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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/15/14

August 18
00:26 2014

1020805_25983300_Trending_Topics_2014.08.18_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:
5 Things to Do to Improve a Retirement Investor’s Goal-Oriented Target,” (, August 11, 2014). The best strategy is to live in moderation – both today and when you retire.

Compliance – The Definition of Insanity:
It trying the same thing over and over again expecting a different result.
How Should the Government Change Social Security?” (Wall Street Journal, August 13, 2014) The three people featured in this article all have one thing in common – they all are trying to solve the problem of this legal Ponzi scheme by perpetuating the status quo. Guys, you gotta break a few eggs to make an omelet.

Fiduciary – Enforcing What’s Already There:
Do we really need a “new” Fiduciary Rule? Do we really need a “new” Fiduciary Standard? Or do we just need to enforce the rules and regulations that are already on the books?
The 401k retirement complex: Retooling Americans’ nest egg,” (InvestmentNews, August 10, 2014) If you read author and famed attorney Jerry Schlichter’s point, they’ll look awfully familiar to those who demand the DOL enforce a very strict fiduciary standard on all 401k service providers.
How Advisors Lure Federal Workers Out of Low-Fee Retirement Plans,” (Financial Planning, August 12, 2014)  Here’s the problem with this article – it promotes the same lack of awareness about the real world that Martin Smith’s “Retirement Gamble” did on his PBS Frontline show last year. The issue has nothing to do with low fees. That is merely a coincidentally easy to access quantifiable that is total irrelevant to any thoughtful analysis. By highlighting “low fees,” the author destroys the credibility of the entire article even though the piece contains some useful truths. The fact is, the “low fees” reflect lower, less customized service and, contrary to the claims in the article, only mediocre (at best) investment performance. The real subject is lack of a fiduciary requirement. That’s what allows a provider to legally place someone in a product that’s not in the client’s best interests.
Fidelity quietly settles employee lawsuits,” (InvestmentNews, August 12, 2014) Fidelity involved in a conflict-of-interest? And this only pertains to their own employees. Is there something beyond this involving other firm’s employees? That’s what we all want to know.
Fidelity to Pay $12 Million to Settle 401k Suits,” (ThinkAdvisor, August 13, 2014) Different take on the same story as above.
Fourth Circuit decision spells more uncertainty for retirement plan fiduciaries,” (Employee Benefit News, August 14, 2014) This court case is a real doozy and you’ll have to read the article to fully appreciate the implications. First, this is a reverse stock option case. That means the plan sponsor got in trouble for removing employee stock as an investment option just prior to a dramatic rise in the stock. Second, and with far reaching implications, is the change in definition of “prudence.” No longer is it enough to say any reasonable fiduciary would make the same decision, this court has, in essence, redefined it to mean most fiduciaries would make the same decision. That’s a lot harder to measure.
SEC Cracking Down on Wrap Fees; Wins Court Case,” (ThinkAdvisor, August 15, 2014) This article has not one mention of the word “fiduciary” or the phrase “fiduciary duty,” but it can’t be avoided. The example cited in this case was a clear instance where a broker picked a suitable investment that wasn’t in the client’s best interest. If that ain’t fiduciary…


Fees – Behind the Green Door:
Who knows what happens behind the green door? Or something like that. It was a popular song at one time. It also describes the nefarious shenanigans many suspect goes on deep within these multi-layered products. You be the judge. You are, after all, the fiduciary. That means it’s your job to sniff these things out.
BlackRock fights lawsuit claiming ‘excessive fees’,” (InvestmentNews, August 15, 2014) Although on the face of it, this seems only relevant to high net worth investors, the concept of “fiduciary duty” and subadviser fees is deeply imbedded in all mutual funds. That means it’s also deeply embedded in all 401k plans. And, yes, “imbed” and “embed” are the same word, the former being the lesser used version of the latter, at least according to the Collins English Dictionary – Complete & Unabridged 2012 Digital Edition.

Investments – Playing with Fire:
As they say, bears and bulls make money, but pigs get slaughtered. Stretching for that extra ounce of investment return is usually what leads people – rookies and pros alike – into trouble.
Energy Master Limited Partnerships for Retirement Income?” (On Wall Street, August 8, 2014) This article wisely extols the need to proceed with caution pertaining to these investments. All is not always what is seems in the high dividend world of investment partnerships.
Should an Annuity Be Annuitized,” (On Wall Street, August 11, 2014) …because we simply must add yet another layer of fees to this investment product.
Retirement plan sponsors post modest returns,” (Employee Benefit News, August 12, 2014) This article talks about returns for the second quarter of the year (the average was 4%). Let’s hope this doesn’t become a trend in reporting. The last thing long-term investors should be looking at is performance numbers of less than five years, let alone a single calendar quarter.
Employee Stock Ownership Plans for Retiring Entrepreneur Clients?” (On Wall Street, August 15, 2014) Hmm, with all the recent court rulings about ESOPs and breaching one’s fiduciary duty, is this a direction anyone is seriously contemplating?

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.
Your Options for Required IRA Distributions,” (Wall Street Journal, August 10, 2014)
Here’s Why More Americans Are Retiring Earlier Than They Expected,” (Money, August 10 2014)
Use Your Roth IRA To Save For Both Retirement And College,” (Forbes, August 11, 2014)
How Today’s Workers Can Dodge the Retirement Crisis,” (Money, August 11, 2014)
Social Security: Optimize Both Spouses Benefits,” (On Wall Street, August 12, 2014)
Top 5 Retirement Expectations of Boomers,” (ThinkAdvisor, August 12, 2014)
Debt: The big threat to a happy retirement,” (USA Today, August 12, 2014)
Accessing Your Retirement Income: Sooner Or Later,” (Forbes, August, 12, 2014)
Why Workers Would Take a Pay Cut for This Retirement Benefit,” (Time, August 12, 2014)
Social Security Q&A: Will My Benefits Continue to Increase if I Delay Receipt Past 70?” (Forbes, August 13, 2014)
How to reduce your RMD by up to 25%,” (MarketWatch, August 13, 2014)
Retirement 2.0,” (BenefitsPro, August 13, 2014)
Client Retiring Unexpectedly? What to Do,” (On Wall Street, August 14, 2014)
Urgent need exists for employee education about retirement plan contributions,” (Employee Benefit Adviser, August 14, 2014)
Bucket Strategies for Retirement Cash Flow,” (On Wall Street, August 15, 2014)
Revisiting missed or late retirement plan deposits,” (Employee Benefit News, August 15, 2014)
Combating Inflation in Retirement,” (On Wall Street, August 16, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 3 Misunderstood Aspects of Social Security Benefits |
The Trust Advisor: Wealth Rising Faster Than GDP Can Trigger a Market Crash |
Behavior Gap: If Only: Competition, Envy & an Instagram Life |
ERISA Lawyer Blog: Eighth Circuit Holds That Surcharge, Reformation And Equitable Estoppel Could Be Available To Remedy The Fiduciary’s Failure To Provide An SPD |
Fiduciary Matters Blog: Fidelity Settles Lawsuit with Own Employees Over 401k ERISA Allegations |
ERISA Lawyer Blog: Sixth Circuit Holds That A Letter From The Plan Administrator Denying A Benefit Must Include Information On The Time Frame For Filing Suit To Challenge The Denial |
Proskauer’s ERISA Practice Center Blog: Righting a Wrong: The “Claim of Right” Doctrine and Other Tax Considerations for the Repayment of Pension Plan Overpayments |
The Chicago Financial Planner: Estate Planning Lessons from Celebrity Deaths |
Behavior Gap Newsletter: Could You Use a Little Mise-en-Place? |
The Trust Advisor: Boston Fed’s Rosengren Calls for Overhaul of Broker-Dealer Regulation |
The Frugal Fiduciary: Companies are trying to fill gaps in 401k fee disclosure regulations |

Hot Tips from Popular Web Resources:
NAPA Net: Should Your Target-date Fund Be DB-ized? |
NAPA Net: Retirement Plan Participants Have More App-titude |
NAPA Net: 401k Participant Transfers (Still) Quiet in July | Customize Your Income-Replacement Rate for Retirement |
NAPA Net: Can Dabblers Exist in the DC Market? |
NAPA Net: Fed Survey Finds Many Americans Not Ready for Retirement |
NAPA Net: Many Participants Have Never Increased Their 401k Contribution |
NAPA Net: Is Active Money Management on the Wane? |
NAPA Net: Hispanics’ Retirement Plans, Priorities Vary |
NAPA Net: EBRI Report Calls Out Pew, CRR on Retirement Conclusions |
NAPA Net: A Digital Divide in Benefit Communications |
NAPA Net: New Report Details Increasing Costs of Retirement Savings Tax Incentives |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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