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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/11/13

October 14
00:03 2013

1020805_25983300_Trending_Topics_2013.10.14_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:
Industry Thought-Leaders: 401k MEPs as Safe as Any Other 401k Plan,” (, October 8, 2013). “MEPs are less susceptible thanks to their size and their often use of multiple providers.” “MEPs really are a great solution for employers, especially small employers.”

Compliance – Threats, Common Sense and More Threats:
That sounds about right for all things governmental. For every one step forward, we move two steps backward. It makes one wonder what the Founding Fathers are thinking right now. Can you imagine the discipline they must have to sit back and watch? How tempting would it be for them to take up their ghostly shrouds and haunt us into rectitude? It is the month of Halloween, isn’t it?
Pension reform could include federal takeover,” (BenefitsPro, October 7, 2013) In the world of the government, it’s all about today, not about tomorrow. So, if saving for retirement reduces current tax revenues in exchange for generating greater tax revenues in the future, the typical politician will grab for today what would otherwise be used for tomorrow. This is the mechanism which “allows” our grandchildren pay for the excesses we enjoy today. We’d like to see what the infamous “Children of the Future” choir would be singing today, now that they know what the administration is actually proposing.
Relaxing Rules Will Help Small Employer Retirement Plans,” (PLANSPONSOR, October 7, 2013) While the White House is busy coming up with plans to take over personal retirement plans, the House (is anyone surprise) is looking into ways to make it easier to create private retirement plans. In particular, they’re considering ways to allow smaller businesses to offer retirement plans that are less costly, less burdensome and just as beneficial as the retirement plans offered by larger businesses. One of the thoughts: Use Multiple Employer Plans (MEP) to bring together several small companies into one large plan.
Employee benefits could be on debt ceiling chopping block,” (Employee Benefit Adviser, October 9, 2013) The drip, drip, drip of dire warnings about the ineffectiveness/inequality or any other “in” of 401k plans has turned into a flood of unbelievable consequences. Who took seriously the idea of reducing incentives to save for retirement when all the empirical evidence suggested that it was precisely savings (or the lack thereof) that was the problem? Who took seriously the idea that government would forgo high tax revenues in the future for immediate tax revenues today? Who took seriously that our politicians were so near-sighted they would strip away a successful program that produces so many win-win-win scenarios it’ll make your head spin? No one took it seriously. Just as no one took government-mandated (er, sorry John Roberts, “taxed”) health care would ever get passed in a country that so values individual freedom.

Fiduciary – All Talk and No Action…:
… is just about what we’ve come to expect. The first article in this series says it best.
The Spirit Of Being A Fiduciary,” (Financial Advisor, October 3, 2013) Perhaps it doesn’t matter what the SEC or the DOL says. Perhaps it just matters what the provider promises to the client.
Fiduciary rules will cost millions in compliance,” (BenefitsPro, October 6, 2013) Hmm, let’s do the math. Brokers say it will cost them $2 million a year to set up compliance systems if they were to declared a fiduciary. Now, our calculations show by not being declaring brokers a fiduciary, it’s costing IRA holders alone about $1 billion per month (see “Study: SEC Fiduciary Delay Costing Retirement Investors $1 Billion per Month,”, February 12, 2013) Ouch, if you’re a broker.
SEC fiduciary panel calls for ‘40 Act rule,” (InvestmentNews, October 6, 2013) Not sure what to make of this story. Earlier reports said “self-dealing” would continue to be allowed as long as it was accompanied by disclosure. This article doesn’t mention that.
Fiduciary duty rule still in SEC’s sights, agency chair says,” (Reuters, October 9, 2013) This is a fairly good overview of the matter, although there’s no real “news” in the story.
3 ways to reduce fraud and abuse in 401k plans,” (BenefitsPro, October 10, 2013) Read the list and you’ll discover it all starts with the same single word: “fiduciary.”
Vanguard threatens to ground pilots from making 401k trades,” (InvestmentNews, October 11, 2013) For the second time in the last few weeks, we see mutual fund companies acting as fiduciaries by preventing some shareholders from taking advantage of other shareholders.

Fees – Catch a Falling Fee and Put It In Your Pocket…:
How soon until we learn it’s not the fee itself that costs money, it the opportunity lost by being placed in a dubious investment vehicle.
DC Plan Fees Fall to Record Lows,” (PLANSPONSOR, October 7, 2013) Now, before you get too excited, it’s only a 2 basis point drop from the previous year. However, there were big drops in bundled service providers (no doubt due to the new 401k Fee Disclosure Rule) and recordkeepers.

Investments – Give Them Enough Rope…:
…to hang themselves. At what point does the role of the fiduciary cross from acting solely in the best interests of the beneficiary to patronizing them? It’s a tough call with no obvious answer.
The Role of ETFs in Retirement Income,” (ThinkAdvisor, October 7, 2013) They may be right, they may be wrong, but they are a popular topic of discussion.
Finke’s ‘Bizarre’ Discovery: Stocks Safer in Long Term,” (ThinkAdvisor, October 7, 2013) “Bizarre” only if you’re among those that think time diversification doesn’t work. Apparently it does.
Unsophisticated allocations threaten portfolios,” (BenefitsPro, October 8, 2013) This article cites three different studies that purport to show do-it-yourselfers underperform their managed counterparts in 401k portfolios. This makes sense purely from a behavioral standpoint. What it doesn’t do is suggest an appropriate solution. After all, the freedom to hit a home run also means the freedom to strike out. Is it any less responsible to prevent a person from striking out as it is to prevent a person from hitting a home run? In the oft-misquoted words of Pope Francis, “Who are we to judge?” This is one tough question for a fiduciary.
Charles Ellis: The ‘Glory Days’ of Performance Investing Are Over,” (ThinkAdvisor, October 10, 2013) That is, until they’re not. On one hand, the intent of the article is good – don’t worry about investing, focus on the client’s goal. On the other hand, the “reasons” to avoid active investing cited in the article are the identical reasons cited in other articles to avoid index investing. Could it be that they’re both right? It all depends on which snapshot in time you wish to take.

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.
ICI: Most workers who want a retirement plan have one,” (Pensions & Investments, October 3, 2013)
Time to Retire the Idea of Retirement,” (ThinkAdvisor, October 4, 2013)
Retirement Savings Rise in IRAs, 401k plans, Pensions & Other Accounts,” (Financial Planning, October 7, 2013)
Fighting to make 401k plans last a lifetime,” (MarketWatch, October 7, 2013)
Employment Agreement Provisions Not an ERISA Plan,” (PLANSPONSOR, October 7, 2013)
10 reasons your retirement plan won’t cut it,” (MarketWatch, October 7, 2013)
How to Judge Your 401k,” (, October 9, 2013)
Another Pension Plan Sued over Investments,” (PLANSPONSOR, October 9, 2013)
Self-Employed? You Need a Retirement Plan,” (, October 9, 2013)
A New Perception of Plan Success,” (PLANSPONSOR, October 9, 2013)
How to Cope with Dreaded Retirement Distributions,” (, October 11, 2013)
Plan Custodians Response to State Court Order Supported,” (PLANSPONSOR, October 11, 2013)

Wisdom from Some of Our Favorite Blogs:
The Trust Advisor: Where Advisors Get Advice |
fi360: Fiduciary Links: When clients set their own priorities, they are more likely to act |
The Trust Advisor: Finra to Consider Requiring Brokerages to Carry Arbitration Insurance |
The Chicago Financial Planner: Lessons the Financial Services Industry Could Learn from Visiting Lambeau Field |
Squared Away Blog: Got a 401k? A Guide for New Retirees |
Boston ERISA Law Blog: A Called Shot: Mangiero Predicted the Public Pension Crisis 6 Years Ago |
ERISA Lawyer Blog: IRS Provides Some Thoughts On Considering The Consequences Of 401(k) Plan Hardship Distributions |
Business of Benefits: About Reporting Those Late Deposits to 403(b) Plans……. |
fi360: It’s Thumbs Up for New Suitability Rule, but Questions Remain |
Fred Reish: Selection and Monitoring of Target Date Funds |
Boston ERISA Law Blog: Opening Up the Courthouse Door: The Second Circuit Weighs in on Exhaustion of Administrative Remedies | Motive and Opportunity |
The Chicago Financial Planner: Mutual Funds and The Rolling Stones: Time is on Their Side |

Hot Tips from Popular Web Resources:
NAPA Net: Some DOL Activity Could be Suspended as a Result of Shutdown |
NAPA Net: Retirement Assets Grew in Q2 |
NAPA Net: Thinking ‘Caps’ |
NAPA Net: LA Times Takes on Active vs. Passive Debate |
NAPA Net: Retirement Saving Through the Rearview Mirror |
NAPA Net: Who Gets Retirement Plans and Why |
NAPA Net: ASPPA: Debt Limit Standoff Could Crash 401k Account Balances |
NAPA Net: More People Seek Semi-retirement |
NAPA Net: Uniform Fiduciary Rule Still ‘Major Focus’ of SEC |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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