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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/16/13

August 19
00:02 2013

1020805_25983300_Trending_Topics_2013.08.19_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:
Should 401k Plan Sponsors Ban Risk Tolerance Questionnaires?” (, August 13, 2013). Exposed as misleading as early as 1999, should 401k plan sponsors continue to risk increasing their fiduciary liability by condoning their use?

Compliance – Those Who Fail to Learn From History…:
Are we doomed to repeat the damaging impact of Social Security? It appears California, which apparently lives in a different universe in which the basic laws of mathematics and economics does not apply, want to go down that road again. It’s not enough they can’t fund their own employees’ pensions. Now they want to put private employee retirement money in the same risk pool. In the words of Peter, Paul and Mary, “when will they ever learn?”
Review & Outlook: The Blue State Reckoning,” (Wall Street Journal, August 9, 2013) Here’s a nice metaphor: The seemingly never-ending cycle between elected officials using taxpayer money to pay public employee unions who then use the money to re-elect those same politicians is like a spinning wheel. Sooner or later it will stop and leave the taxpayers to pay the bill. Sure sounds like a form of a Ponzi Scheme.
Pensions Continue Lowering Assumptions,” (, August 14, 2013) Long-term return expectations have been reduced by 25 basis points, adding more pressure on already pressured pension plans to produce what they need to produce to satisfy the scheme inherent in the pension plan. Ah, pension plans. They’re sorta like the opposite of musical chairs. The last one left loses.
Are We Headed to Mandatory Retirement Savings Accounts?” (ThinkAdvisor, August 16, 2013) As we said before, how does this make sense? Let’s take a failed Ponzi Scheme (public employee pensions) and require private employees to participate. What about this just doesn’t just scream, “Stop the World! I want to get off!” The article makes it sound like the bill sponsors are proud to eliminate the “evil” financial industry from the equation. How does that make all the non-evil member of the financial industry feel?

Fiduciary – A Dead Horse:
How much more can we, or anyone else say. Either you’re in favor of putting the client’s interest first or your not.
Look Who’s Locking Horns Over Retirement Accounts,” (Wall Street Journal, August 9, 2013) Here’s that article that quotes the people you want to see quoted, if only to identify who’s to blame. We’ll tell you one thing, though, Phyllis Borzi pulls no punches. We like people willing to stand up to the political establishment.
Institutionalizing DC Plans Can Help Sponsors Participants,” (, August 16, 2013) A new study shows fiduciaries how to, well,… be better fiduciaries.

Fees – The Best Regulation Lobbyist Money Can Buy:
If we create regulations to expose certain, shall we say, “inefficient” practices, and the behavior doesn’t change, can we at least agree to call those regulations a failure? Just sayin’.
Fiduciary Fate of Millions of Retirement Accounts Soon to Be Decided,” (ThinkAdvisor, August 14, 2013) “Wait?!” you might be thinking. “Why isn’t this in the above category?” Don’t be fooled by the headline, but this is really a fee issue. It concerns the ING trial and the role of revenue sharing is at the crux of it. Yes, it overlaps with the fiduciary side of things (the trial may answer the question of whether a fiduciary can accept revenue sharing fees), be, without the fee question, there would be no trial.

Investments – A mess. Simply a mess:
The solution: make it messier. Then everyone will just assume the mess is the de facto standard. Target date funds aren’t working as advertised, so the sheen has worn off of that product. We can go down two roads: 1) Improve the product; or, 2) Ignore the problem and focus on another product whose problems have yet to be exposed. Guess which way the industry prefers to go.
Target-Date Funds Post ‘Respectable’ Results: Ibbotson,” (ThinkAdvisor, August 9, 2013) As the article implies, one man’s trash is another man’s, well, it’s still trash. It seems like they’re being undone by their bond fund holdings. Oops. It’s like anyone didn’t see that coming.
Target-date retirement ETFs miss the mark,” (MarketWatch, August 12, 2013) More truth behind the mess that is Target Date anything.
Annuities In Your 401k? What You Need to Know,” (, August 13, 2013)
Are 401k options more confusing than health insurance benefits?” (InvestmentNews, August 14, 2013) Ya think? That’s why we wrote this article: “Adding Categories: A Sample of a New and Improved 401k Investment Option Menu,” (, June 6, 2013).
The danger of risk tolerance questionnaires,” (BenefitsPro, August 15, 2013) Here’s the op-ed version of the lead story which contains an actual real-life demonstration of where this situation comes up.

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.
Lockheed Martin employees win class-action status in 401k suit,” (BenefitsPro, August 9, 2013)
Many plan sponsors unhappy with their advisors,” (BenefitsPro, August 9, 2013)
Failure to Communicate: Plan Sponsors Want Advisors to Share More,” (ThinkAdvisor, August 12, 2013)
Premature conclusions,” (BenefitsPro, August 12, 2013)
Court Reverses Ruling on Denial of Class Certification,” (PLANSPONSOR, August 12, 2013)
Why Small Businesses Don’t Offer Retirement Plans,” (US News and World Report, August 12, 2013)
Displaced Workers Tap Retirement Funds, Study Shows,” (Financial Advisor, August 12, 2013)
Is your 401k loan program state-of-the-art?” (Employee Benefit News, August 13, 2013)
Warning Clients On 401k Loans,” (Wall Street Journal, August 13, 2013)
Wealthiest Investors Less Likely to Plan for Retirement,” (ThinkAdvisor, August 14, 2013)
401k gender gap is even bigger than pay gap,” (MarketWatch, August 14, 2013)
401k savers are confused and stressed,” (MarketWatch, August 15, 2013)
Women save less for retirement,” (BenefitsPro, August 15, 2013)
In Debt? The Scary Cost of Tapping Your 401k,” (, August 15, 2013)
Early Retirement Forced on Some,” (, August 15, 2013)
Singles Rely More on Social Security than Marrieds,” (, August 16, 2013)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: Guest Post: Knut Rostad – The “Discussion” in D.C. on Fiduciary; Wall Street’s Surprising Admission |
Retirement Plan Blog: Managing the 401k Data Deluge and How to Avoid Problems |
fi360: Fiduciary Links: Plan sponsors taking a closer look at retirement readiness |
The Trust Advisor: Blurring the Fiduciary Standard |
The Chicago Financial Planner: 5 Essential Financial Planning Steps for Your 30s and 40s |
Proskauer’s ERISA Practice Center Blog: Georgia Federal Court Holds that Continuing Course of Conduct Did Not Extend Statute of Limitations Period for Fiduciary Breach Claim |
ERISA Lawyer Blog: Third Circuit Upholds Dismissal Of Plaintiff’s Case On The Grounds That The Defendant Did Not Engage In A Fiduciary Act |
fi360: SEC Crackdown on Advisers a Reminder of Best Execution Duties | The Long Haul |
The Chicago Financial Planner: Led Zeppelin and Your 401k |

Hot Tips from Popular Web Resources:
NAPA Net: The Ayres Saga Continues |
NAPA Net: Schlichter Wins Class Action Status in Stable Value Fund Case |
NAPA Net: ING is Ruled a Fiduciary in Class Action Suit |
NAPA Net: Fewer Plans Looking to Switch Advisors |
NAPA Net: How Advisors (and Record Keepers) Can Enhance Retirement Readiness |
NAPA Net: Are Risk Tolerance Questionnaires Too Risky? |
NAPA Net: Yale ‘Love Letters’ Highlight Flaws of 5500 Database |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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