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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/19/13

July 22
00:05 2013

1020805_25983300_Trending_Topics_2013.07.22_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:
401k Fee Disclosure One Year Later: What We’ve Learned,” (, July 9, 2013). The DOL’s new 401k Fee Disclosure Rule, while its effectiveness might be suspect, has empowered plan sponsors.

Compliance – Fixing What Ain’t Broke:
Government does few things right (and nothing perfect). Along those lines, sure, our personal retirement savings incentives of IRA and 401k plans could use a little tweaking, but they’ve been a success in that many many people have saved enough to retire (yes, albeit with the need for the regularity of Social Security payments). Precious few government programs have helped so many people at so little cost (and possibly, at a profit to the government). While some complain it doesn’t help everyone, perhaps the solution isn’t government, perhaps the solution is within those people themselves.
‘Blank Slate’ seen as threat to retirement saving,” (BenefitsPro, July 18, 2013) Hear that? It’s the sound of footprints creeping up behind you. No need to fear, though. It’s merely your friendly neighborhood government seeking to steal away your retirement plan. We’re noticing a trend here. Why do these “bispartisan”  efforts always include what the pundits affectionately call “RINOs”? When comes to taxes and retirement savings, you never see one of them there Tea Party types attempting a “government is the solution” sort of thing. Makes you wonder…

Fiduciary – A Sea Change?:
Or just a tease? Something in our gut is telling us all the dollars spent by industry lobbyists won’t result in giving them what they want. They might still get a little – and that still scares us – but the worst case will be a public relations nightmare for the industry, its regulators and an administration already cruising at lame duck altitude.
Fiduciary ball squarely in commission’s court,” (InvestmentNews, July 14, 2013) This is a good overview of all the possibilities, albeit with no real handicapping.
Turning to outside fiduciaries for relief,” (BenefitsPro, July 15, 2013) All about 3(16), 3(21) and 3(38). If you don’t know what these mean, read the article. If you do know what they mean, the article is still a good overview.
Squeezing the Most Out of 401k Plans, for Now,” (New York Times, July 15, 2013) You might notice two things about this article. First, “What’s it doing in the fiduciary category?” Second, “Did we really just write something complimentary about a New York Times story?” Regarding the second item, we’re complimenting the author, Carl Richards. Though we accept the way things are, we always thought he was much better than the Times. This article is a great example why. He takes the usual Times angle and twists it back on the individual retirement investor. That’s sacrilege at the normally collectivist Gray Lady, but Richards emphasis on personal responsibility is pure genius – and the ultimate in fiduciary reasoning. After all, if you’re not a fiduciary from the point of view of yourself, then that’s the ultimate fail. (See our commentary heading up the Compliance section of this piece.)
Fiduciary rules will be re-proposed in October,” (BenefitsPro, July 15, 2013) The headline says it all.
DOL Fiduciary Redraft Has ‘Left the Station’,” (ThinkAdvisor, July 18, 2013) There’s a new sheriff (i.e., Secretary) in town at the DOL – Thomas Perez – and he says all systems are go for the new fiduciary rule.
FINRA Tells BDs to Stop Pitching ‘Free’ IRAs,” (ThinkAdvisor, July 19, 2013) Wait?! You mean to say FINRA has previously allowed this practice. Way to go FINRA. Actually, go, FINRA. No, we mean it. Just go.

Fees – Remember Them?:
Just as predicted, the one year anniversary of 408(b)(2) has spawned a fair share of summary articles from the usual media outlets (yes, you can add to that list). Of course, the real news is the letter allegedly penned by a Yale Law School professor. We asked him for a quote, but he’s apparently not speaking to the press at this time.
Key Points to Remember on Fund Fees,” (Investment Company Institute, July 12, 2013) The key takeaway here is that 401k investors generally pay less than retail investors. That’s assuming plan sponsors are paying attention, and not paying non-fiduciaries for “advice.”
A Year On, Impact of 401k Fee Rules is Mixed,” (, July 16, 2013) As they say, great minds think alike (see above lead story).
Fee Disclosures Had Negligible Effect on Participants,” (, July 17, 2013) Unlike this week’s lead story in, which interviewed service providers, this story focuses on – you guessed it – plan sponsors. An amazing 80% say the fee disclosure rules had no impact.
Letter to 6,000 401k sponsors has advisers doing damage control,” (, July 18, 2013) If the other reports are true, it might be the authors of this letter that might be doing damage control.

Investments – What the Other Hand is Doing:
Is it a wonder investment folks aren’t magicians on the weekends? And we’re not talking about professionals, we’re talking about certain big name plan sponsors, too. It’s like they all know how to paint the rosiest picture with the barest set of facts. And you know what’s worse? People buy it – hook line and sinker. And by people, we mean regular people, the mass media and even industry professionals. Come on, now. Do you believe the guy at the cocktail party who constantly bragging about his investments? Do you believe it’s all been win, win, win with him and never a loser? Well, just because someone has a fancy title and gets paid lots of money doesn’t mean they’re not just another cocktail party braggart.
Largest Pension Funds Announce Double Digit Gains,” (, July 16, 2013) Here’s the thing, and we don’t mean to pick on CalPERS, the pension fund featured in this article, but relying on alternative investments to get nearly the same return as the average retail value-based mutual fund is not something to brag about. For the amount of implied additional risk one assumes by investing globally, in real estate or any one of a number of myriad “alternative” investments, one would expect the return to me much higher. Modern Portfolio Theory may have flubbed up in other areas, but the correlation between risk and return is one of its shining truisms.

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.
Which are better, 401k plans or pensions?” (MarketWatch, July 12, 2013)
Designing 401k plans that really work,” (InvestmentNews, July 14, 2013)
Retirement Readiness: What Exactly Does That Mean?” (Employee Benefit Adviser, July 15, 2013)
KKR-Owned First Data to Suspend 401k Contributions,” (Wall Street Journal, July 15, 2013)
Newer Participants More Likely to Use Roth,” (, July 15, 2013)
Clients With An Advisor More Focused On Retirement Savings, Survey Says,” (Financial Planning, July 16, 2013)
Most U.S. Workers Not on Road to Retirement Readiness,” (Employee Benefit Adviser, July 16, 2013)
7 Things Clients Must Know to Stay Solvent in Retirement: Evensky,” (ThinkAdvisor, July 17, 2013)
Plan Sponsors Can’t Get No Satisfaction,” (Employee Benefit Adviser, July 17, 2013)
DOL: Will Your 401k Last You For Life?” (Forbes, July 18, 2013)
Retirement industry pushes back,” (BenefitsPro, July 18, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: The Winner of the Latest Fiduciary Debate is….the Moderator  |
The Chicago Financial Planner: A Bucket Approach to Retirement |
Proskauer’s ERISA Practice Center Blog: Top 10 Summary Plan Description Issues Not Addressed in the ERISA Regulations |
ERISA Lawyer Blog: Second Circuit Rules That Plaintiffs’ Claims of Breaches Of ERISA Fiduciary Duties Of Prudence And Loyalty Were Properly Dismissed |
Boston ERISA Law Blog: The Lessons of First Data Corp’s Suspension of 401k Contributions |
The Chicago Financial Planner: 5 Things You Should Know About ETFs |
The Chicago Financial Planner: 7 Major Benefits of Financial Independence |

Hot Tips from Popular Web Resources:
NAPA Net: Love Letters from Yale |
NAPA Net: Philadelphia Region of the EBSA to Focus on Fees in 401k Plan Audits |
NAPA Net: Happy 1st Birthday, Fee Disclosure Rules! |
NAPA Net: Can Employers Outsource Administrative Fiduciary Responsibility? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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