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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/20/14

June 23
00:17 2014

1020805_25983300_Trending_Topics_2014.06.23_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:
Exclusive Interview: Ron Surz Says Regulators Can’t Solve Target Date Fund Problems,” (, June 17, 2014). “Advisers should be very scared of being implicated in the lawsuits that will happen.”

Compliance – Down the Memory Hole?:
We’re not saying this has anything to do with the Tea Party persecution, but Bill Roth, whose name appears on the Roth IRA) was the co-author of the Reagan administration’s very successful across-the-board “Kemp-Roth” tax cuts. Is this an example of trying to erase history?
IRS targets Roth feature in 401k plans,” (Employee Benefit News, June 16, 2014) The IRS has developed a questionnaire to determine if plans are in compliance and, if not, what type of action is required (e.g., an audit, etc…).

Fiduciary – Look, this isn’t Rocket Science:
It’s really quite simple. If you’re a fiduciary, you can’t enter into a self-dealing transaction. In other words, you can’t receive compensation for the transaction. It’s that simple. Apparently what’s not simple is whether all advisors should act in a fiduciary capacity.
Retirees Suffer as 401k Rollover Boom Enriches U.S. Brokers,” (Bloomberg News, June 17, 2014) While the story that opens this article is all too often true, the unfortunately reality is that many people are better off rolling over their assets to an IRA once they leave their company. This is especially true for almost every employee with more than $500,000 where they would be better served with custom portfolios rather than mutual funds.
Senator Charges Retirement Savings Hurt By Broker Conflicts,” (Financial Advisor, June 17, 2014) Hmm, it seems like someone sent out a talking points memo this week. And this came up in a hearing about Flash Trading of all places.
CFO Conflicts Led to SEC Whistleblower Charges,” (CFO Magazine, June 17, 2014) Here’s an example of what can go wrong.
Protect Fiduciaries with the Right Insurance,” (PLANSPONSOR, June 17, 2014) Look it up if you’re interested.
DOL Fiduciary Rule in 2016?” (ThinkAdvisor, June 18, 2014) If even.
DOL’s Borzi Mum Since Delay Of New 401k, IRA Rules,” (Financial Advisor, June 18, 2014) This novella (it’s 8 pages long) starts off as a tribute to Borzi but ends on a less-than-satisfactory note.
Understanding fiduciary protection from retirement providers,” (Employee Benefit Adviser, June 18, 2014) Good overview for pros and amateurs alike.

Fees – Ouch! That hurt!:
It turns out you don’t have to be a formal fiduciary to get fined for not acting in a fiduciary capacity.
FINRA Fines Merrill Lynch Due to Sales Charges,” (, June 16, 2014) This $25 million fine is in part due to over-charging retirement plans. How’s that suitability standard workin’ for you?

Investments – “We have the technology…”:
“…We can make it better than it was before.” Or worse, depending on which part of the system you want to give the ol’ techno-tweak to.
DC Plans Focus on Streamlining Investments,” (PLANSPONSOR, June 16, 2014) This is all about the move to shrink the number of options on 401k menus. For this interested in this, we suggest you read 401(k) Fiduciary Solutions. It contains a complete “How-To” section on creating a 21st Century Investment Policy Statement, including a “reduced” option menu based on the latest studies in behavioral finance.
Who Should Buy an Income Annuity?” (, June 17, 2014) The article leads with a tempting tidbit. It states, “to receive $17,000 in annual retirement income at age 65, you would need to invest $150,000 as a 55 year-old or invest $260,000 as a 65 year-old.” If the intent is to lure you towards investing in annuities at a younger age, this tease is a major FAIL, (but let’s not blame the author – his source for this data was New York Life). Anyone with the new Retirement Readiness Calculator (just a tease, it’s coming out next month) can tell you it’s better to invest the $150K. All you need to earn $17K per year at age 65 is to make 8.23% a year (vs. the average long-term equity return of 10.35%). Still rather have the sure thing (i.e., the annuity), then you’re still better off investing the $150K. That way all you’ll need to do is have an average annual return of 5.52% to get your precious $260K to buy the annuity at age 65. Of course, you could get the full average market return over that same time period. That would yield enough assets to give you $21,000 a year – almost 20% more than the original annuity offer. So, do you still want to buy that annuity? (P.S.: That 20% surplus is always there. Who do you think pockets it?)
Bull Market Reality Check: Investors Seek Greater Return but Less Risk,” (MainStreet, June 17, 2014) Is this an indicator of a market top?
Risk Questionnaires and Risk Tolerance for Investors,” (Financial Planning, June 18, 2014) The author doesn’t say it, but he must have read the series on risk that concluded with last week’s article in
How do you solve a problem like TDFs?” (BenefitsPro, June 18, 2014) Are Target Date Funds too broke to fix? Read here and find your answer.

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.
Why the Supreme Court Ruled Inherited IRAs Are Not Protected in Bankruptcy,” (On Wall Street, June 16, 2014)
Six Good Reasons to Start Collecting Social Security at Full Retirement Age,” (, June 16, 2014)
How to Beat the Retirement ‘Crisis’,” (ThinkAdvisor, June 16, 2014)
IRA Investing for the Young Worker: Why the Growth Is Robust,” (MainStreet, June 16, 2014)
Congress, DOL Urged to Require Notice on 401k Plan Changes,” (ThinkAdvisor, June 16, 2014)
5 Ways to Maximize Your Rigged 401k Plan,” (US News, June 17, 2014)
75 is the New 59: Retirement Picture Changing,” (Financial Advisor, June 18, 2014)
More retirees planning to work through the golden years,” (Employee Benefit Adviser, June 18, 2014)
It’s your inherited IRA, not creditors’,” (BenefitsPro, June 18, 2014)
Ask Ed Slott: RMDs for Inherited IRAs?” (Financial Planning, June 18, 2014)
Retirement Plan Loans Commonly Taken Commonly Regretted,” (PLANSPONSOR, June 18, 2014)
Save Thousands of Dollars by Delaying Retirement Just 5 Years,” (MainStreet, June 18, 2014)
7 Ways to Spring Clean Your Investment Portfolio,” (US News, June 18, 2014)
Collective Trust Funds Used Most by Large DC Plans,” (PLANSPONSOR, June 18, 2014)
From Allocations to Annuities: 4 New Retirement Planning Ideas,” (On Wall Street, June 18, 2014)
How to Retire and Be Truly Happy,” (MainStreet, June 18, 2014)
Sponsors Should Encourage Into Plan Rollovers,” (PLANSPONSOR, June 19, 2014)
Why a 401k Rollover to an IRA is Not Always the Right Answer,” (MainStreet, June 19, 2014)
3 Ways to Make Your Retirement Strategy More Efficient,” (, June 19, 2014)
Seek financial advice before tapping into 401k nest egg,” (Employee Benefit Adviser, June 20, 2014)


Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: Looking forward to the next big advisor fee model |
The Trust Advisor: Article on Asset Protection Trusts in Ohio |
Squared Away Blog: Depression Up After Pension Benefits Cut |
Behavior Gap: The Drawbacks to Investing with the Group |
Boston ERISA Law Blog: ERISA, the Wisdom of Crowds and the First Hundred Names in the Phonebook |
The Chicago Financial Planner: 401k Rollovers – Buyer Beware |
ERISA Lawyer Blog: Seventh Circuit Rules That Plaintiffs Did Not Have Actual Knowledge Of The ERISA Violation, So The Three-Year Statute Of Limitations In ERISA § 413(2) Did Not Apply |
Behavior Gap Newsletter: How Risk Savvy Are You? |
Frugal Fiduciary: Small Business Retirement Plans improved changes |

Hot Tips from Popular Web Resources:
NAPA Net: Galvin’s Solution to Year-end Matches: More Disclosure |
NAPA Net: Fiduciary Training Should Be Ongoing |
NAPA Net: New Jersey Floats ‘Millionaire’s Tax’ to Fund Pension Shortfall |
NAPA Net: Incendiary Bloomberg Report Fuels Debate on IRA plans vs. 401k plans |
NAPA Net: Case of the Week: Plan Expenses — How Are They Paid? |
NAPA Net: Bloomberg Tackles Fiduciary Rule |
NAPA Net: Employee Engagement, Financial Involvement Growing |
NAPA Net: The Impact of Overconfidence on Participants’ Financial Behavior |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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