” (InvestmentNews, February 10, 2013) Lest you think this is only about unconditional love, think again. Author Knut Rostad does an excellent job showing the role of fiduciary duty going back to classical times. It’s about more than just a dozen roses.
Senator pushes SEC’s Walter on fiduciary rule,” (InvestmentNews, February 14, 2013) Lookie here, a Congressional type pushing the SEC to follow through on this Fiduciary Standard thing. You’d be happy if you’re a fiduciary advocate. Not so happy if you read to the end of the article. We’ll let you find out why.
SEC’s Walter: Fiduciary Rule Under ‘Serious Consideration’,” (AdvisorOne, February 14, 2013) The version of the story is a lot more comprehensive than that once above.
SEC to Move on Fiduciary Standard in Next Two Months,” (, February 15, 2013) Despite this news coming straight from the proverbial horse’s mouth, this article cites skeptics.

Fees – This Means You!:
There’s no escaping the clutches of the DOL’s Fee Disclosure Rule. That’s the bad news. The good news comes later down the list of this week’s Trending Topics (Hint: February 12, 2013;; Major Plan Sponsor Moves and News). And you thought nobody was paying attention. Surprise! Nobody was.
408(b)(2) fee disclosure – not just for retirement advisers,” (Employee Benefit Adviser, February 13, 2013) Here are the 8 most frightening words that appear in the article: “the DOL prepares for an upsurge in audits.” The piece outlines Marcia Wagner’s comments on the topic and includes a handy-dandy best practices list.

Investments – The Elixir de jour:
Actually, snake oil salesmen have been trying to peddle these two elixirs for more than just a day. It’s been years and we still haven’t seen either ETFs or annuities take hold in 401k plans. To paraphrase our good friend Roger Wohlner’s tweet in response to our originally post of them: “Are these solutions looking for a problem?”
ETFs and 401k Plans: The Romance Begins,” (AdvisorOne, February 12, 2013) You can pass on this article. The headline implies much more than the reality. Perhaps the editor was trying too hard to work in a Valentine’s Day angle. The article isn’t about 401k plans, it’s about a 401k product being offered by a well-known vendor. There’s nothing to indicate plan sponsors and recordkeepers will go for this. There remain several issues we have yet to reach a consensus on resolving the many logistical problems associated with ETFs (although there are some vendors who claim to have done this). Also, until ETFs – primarily index funds – can be measured in terms of their leverage in a way everyday investors can understand, plan sponsors will assume far greater fiduciary liability choosing an ETF versus choosing a brand name (i.e., low expense ratio) index fund.
Are annuities solution to old 4% retirement rule?” (BenefitsPro, February 13, 2013) Well, this assumes the veracity of the Texas Tech study that suggested historically low interest rates might cause a 57% fail rate for retirees using the 4% retirement rule. First, enough people are assuming a continued low interest rate environment to suggest – as contrarians would appreciate – it’s about time for interest rates to rise. Second, any economist will tell you interest rates won’t rise until the economy starts to overheat, and we’re a long way from getting out of cold let alone getting past lukewarm and into overheating. Finally, a low interest rate environment might be bullish on stocks, perhaps making them a less expensive alternative to annuities. Let the debate begin.

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.
More Firms Roll Out Roth 401k plans,” (Wall Street Journal, February 8, 2013)
Adviser to Detroit Pensions Guilty in Pay-to-Play Scheme,” (, February 11, 2013)
‘Automatic’ 401k Plans Growing in Acceptance,” (New York Times, February 11, 2013)
More Plan Sponsors Sticking With Providers,” (, February 12, 2013)
Rising 401k Balances Helping Retirements Recover,” (, February 12, 2013)
EBRI Shares Factors That Impact Retirement Readiness,” (, February 13, 2013)
IRA rollovers to hit historic highs as Boomers near retirement,” (BenefitsPro, February 13, 2013)
Married Boomers Better Retirement Savers, Study Says,” (Financial Advisor, February 13, 2013)
Less Than Half of Couples Share Retirement Vision,” (, February 13, 2013)
401k balances grew 12 percent last year,” (BenefitsPro, February 14, 2013)
Retirement balances of 401k faithfuls quadrupled in past decade,” (Reuters, February 14, 2013)
Your 401k: Good or Lousy?” (, February 14, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links |
The Chicago Financial Planner: The Ameriprise 401k Lawsuit – What Does it Mean to You? |
ERISA Lawyer Blog: Fourth Circuit Rules That Limitations Period For ERISA Breach Of Fiduciary Duty Case Starts To Run When The Defendants Selected the Investments in Question |
fi360 Blog: Fiduciary Hedge Clauses, Mary Jo White, and the Pending Rule |
The Chicago Financial Planner: Friday Finance Links – February 15, 2013 |
ERISA Lawyer Blog: DOL Provides Advice On Cleared Swap Transactions Conducted Pursuant To The Dodd-Frank Act |
Scholarly Financial Planner: Ron Answers the Question: Must IRAs Be Handled in a Fee-Based Account? |

Hot Tips from Popular Web Resources:
Social Science Research Network: Time Inconsistent Preferences and the Annuitization Decision |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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