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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 12/06/13

December 09
00:02 2013

1020805_25983300_Trending_Topics_2013.12.09_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:
Detecting These Signs of Overconfidence Can Help 401k Investors Avoid a Fall,” (, December 3, 2013). Knowing Greek Tragedy and Elizabethan Theater can help us live a better retirement. Here are some signs that a retirement investor might be heading for a fall.

Compliance – Pay the Piper of Peace:
As we glide ever so softly into our heightened Holiday season, we find ourselves desiring a tranquility often limited to stories of yore. With our return to Middle Earth days away, we can rest comfortably knowing at least some are finally acting on the one public policy that handcuffs us all (at least those not fortunate enough to work for the government) – the guaranteed pension. Our constitution never created a right to live a comfortable retirement, only the opportunity to live one if we worked hard and made the right choices.
Detroit Retirees Got Extra Interest After Their Guaranteed 7.9%,” (Bloomberg, December 2, 2013) The article quotes one official saying this was “effectively robbing the general retirement system of precious funds.” Though apparently legal, there is still enough gray area in the process to allow creditors to have a right to claim this money. Stay tuned.
Illinois Lawmakers Confront Historic Burden of Pension Futility,” (Financial Planning, December 3, 2013) It’s time for Illinois to pay the piper and the politicians are left with no good choices. Too bad those responsible for creating this mess are mostly long gone.
Judge rules Detroit’s eligible for bankruptcy,” (BenefitsPro, December 3, 2013) “Uh-oh,” say the unions. This could end the idea of public pensions as we know it and start a mass movement towards defined contribution plans in the public sector (only about 30 years after the private sector did so). In either case, taxpayers just exhaled a big sigh of relief.
Bill Would Close DB for Federal Workers,” (PLANSPONSOR, December 4, 2013) It’s about time this matter was taken as seriously as it should, albeit decades after it should have been. It’s just too bad only the Republicans are (so far) smart (brave?) enough to sponsor the bill. This needs to be bipartisan to get anywhere.
Threats in Illinois, Detroit Rattle Government Workers,” (Financial Planning, December 5, 2013) Recent rulings and legislation may have begun to unravel the strangle-hold of unfunded pension liabilities on municipalities.

Fiduciary – The One Ring:
Tolkien’s famous allegory invented neither the ethical question posed nor the metaphor of the ring itself. No, Plato (q.v., The Ring of Gyges) lays claim both to the philosophical origins and the creation of the ring of invisibility. Tolkien merely updated Plato to the era of the British Empire. Today, the term and meaning of the word “fiduciary” has become the infamous “One Ring.” The question isn’t whether you behave like a fiduciary when you wear the cloak, but whether you act accordingly even when you don’t wear the cloak.
TD s Schweiss: Fiduciary Standard One Step Closer,” (Financial Planning, November 30, 2013) Nothing really new here. It’s a retread of the committee’s report to SEC suggesting the Commission adopt a uniform fiduciary standard.
Fiduciary Standard For Brokers Backed By SEC Advisory Panel,” (Financial Advisor, December 2, 2013) And, again, a retread of old news. What’s going on?
SEC puts fiduciary duty on 2014 agenda as ‘long-term action’,” (InvestmentNews, December 2, 2013) Ah, here at last we have some real “news,” if you can call it that. The news part is that the SEC and the DOL both released their regulatory priorities for 2014. In both cases, the “fiduciary” issue appears on the same (way back) portion of the list it did last year.
DOL to Be First Mover on Fiduciary, Industry Watchers Say,” (ThinkAdviser, December 6, 2013) The article states the DOL is better prepared to move forward on its proposal and the SEC would prefer the DOL go first. On the downside, new Secretary of Labor wants to revisit the proposal to get greater industry buy-in. Hmm, isn’t this supposed to be about putting clients (i.e., investors) first (i.e., ahead of “industry buy-in”)?

Fees – What’s Hiding Under Your Dragon?:
Today we have unmentioned elephants (or the renegade 800 pound gorilla) in our rooms. Back in time between the Dawn of Færie and the Dominion of Men,” they had unmentionable dragons. Beneath these dragons sat piles of gold, which really belonged to someone other than said dragons. But, dragons be dragons, the inhabitants of that time sought to forfeit their hard-earned money in exchange for ignoring the dragons (and, more importantly, the dragons ignoring them). There are dragons today, although there are also a greater number of brave souls wishing to discover those hidden hoards on behalf of the little people who really own that money.
Looking for lower 401k fees? See ETFs,” (New York Post, November 30, 2013) These are the kinds of MainStreamMedia articles that make professionals cringe. It’s like saying the way to get better gas mileage is to stay home and watch TV. How many times do we have to repeat the fees at issue are not those already embedded in fund performance?
401k Plans Tweak Fees for Investors,” (Wall Street Journal, December 4, 2013) This headline promises more than it delivers. The article really focuses on revenue sharing fees – i.e., fees that are questionable from a fiduciary standpoint right off the bat. Then is morphs into a discussion of translating per-head fees into asset-based fees. Don’t know if this is the right direction to be heading in if you’re a plan participant.
Employers pushing hard for lower 401k fees,” (BenefitsPro, December 5, 2013) The good news is that this article correctly distinguishes between mutual fund expense ratios and plan-level fees. The bad news is, according to the study mentioned in the article, plan sponsors’ top reason for switching funds is the expense ratio.
The Evolving 401k: Fees are Down; the Match is Up,” (TIME, December 5, 2013) Here’s a mass-media take on the same study discussed in the above article. Only, this article is extremely well written for a mass-media take. Take a look and decide for yourself.

Investments – Gandalf and the Amazing Technicolor Dreamcoat:
It may seem like magic – or even the mystical ability to interpret dreams – but investing is really just about managing one thing. No, it’s not your money, although that, as they say, is the bottom-line. It’s about managing your emotions. Imagine it’s the 24th century. Who would you rather hire as your Investment Adviser? Spock? Kirk? Or McCoy? Wait, that a different movie series.
Annuities vs. Bonds: Do the Math,” (Financial Planning, November 27, 2013) Word of warning: If you think annuities are the cat’s pajamas, be prepared to have your world shattered. The article uses actual math to almost single-handedly bring the annuity movement to its needs, if not lead to a call for congressional hearings.
New strategy for equity investing during retirement ignites debate,” (InvestmentNews, December 3, 2013) Academic research is finally catching up with financial reality. A recent study has (finally) shown retirees may actually be better off with a higher equity exposure. However, there’s always another side of the story.
3 ‘over’ errors that can cause 401k investors to ‘under’perform,” (BenefitsPro, December 6, 2013) Tired of trying to teach 401k plan participants to stop worrying about investments? Then turn their focus on to these three errors and see if they can figure out how often they make them.

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.
Majority of Self-Employed Not Saving Regularly for Retirement,” (ThinkAdvisor, November 27, 2013)
Don’t Get Left Behind On These Emerging Retirement Trends,” (Financial Advisor, December 2, 2013)
4 reasons to be thankful for 401k plans,” (Employee Benefit News, December 3, 2013)
401k Plans: Time For a Checkup,” (CFO, December 3, 2013)
4 Retirement Strategies to Avoid Now,” (, December 3, 2013)
Social Security: Common Myths and Hard Facts,” (Financial Planning, December 4, 2013)
Retirement at Risk for Half of U.S. Households, Even With Market Rebound,” (Financial Planning, December 4, 2013)
That retirement crisis? Not so bad, after all,” (Reuters, December 4, 2013)
Workers like retirement projections, but don t see enough,” (Employee Benefit News, December 5, 2013)
6 year-end tasks for retirement plan sponsors,” (BenefitsPro, December 5, 2013)
Ready or not? Surveys conflict on Americans’ retirement preparedness,” (InvestmentNews, December 5, 2013)
Court Appoints Fiduciary for NY 401k Plan,” (PLANSPONSOR, December 6, 2013)

Wisdom from Some of Our Favorite Blogs:
The Trusted Advisor: Understanding the Key Benefits of TAMPs |
The Chicago Financial Planner: 7 Year-End 2013 Financial Planning Tips |
fi360: How does one demonstrate that a service provider arrangement is reasonable? |
ERISA Lawyer Blog: First Circuit Rules That The Plaintiffs’  |
Squared Away Blog: Laid-off Boomers: Retirement as Default |
MainStreet: Retirement Is Impossible | ‘Half” Measures? |
Boston ERISA Law Blog: Public Pensions After Detroit and Stockton |

Hot Tips from Popular Web Resources:
NAPA Net: Tax Reform Fades Away  |
NAPA Net: Delays Likely on SEC Uniform Fiduciary Rule |
NAPA Net: Schlichter’s Original Excessive Fee Case Set to Proceed  |
NAPA Net: Detroit Bankruptcy Judge Rules that Pensions May Be Cut  |
NAPA Net: Smart Beta: Definition and Efficacy |
NAPA Net: Case of the Week: IRAs and Real Estate |
NAPA Net: Chicago Pursues Deal to Change Pension Funding |
NAPA Net: Using Choice Architecture to Boost Retirement Readiness |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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