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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/27/13

September 30
00:17 2013

1020805_25983300_Trending_Topics_2013.09.30_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:
Exclusive Interview with Phyllis C. Borzi: Why Plan Sponsors Shouldn’t Treat Their 401k Plans Like Cheap T-Shirts,” (FiduciaryNews.com, September 24, 2013). Borzi: “…the average person would prefer to work with people who are legally required to provide unbiased investment advice and put the client’s interests first.”

Compliance – 401K is the Worst Retirement Plan Ever…:
…except for all the others. Studies have shown a greater percentage of workers are “retirement ready” today, during the Age of the 401k, versus thirty years ago during the Age of the Pension.
DOL Announces More Enforcements,” (PLANSPONSOR.com, September 23, 2013) Don’t let the small dollars fool you. These cases may be instructive as to where compliance issues may be most sensitive.
How Public Pensions Invested Assets,” (PLANSPONSOR.com, September 23, 2013) The article announces the good news that public pensions finally surpassed their pre-recession highs in the second quarter. What the article doesn’t tell you is that, despite greater contribution rates by governments as opposed to corporations, corporate retirement plans surpassed their 2007 highs sometime in 2011-2012. And some individually managed IRAs beat their 2007 highs as early as mid-2010.
America’s 401k revolution was a failure,” (Salon.com, September 24, 2013) According to Sun Tzu’s Art of War, the best way to defeat the enemy is to walk in his shoes. Try this article on for size and take a good long walk. People actually believe this stuff. People you may be talking to.
Public Pensions Need Sound Funding Policies,” (PLANSPONSOR.com, September 24, 2013) If you think the 401k is a failure, take a look at the boondoggle known as public pensions. This article discusses and independent study that highlights two of the biggest problems.
Market Deals a Blow to City and County Retirement Systems,” (PLANSPONSOR.com, September 24, 2013) Yet more bad news for public pensions, this time at the hands of the market.
Orr proposes freezing Detroit’s two pension funds, moving employees to 401k-style plan,” (Detroit Free Press, September 26, 2013) | This is it, folks. This could be the watershed event when we admit pension plans are Ponzi schemes. Let’s see how this one will turn out. The unions will not go quietly.

Fiduciary – Be Prepared…:
…Be very prepared. Roles are changing within plan sponsors; thus exposing more folks to fiduciary liabilities. In addition, many service providers may be taking actions which expose themselves to fiduciary liabilities.
Protecting Fiduciaries and Optimizing Committee Performance,” (PLANSPONSOR.com, September 20, 2013) It’s important to consider the changing fiduciary roles as 401k committees take on new roles.
Service Provider Assessing a Fee Was a Fiduciary,” (PLANSPONSOR.com, September 27, 2013) This could be a harbinger to the DOL broadening the definition of fiduciary.

Fees – Wear it for Life?…:
… Or wear it for the weekend? The answer to that question makes a difference. It’ll determine whether fees are of primary importance or of secondary importance.
Fees, 401k plans and cheap T-shirts,” (BenefitsPro, September 26, 2013) On Phyllis Borzi’s common sense metaphor as to why fees are not the be-all and end-all for 401k plans.

Investments – Sometimes a Cigar…:
…is just a cigar. Meanwhile, in financial services land (which includes the industry as well as academics), the owners of the smartest heads keep pounding them against the wall as they wonder why people don’t make purchase decisions consistent with their computer models. Is there a chance they might be missing a variable or two from their equations?
Does your target-date fund have a secret flaw?” (MarketWatch, September 21, 2013) Robert Powell talks to Ron Surz about the evils of target date funds. Look, this has become pretty standard fare for some time now. Still, Target-Date Funds have increased their market share of 401k assets. Why the disconnect?
Study Supports Increasing Equities During Retirement,” (PLANSPONSOR.com, September 23, 2013) Uh, oh. What’s this? Yet another study implying the traditional approach applied by target date funds is wrong. Can these popular retirement investment options ever catch a break? Or are they destined to be the Edsel of the financial industry. No. Wait. The Edsel was actually a good car that never sold. Maybe TDFs are the Yugos of the financial industry.
The Logic Behind Annuities,” (Financial Planning, September 24, 2013) Here’s another attempt to convince you annuities are cool. Well, they aren’t exactly hot, that’s for sure.
Workers sticking to target date funds,” (Pittsburgh Post-Gazette, September 25, 2013) Like so many lemming making that “one-and-done” choice, this articles reiterates the preeminence of sizzle vs. steak. Alas, just like in any argumentum ad populum, the fallacy of following rings true here, too. Or, in the words of your mother, “if everyone else jumped in the lake, would you jump too?” For too many Americans, the answer is “yes.”
Active vs. Passive Investing: Which Wins?” (On Wall Street, September, 25 2013) If you believe that either one “wins” consistently, then we’ve got a bridge in Brooklyn you might be interested in buying. This is a terrible article (although we admit the headline is seductive). The source has an obvious stake in the game and the time period is only for the last twelve months. What is it about humans that keeps article like this popping up with regular frequency?
Actuaries Encourage Offering Retirement Income Solutions,” (PLANSPONSOR.com, September 26, 2013) Academic researchers, bean counters and finance professors all agree people should use annuities. You’ve got to wonder if they might be missing something in their equations since people’s actions show they don’t agree people should buy annuities.

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.
Cleaning Up Loose Ends for 403b Plans,” (PLANSPONSOR.com, September 23, 2103)
Tips to Ensure Your Retirement Income,” (USNews.com, September 23, 2013)
Gen X Most Concerned About Adequate Retirement Savings,” (PLANSPONSOR.com, September 23, 2013)
How Gen X Learned to Start Worrying and Love Retirement Planning,” (ThinkAdvisor, September 23, 2013)
5 ‘Yes’s’ for Your 401k,” (USNews.com, September 24, 2013)
5 Years On, Americans See Wall St. as ‘Foreign … a Culture Apart’,” (ThinkAdvisor, September 24, 2013)
Welcome to the 401k Selling Season,” (Employee Benefit Adviser, September 25, 2013)
Americans Lag Globally in Retirement Readiness,” (Financial Planning, September 25, 2013)
Retirement Income: Are Financial Advisors in Trouble?” (Financial Planning, September 26, 2013)
Are unmatched 401k contributions a good idea?” (Employee Benefit Adviser, September 26, 2013)
Social Media Used By 71% Of Retirement Plan Participants, Survey Says,” (Financial Advisor, September 26, 2013)
After retiring, high earners may feel poor,” (MarketWatch, September 26, 2013)
Rolling a 401k account into an IRA is a bad idea,” (Employee Benefit News, September 27, 2013)
Next Five Years Could See Many Retiring,” (PLANSPONSOR.com, September 26, 2013)
Participants Learning More About Retirement Via Social Media,” (PLANSPONSOR.com, September 26, 2013)
Largest Generation Lagging in Retirement Readiness,” (PLANSPONSOR.com, September 27, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: As Reg D Advertising Begins, FINRA Cautions Investors |
The Trusted Advisor: How to Dismantle a Trust |
Retirement Reform Policy: Retirement and Dependency (In Reverse) |
Retirement Plan Blog: “Reasonable Compensation”: A Matter of Perspective Between S Corporation Shareholders and the Internal Revenue Service |
ICI: A ‘Modest’ Proposal That Isn’t: Limiting the Up-front Benefits of Retirement Contributions |
The Trust Advisor Blog: Ready for Your Sneak Peek at the Future of Estate Planning? |
Boston ERISA Law Blog: Imposing Discipline on Promises of Public Pensions |
Squared Away Blog: Nearly Retired, Lugging a Mortgage |
Boston ERISA Law Blog: Public Pensions, Overpromising, and Municipal Discipline: the Lessons of San Jose |
The Trust Advisor Blog: Save Money, Scale & Gain Efficiencies: Outsource Portfolio Back Office Functions |
fi360: The Prudent Practices Update: Revisiting the Spotlight on the Practices Series |
Squared Away Blog: Social Security Claiming and Psychology |
Boston ERISA Law Blog: Thoughts on Rolling Stone, Matt Taibbi and “Looting the Pension Funds” |
The Trust Advisor Blog: High-Net-Worth Retirees Need Broader Portfolios: Think Outside the Stocks |
The Chicago Financial Planner: Avoid These 6 Serious Estate Planning Mistakes |

Hot Tips from Popular Web Resources:
ICI: Retirement Plan Contributions Are Tax-Deferred—Not Tax-Free |
NAPA Net: 408(b)(2) Disclosures May Have Been Sent to Wrong Person |
NAPA Net: Excessive Fee Case Granted Class Action Status |
NAPA Net: Should a DC Plan Have Two Committees? |
NAPA Net: Borzi Weighs in on Fiduciary Rule, MEPs and Fee Disclosure |
NAPA Net: A ‘Win-Win-Win’ for Retirement |
NAPA Net: What are the Top ETFs in 401k Plans? |
NAPA Net: Detroit Spent Billions on Undisclosed Excess Payments |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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