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

June 09
00:03 2014

1020805_25983300_Trending_Topics_2014.06.09_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:
Why Every 401k Fiduciary Should Redefine Risk as What Happens When You Miss Your Goal,” (, June 3, 2014). Volatility simply can’t be used to measure risk because it contains components both of risk and reward. Here’s a better way to measure true investor peril.

Compliance – Don’t Tease Us:
Maybe it’s getting closer to election day, but at some politicians are talking like they “get it.” You know what they say about “fool me once, fool me twice…” – what about “fool me infinity”? Oh what a sad sad state we’re in (pun intended).
Social Security: Then, Now and the Future,” (Thinkadvisor, May 27, 2014) This is a great “sausage being made” story that shows you how a dysfunctional government came up with such a dysfunctional program like Social Security. If there’s any upside to be taken away, it’s that it could have been much worse.
DOL Again Seeks Comments on TDFs,” (PLANADVISER, June 2, 2014) This is all about disclosure. Again. We’re telling you, sooner or later the dam is going to burst and the truth about these products will gush out.
There Is Hope for Retirement Security Policies from Congress,” (PLANSPONSOR, June 2, 2014) Um, by “hope” do they really mean “threat”? But, seriously, the Congressman interviewed comes within a smidgeon of describing a Child IRA. That’s the easiest way to solve the retirement crisis. Congress needs to create a Child IRA.
5 changes to expect in Social Security,” (Employee Benefit News, June 3, 2014) Here’s the problem with the low employment rate – it removes a large source of payroll tax revenue used to fund Social Security. Unfortunately, rather than focus on improving employment, chances are much more likely Washington will take the easy route and cut Social Security benefits. The only question is what will be the age of the grandfather clause.
Public pensions hiding trillions in liabilities, SEC commissioner says,” (BenefitsPro, June 3, 2014) This is definitely a problem for public pensions, but the SEC commissioner reveals an even nastier problem. This is also a major problem for many municipal bond holders. They’re the ones most likely to get stuck holding the bag.
Funds’ investments leaves pensions at risk, Pew says,” (BenefitsPro, June 4, 2014) Hmm, this leaves one to question the validity of some of Pew’s research techniques. Since when are equities not the appropriate was to go for a long-term investment? Sure, alts can be an issue (just like another other fad investment). Still, equities, especially with today’s historically low interest rates, may be the only reasonable game in town. And, making Pew’s case worse, they complain about “higher fees” after lauding higher returns of equity managers. Again, sometimes you get what you pay for and, sometimes, that can be a very good thing.
Public Sector Needs More Retirement Readiness Help,” (PLANSPONSOR, June 6, 2014) As more and more public employees find themselves moving from the archaic (and costly) public pension system to the kind of defined contribution system most private sector workers now have, they may be in for some culture shock. We’ll let them ease in slowly by saying, “Welcome to the end of the twentieth century.”

Fiduciary – So they do care!:
Apparently, some people do think it’s important to have a designated fiduciary throughout the process.
Fiduciary Status Not Triggered by Contribution in Company Stock,” (PLANSPONSOR, June 2, 2014) This is tricky, but here’s why: There’s a difference between a fiduciary and a settlor. A settlor decides how to fund a trust and doesn’t necessarily handle the assets as they move to the trust. A fiduciary is the person responsible for handling the assets as they move to the trust. Any questions?

Fees – You get what you pay for:
That little bit more you pay for a financial adviser appears to reap far greater returns than the do-it-yourselfers would like to admit.
How leveling retirement plan fees can help your clients employees save more,” (Employee Benefit News, June 5, 2014) This is about providing individual advice to plan participants. It follows the pretty much agreed upon thesis that having a personal financial coach is better than not having one.

Investments – Repeating history:
Are 401k investors doomed? After all, isn’t that what they say of people who don’t learn from history? Why all the sudden do we have a renewed interest in short-term investments? Don’t 401k investors know they’re in it for the long haul? And if they don’t know, who’s to tell them?
Is There Enough Fixed Income in Your Retirement Plan Lineup?” (ThinkAdvisor, May 29, 2014) Here’s an example of what’s wrong with the 401k industry. They’re still playing MPT games assuming employees are all expert investors. Breaking News: 401k investors are not professional portfolio managers. They want professional portfolio managers to take care of all their needs. This is why the “one-portfolio” option is making a comeback in so many 401k menus.
DOL Again Seeks Comments on TDFs,” (PLANSPONSOR, June 2, 2014) Didn’t Congress just examine these critters a few years back? And didn’t they come up with a bunch of recommendations? Whatever happened to those recommendations?
Peril, the new risk,” (BenefitsPro, June 4, 2014) It’s time to turn the entire world of investment theory over and get rid of “risk” and all its misguided definitions. It’s time for a new parameter. Ignore it at your peril.
Participants Want Plans with Stable Value Option,” (PLANSPONSOR, June 4, 2014) Which is precisely why Congress passed the PPA in 2006 – too many long-term 401k investors were opting for the stable value option. Maybe Congress should pass a new PPA in 2014 – outlawing 401k investors’ use of stable value options unless they’re older than 55. Five years ought to be enough (but not too much) time to build up enough cash reserves in your retirement account to equal a couple years worth of expenses.

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.
Judge rejects MassMutual’s bid to dismiss ERISA suit,” (BenefitsPro, May 30, 2014)
401k Distributions Will Outpace Contributions By 2016, New Study Says,” (Investor’s Business Daily, June 2, 2014)
How to Fix the 401k,” (Wall Street Journal, June 2, 2014)
Millions of retirees yet to roll out of 401k Plans,” (BenefitsPro, June 3, 2014)
Men Slightly More Confident About Retirement,” (PLANSPONSOR, June 3, 2014)
401k savings rates spiked in 2013,” (MarketWatch, June 3, 2014)
403bs Simplifying Investment Menus,” (PLANSPONSOR, June 3, 2014)
Boost your clients employee retirement engagement,” (Employee Benefit News, June 4, 2014)
Retirees Wish They Had Waited To Take Social Security,” (Financial Advisor, June 4, 2014)
Bridge the retirement gender gap,” (BenefitsPro, June 4, 2014)
DOL Resolves Valuation Issues with ESOP Transaction,” (PLANSPONSOR, June 4, 2014)
Taking Social Security Early Can Make Sense,” (Financial Advisor, June 4, 2014)
People Regret Taking Social Security Too Early,” (PLANSPONSOR, June 4, 2014)
Retirees Want a Post-career, Merrill Lynch Survey Finds,” (On Wall Street, June 5, 2014)
SEC, DOL Enforcement: Appeals Court Backs SEC in Citigroup Case,” (ThinkAdvisor, June 5, 2014)
Many Want to Slow Down, Not Stop, in Retirement,” (ThinkAdvisor, June 6, 2014)

Wisdom from Some of Our Favorite Blogs:
MainStreet: Americans Live for Today Rather Than for Retirement |
fi360: Fiduciary Links: Considering 401k plans from advisor and client perspectives |
The Trust Advisor: Estate Planning For the Young, Rich and Childless |
ERISA Lawyer Blog: IRS Provides Guidance On Retirement Plan Payments for Accident, Health and Disability |
Boston ERISA Law Blog: What Happens to Company Owners Who Get Overaggressive When Selling Out to an ESOP? |
The Chicago Financial Planner: 7 Questions to Ask Before Buying a Variable Annuity |
MainStreet: 5 Investing Mistakes Millionaires Make – But They’re Still Rich |
ERISA Lawyer Blog: Second Circuit Finds That The Employer And Its Directors Did Not Violate ERISA By Contributing Employer Stock (Instead Of Cash) To Two Retirement Plans, Despite A Price Decrease Of The Stock |
MainStreet: Retirement Dreams Become Nightmares – Depending on Your Generation |
MainStreet: Should You Get a Traditional 401k or a Roth? |
The Trust Advisor: Saving for Your Children’s Future with Custodial Accounts |
MainStreet: The Social Security Mistake More Than One-Third of Retirees Are Making | Pre-existing Conditions? |
MainStreet: How to Sustain Retirement Savings While Traveling Abroad |
The Frugal Fiduciary: Indirect compensation in small business retirement plans are outdated |
The Chicago Financial Planner: What I’m Reading – Triple Crown Edition |

Hot Tips from Popular Web Resources:
NAPA Net: ‘Mass Affluent’ Worried About Retirement |
NAPA Net: What to Do with Terminated Employees’ 401ks Plans |
NAPA Net: Calm Before the Storm |
NAPA Net: Source ‘Spots’ |
NAPA Net: Industry Execs See Role for Robo-advisors |
NAPA Net: WSJ Issues Liberal Manifesto on 401k Plans |
NAPA Net: Tax Bills Would Affect IRAs, Pensions |
NAPA Net: God Save the Queen |
NAPA Net: Provider Trends and the Future of ETF-only 401k Plans |
NAPA Net: Schlichter on the Future of Class Action Litigation |
NAPA Net: Are Massive Outflows on the Horizon? |
NAPA Net: Fiduciary Warranties: Caveat Emptor |
NAPA Net: Top 10 Attributes of Effective Plan Professionals |
NAPA Net: Plan Sponsors Trust Advisors But Have High Expectations |
NAPA Net: 6 June 1944 |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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