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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/28/14

March 03
00:02 2014

1020805_25983300_Trending_Topics_2014.03.03_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:
What Every 401k Plan Sponsor and Fiduciary Should Disclose to Employees: How to Retire a Millionaire (Hint: It’s Easier Than You Think),” (FiduciaryNews.com, February 25, 2014). They say they best way to learn is by teaching. Here’s something you can teach your kids that will help you.

Compliance – Because WeSaySo:
There have been plenty of one-year-wonder TV series. Our favorite is Brisco County. One such one-year-wonder actually lasted three seasons: The Dinosaurs. The lead character – Earl Sinclair – worked for a company called WeSaySo. Sometimes it seems like we’ve lost the idea our government is of, for and by the people. Sometimes it seems like the folks in Washington think it’s the other way around. The government acts as if if could do anything it wants because “WeSaySo.” Too bad.
More states look to mandate retirement plans for private employees,” (Employee Benefit News, February 24, 2014) So now Maryland and Wisconsin wish to jump on the California bandwagon and offer retirement plans to private employees. Apparently public pensions can only survive if we find a way to put more money into them. Forget the idea that more money means more liability, we’ll let the grandkids figure out how to get out of that one. There oughta be a law against this sort of thing.
Massachusetts opens inquiry into 401k plan contribution delays,” (InvestmentNews, February 24, 2014) An unfortunate use of the term “delay.” While it is illegal to delay contributing money that is earmarked for an employee’s 401k, it is not illegal to delay contributions of they aren’t already earmarked. It all depends on the plan document. AOL wanted to change its plan document (like IBM did earlier). It may not be in the plan beneficiaries’ (a.k.a. employees) best interests, but it may be in the company’s beneficiaries’ (e.g. employees, shareholders, etc…) best interests. Ooh, the again of the split-interest trust!

Fiduciary – The Beauty of Gridlock:
It’s the small things in life that make us happy – and at the same time perplex us. It’s as if four out of five SEC Commissioners don’t understand 2+2=4. Well, inaction is better than them agreeing 2-2=5.
4 Of 5 SEC Commissioners Undecided On Common IA/B-D Standards,” (Financial Advisor, February 24, 2014) This is why a lot of the smart money is saying “no decision is better than any decision.” If they can’t tell the difference by now, who knows what they’re capable of deciding.

Fees – They’re Back!:
If there’s one movie you don’t want to be associated with, it’s Poltergeist. Apparently, the notorious film is well known not just for that famous line “They’re Back!” but for the strange coincidental deaths of many of those associated with it.
Yale Law Professor Again Targets Industry Fees,” (PLANSPONSOR, February 28, 2014) True to their threat last year, law professors Ian Ayres (Yale) and Quinn Curtis (University of Virginia) published a paper condemning the use of “high cost” funds. The study claims these so-called “dominated” menu fund options hold 11.5% of plan asses and produce an average loss of 86 basis points compared to low cost index funds. The article doesn’t say what data or years the study uses. This is critical as a data set of returns of, say, the last three years (when index funds had a greater chance to beat actively managed funds) may have yielded different results than a data set of returns of the first decade in the new millennium (when actively managed funds handily bested index funds). Finally, and most importantly, this is not a peer-reviewed paper.

Investments – The Greatest Sin:
Plan Sponsors walk out on a limb every time they approve an investment option. The limb is less sturdy when they let participants make their own choices – and when they pick higher risk investments.
Plan Sponsors See Value in Offering Managed Accounts,” (PLANSPONSOR, February 25, 2014) At the same time this article suggest plan sponsors are doing this to protect their fiduciary downside, other articles say offering managed accounts actually increases fiduciary liability. Although this article doesn’t quite admit it, if you read the end of the article (or “page 2” in that annoying tendency for these on-line publication to not put the entire article on one page), you’ll be able to guess where this increase in liability comes from.
Don’t Know Much About Investment Options,” (PLANSPONSOR, February 26, 2014) It all comes down to this: Most plans have too many options.
Detroit Pension Funds Settle Class Action Lawsuit,” (PLANSPONSOR, February 28, 2014) You might think, given all the news of the Detroit bankruptcy, that this has something to do with that. Actually, this is a more traditional type of complaint. It holds that the trustees of the plan have breached their fiduciary duty by failing to undertake appropriate due diligence before buying “high risk” investments.

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.
Advisers must act as 401k watchdogs,” (InvestmentNews, February 23, 2014)
Retirement advisers help plan sponsors get fiduciary job done: study,” (Employee Benefit News, February 24, 2104)
How to Take Full Advantage of Your 401k,” (US News, February 24, 2014)
No Harm Required to Seek Plan Reformation,” (PLANSPONSOR, February 24, 2014)
How much money do you really need to retire?” (MarketWatch.com, February 25, 2014)
Help 401k plan participants overcome ambiguity,” (Employee Benefit News, February 25, 2014)
Failed to Provide Safe Harbor 401k Plan Notice,” (PLANSPONSOR, February 25, 2014)
This idea will solve the retirement crisis, guaranteed!” (BenefitsPro, February 26, 2014)
What That 1% Increase Can Do for Participants,” (PLANSPONSOR, February 26, 2014)
Rethinking the 4% Withdrawal Rule,” (PLANSPONSOR, February 27, 2014)
Fewer Employees Delay Retirement,” (PLANSPONSOR, February 27, 2014)
Financial Literacy Could Be Our Nation’s Greatest Asset,” (MainStreet, February 28, 2014)

Wisdom from Some of Our Favorite Blogs:
MainStreet: Workers Pocket More Cash with Lower 401k Fees |
fi360: Alternative Investments: Are you conducting adequate due diligence? |
The Chicago Financial Planner: 7 Retirement Investing Tips |
Squared Away Blog: Why Some Retire, Others Persevere |
ebri.org: Silver Linings |
Pension Risk Matters: Deciding When to Tweak or Overhaul a Pension Plan |
Retirement Plan Blog: Automatic Enrollment in the United Kingdom: Lessons for the United States |

Hot Tips from Popular Web Resources:
NAPA Net: SEC’s White Pushes Commissioners on Fiduciary Rule |
NAPA Net: Balancing the Focus of DC Plans: Accumulation and Decumulation |
NAPA Net: EBRI: Participation in Retirement Plans Declining |
NAPA Net: Retirement Readiness: Look Past Raw Numbers |
NAPA Net: Massachusetts to Investigate Annual Lump Sum Matches |
NAPA Net: ‘Off’ Putting |
NAPA Net: New Stage in Detroit Bankruptcy |
NAPA Net: The Ivory Tower Returns |
NAPA Net: Wisconsin Could be Next to Jump into State Run Retirement Plan Fray |
NAPA Net: Love and Marriage (and Divorce) and Retirement: Part 1 |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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