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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/23/13

August 26
00:12 2013

1020805_25983300_Trending_Topics_2013.08.26_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:
Exclusive Interview with Fred Reish: 401k Plan Sponsors Who Fail to Properly Evaluate Fees ‘at Risk’,” (, August 20, 2013). “High” fees are not necessarily “bad” fees, and plan sponsors who don’t know why this is so may be in for some trouble.

Compliance – The Political Campaign Begins:
It’s a shame when good things get mixed up in politics. Alas, it looks like our favorite retirement plans are now squarely in the sights of those who think they know better than everyone else. It was fun while it lasted. That ‘70’s Show, here we come!
Is the 401k plan a fraud?” (Christian Science Monitor, August 17, 2013) Don’t let the title fool you. This article takes on the popular misconception that the 401k plan is a scam and expertly slices some of our favorite myths to shreds (including that old standby “high mutual fund expense ratios are bad.” If you’re a 401k fan – but don’t drink the Kool-Aid – you’ll love this article.
Obama Budget s Changes to IRA, 401k and Other Retirement Rules,” (Financial Planning, August 19, 2013) Well, well, well. It appears, in his sixth year on the job, the president has decided to do to retirement savings what he did to health insurance. Why does “Hi! I’m from the government and I’m here to help” keep ringing in our ears. How long until we start hearing “Don’t tread on me.”
Obama Meets With Financial Regulators on Dodd-Frank Progress,” (On Wall Street, August 20, 2013) More than three years after the partisan bill passed, the President picks this week to meet with key regulators to urge “quick” implementation. Does anyone else see a pattern here.
To Solve The U.S. Retirement Crisis, Look To Australia,” (Forbes, August 19, 2013) For those who don’t know, Australia has what Americans would call “privatized Social Security accounts.”
A better way to save for retirement?” (The Washington Post, August 20, 2013) Take a look at the publication. When’s the last time the mass media reported on the retirement system? Oh, yeah, during the infamous PBS Frontline debacle. This report features a position advocated by a “liberal think tank” with ties to the White House. They want to – surprise – replace the defined contribution model with the old pension model. What was that line about “doomed to repeat it” and failing to learn from history. Alas, some folks never learn.
How Underfunded Are Detroit’s Pension Plans?” (Financial Planning, August 22, 2013) Here’s what they apparently do learn. If you cook the books, you can make it appear everything isn’t as bad as it is. At least until an independent reviewer steps in an exposes the book cooking. This seems to have been the case with the Detroit pensions, albeit the book cooking is just subjective enough to not make it an outright crime. At least that’s what they’ll tell the pensioners who end up with less money than they thought.

Fiduciary – Can We Call a Spade a Spade?:
Or is that just too obvious? If it walks like a duck and talks like a duck, it must be a duck. Why can’t we apply the same common sense rule to investment advisers (and investment advisors)?
Bob Veres Goes Laissez-Faire in the Fiduciary Debate,” (ThinkAdvisor, August 21, 2013) Bob Clark goes off on Bob Veres going off on regulatory capture. It seems the Veres Bob wants to turn back the hands of time to the roaring twenties with the only regulation being “caveat emptor” (for those who shunned Latin, that means “Let the buyer beware”). In a less radical alternative, the Clark Bob repeats the mantra long supported by these pages: eliminate the broker exemption from the ‘40 Act and require anyone using the term “adviser” or “advisor” to register with the appropriate authority (and operate under the ’40 Act).

Fees – The Dreaded 3:00pm Call:
Unlike Presidents, who apparently fear the phone will ring at 3:00 in the morning, for HR types, the fear is the call that comes in late afternoon, just as things should be winding down. It’s the disgruntled employee call. Here’s why you have more to fear than you think.
The 401k fee freak-out call,” (BenefitsPro, August 22, 2013) Professionals laugh about these naïve complaints all the time, but do they realize these calls could be exposing the plan sponsor’s liability for failing to obtain proper fee disclosures?

Investments – Houston, We Have a Problem:
It’s not rocket science. It’s just, no matter how hard you try to prove otherwise, investments are the lowest priority in terms of what it takes for employees to become “retirement ready.”
Company Stock in 401ks Bad for the Bottom Line,” (, August 19, 2013) Old news.
Active management is gaining favor with some advisers,” (InvestmentNews, August 20, 2013) Again, old news, but only in the sense the active vs. passive debate is a non-stop wash-rinse-repeat cycle.
A Yale Professor Takes on the 401k Industry,” (Huffington Post, August 20, 2013) Despite the generally fee and fiduciary angle of this story that won’t end, this author decides to enter the tired and untrue world of “index funds are always better than active funds” that this faux study implies.
Resistance high to lifetime income illustrations,” (BenefitsPro, August 22, 2013) Aside from the “mandatory” part of the proposal – which nobody likes – the biggest problem is the DOL is insisting the calculation assume a 7% return. This, in a nutshell, is the problem with most retirement plan calculators (including this “lifetime income” illustration) – it requires you to assume a certain long-term return. This isn’t realistic. It’s never been realistic. And it never will be realistic. It’s one thing if individual companies foolishly use this tactic. It’s quite another if the government mandates it. Alas, we wouldn’t be surprised if they did. After all, they’re the one who gave us Target Date Funds.

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.
One Dip Into a 401k Often Leads to Another,” (New York Times, August 16, 2013)
6 solutions to the retirement crisis,” (BenefitsPro, August 16, 2013)
Pushing the retirement age to 70?” (BenefitsPro, August 19, 2013)
Investment Adviser Ordered to Restore Plan Losses,” (, August 16, 2013)
Communication Needs More Focus on Younger Employees,” (, August 19, 2013)
Most 401k participants have recovered since 2008,” (LifeHealthPro, August 19, 2013)
Participants taking command of retirement,” (Employee Benefit News, August 20, 2013)
3 Ways to Leave 401k Money On the Table,” (, August 20, 2013)
Americans Saving Less for Retirement This Year,” (, August 20, 2013)
10 attributes of a retirement-ready 401k plan,” (Employee Benefit News, August 21, 2013)
Labor: An ERISA plan for litigation (Part II),” (Inside Counsel, August 21, 2013)
Directionless?” (BenefitsPro, August 22, 2013)
More Older Americans Carrying Debt into Retirement,” (, August 22, 2013)
Retirement no buzz word for young, middle-aged investors,” (InvestmentNews, August 23, 2013)
Sponsors Should Ask Providers About Data Management,” (, August 23, 2013)
DOL Seeks New Fiduciary for Abandoned 401k Plan,” (, August 23, 2013)
DOL Seeks Restoration of NJ Plan Contributions,” (, August 23, 2013)

Wisdom from Some of Our Favorite Blogs:
Business of Benefits: Complications for 403(b) Plan Fiduciaries Under the TIAA Class Action: The Striking Impact of LaRue and the Cy Pres Notice |
ERISA Lawyer Blog: Sixth Circuit Affirms Dismissal Of Claim By Employer Seeking Declaratory and Injunctive Relief To Prevent Collection Of Withdrawal Liability |
fi360: Fiduciary Links: The Conflict Inherent to all Advisory Relationships |
ERISA Lawyer Blog: DOL Provides Guidance As To When A Plan Is Maintained Pursuant To Collectively Bargained Agreements  |
Squared Away Blog: What’s Your ‘Money Script’? |
ERISA Lawyer Blog: Reminder: Second SBCs Are Coming Due- There Are Changes And Instructions To Note |
The Chicago Financial Planner: Is a Variable Annuity Right for You? |
Squared Away Blog: More Carrying Debt into Retirement | “Lead” Times |
Employee Fiduciary: The Two-Headed Monster, Fairness and Safe Harbor Plans |

Hot Tips from Popular Web Resources:
NAPA Net: Profit Sharing Allocations Explained |
NAPA Net: Yale Law School Disavows Ayres’ Research |
NAPA Net: ‘Upside’ Potential |
NAPA Net: Active Management May Be on the Rise |
NAPA Net: Think Tank Proposes to Scrap Current Employer-based Retirement System  |
NAPA Net: Effective Plan Designs Start at the End |

Miss anything? Feel free to add a comment below.


About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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