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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/30/14

June 02
00:03 2014

1020805_25983300_Trending_Topics_2014.06.02_stock_xchng_royalty_free_300Welcome to FiduciaryNews 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:
A 401k Fiduciary Dilemma: The Risk of Using Volatility to Define Risk,” (, May 28, 2014). Despite evidence of its uselessness, it’s been a long goodbye for volatility. Will this bomb unsuspecting plan sponsors?

Compliance – Fear and Loathing in Retirement Plans:
At what point did America change from being run by the people to being run by the People? Or is this just a testament to own poor secondary school system?
Illinois lawmakers consider private sector retirement options,” (Employee Benefit News, May 27, 2014) Here’s the difference between red states and blue states. Red states want to convert public pensioners into private defined contribution participants. Blue states want to convert private workers into public retirement plan beneficiaries. You know where this is going.
Obamacare for Retirement: Mandated State Savings Plans,” (MainStreet, May 27, 2014) You need look no further than the current VA scandal if you want to see the future of America’s (soon to be government run) health care system. Veteran friends have never had anything good to say about the VA. Even its much bally-hooed low cost comes at a price (i.e., low value, which is why the DOL tells plan sponsors to always focus on getting the best value for the cost, not just the lowest cost). Well, this article maintains the future of America’s retirement system can be seen in these popular (but unproven) state mandated retirement plans.
How to get compliance leeway for your retirement plan clients,” (Employee Benefit Adviser, May 28, 2014) Basically, this article is about how to get a reprieve if you forget to file your 5500 by the deadline.
ERISA penalizes administrators for hiding plan documents,” (Employee Benefit Adviser, May 29, 2014) Hard to believe people are dumb enough to try to get away with this. An honest mistake is one thing. Flagrant disregard for the law is something totally different.

Fiduciary – Who’s Side is Time On?
In the likely words of one James Tiberius Kirk, when explaining his actions prior to taking the Kobayashi Maru Test for the third time: “When the rules are stacked against you, change the rules.”
DOL to Delay Fiduciary Redraft Release Until January,” (ThinkAdvisor, May 27, 2014) The sharks are circling investors. The DOL’s repeated response? “Don’t worry, we’re on our way.”
Raymond James, the New Borders Bookstore?” (ThinkAdvisor, May 27, 2014) Once again, Knut Rostad brings up an excellent point on how “disruptive innovation” has caused the brokerage industry to wither away like so many buggy whip manufacturers of old. His last sentence is most intriguing. To paraphrase, he asks, “If the brokerage industry is Borders, who is Amazon?” Interesting. Very interesting.
DOL Pushes Back Timeline for Fiduciary Rule…Again,” (, May 28, 2014) Different take on earlier story.
Industry Hails DOL Fiduciary Delay; Supporters Seek Message Reboot,” (On Wall Street, May 28, 2014) If you don’t know who’s on what side, this article begins to draw the battle lines. It’s Goliath vs. David. Place your bets now.

Fees – It’s All a State of Mind:
And since minds differ, it’s foolish to expect we will ever reach a consensus.
Do ETF Expense Ratios Matter?” (On Wall Street, May 28, 2014) Do mutual fund expense ratios matter, for that matter (no pun intended)? Why quibble over a few basis points when it’s the performance that matters? This applies to both mutual funds and ETFs. But, for all the talk about ETFs having lower expense ratios (a dubious claim since, for the most part the lowest index fund expense ratios match ETFs, which are mostly index funds), the real difference is that ETFs come with spreads and mutual funds don’t. Any trader will tell you to forget commissions and other expenses, it’s the spreads that kill you.
Fee Suit Litigator Discusses Best Practices,” (PLANSPONSOR, May 28, 2014) “Fee litigation specialist” Jerry Schlichter shares his thoughts, deflects some criticism and gives an overview on 401k fees.

Investments – The Latest Fad:
We’ve said it before and we’ll say it again, when investments turn into fads, they cease being investments.
Why advisers should reframe retirement investment exposures,” (Employee Benefit News, May 28, 2014) Unfortunately, this article uses a sound age-old (well, at least from the 1960s) adage (total return investing) and perverts it to justify the use of a specific alternative investment. Worse (for investors, at least), this product mixes bonds (long considered a “safe” investment) and derivatives (long considered gambling).
Should Your DC Plan Include Absolute Return Strategies,” (PLANSPONSOR, May 28, 2014) Same story as above.
Investment risk isn’t what they tell you it is,” (BenefitsPro, May 28, 2014) A very appropriate metaphor from the anti-war pop culture milieu of the 1960s.

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.
Pension Cash-Outs Trending Upward: Mercer,” (ThinkAdvisor, May 20, 2014)
Longer-Term View Needed for TDFs,” (PLANSPONSOR, May 27, 2014)
Getting private college faculty to change their retirement mentality,” (Employee Benefit Adviser, May 27, 2014)
Easier Enrollment Leads to Better Participation,” (PLANSPONSOR, May 27, 2014)
Solving the Retirement Income Puzzle: Gamma and the Tax Efficient Frontier,” (ThinkAdvisor, May 28, 2014)
Going broke tops list of American worries in retirement,” (Employee Benefit News, May 28, 2014)
IRA Tax Strategies to Manage Retirees Cash Flow,” (On Wall Street, May 28, 2014)
Retirement Is a Phase Not a Single Date,” (PLANSPONSOR, May 28, 2014)
EBRI Examines Factors Behind Rollover Decisions,” (PLANSPONSOR, May 28, 2014)
Roth IRAs Give Millennials Welcome Perks,” (MainStreet, May 29, 2014)
Participant Retirement Savings Rebounded from Recession,” (PLANSPONSOR, May 29, 2014)
Court Deems MassMutual a Fiduciary for Setting Compensation,” (PLANSPONSOR, May 29, 2014)
Younger and Newer Employees the Plan Participation Challenge,” (PLANSPONSOR, May 29, 2014)
Complete Stats Paint Rosier Retirement Savings Picture,” (PLANSPONSOR, May 29, 2014)
Online Financial Guidance Seeks to Replace Face-to-face Advice,” (MainStreet, May 30, 2014)
A More Complete Picture of DB Plan Liabilities,” (PLANSPONSOR, May 30, 2014)
How to Avoid Errors in QDROs,” (PLANSPONSOR, May 30, 2014)

Wisdom from Some of Our Favorite Blogs:
Fiduciary Matters Blog: MassMutual is Found to be a Fiduciary in ERISA Suit by Proposed Class of Client Plans |
RetirementRevised: Warning: Not all ‘target date’ funds have the same target |
fi360: Fiduciary Links: A Nod to the Past and a Look to the Future |
The Chicago Financial Planner: Six 401k Investing Mistakes to Avoid |
Fred Reish: Advisory Opinion 2013-03A |
The Trusted Adviser: Five Myths About Retirement | The Hassle Factor |
Retirement Plan Blog: The Power of Regular Contributions, a/k/a Exponential Growth, on Retirement Savings as an Infographic |
Proskauer’s ERISA Practice Center Blog: Court Approves USERRA Class Action Settlement Over Pension Contributions |
Proskauer’s ERISA Practice Center Blog: The Debate Continues Over The Fiduciary Status of 401(k) Plan Service Providers |

Hot Tips from Popular Web Resources:
NAPA Net: Surface Conditions |
NAPA Net: No Rush to Roths |
NAPA Net: DOL Delays Fiduciary Rule Until 2015 |
NAPA Net: MassMutual a ‘Functional Fiduciary,’ District Court Rules |
NAPA Net: Improving Investor Outcomes and the Annual Plan Review |
NAPA Net: Fee Concerns Driving Rise of Passive Strategies |
NAPA Net: Leadership is Exhilarating; Fiduciary is Exhausting  |
NAPA Net: The Coming War on Income Inequality |
NAPA Net: Deficit of Confidence in Investment Advice |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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