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

August 11
00:04 2014

1020805_25983300_Trending_Topics_2014.08.11_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:
How a Fiduciary Can Assess a Retirement Investor’s GOT,” (, August 4, 2014). Now that you’ve determined your Goal-Oriented Target, discover what it means.

Compliance – Nobody Gets It:
Why is it that those so adamant to proclaim “what’s right” for retirement investors know so little about the business? Hmm… A thought just occurred. Aren’t those the very same types of people you proclaim they know “what’s right” for every aspect of real world but know so little about the real world? ‘nuff said.
Annuity Aversion, Pension Envy,” (Financial Advisor, August, 2014) It’s all about cash flow. Unless the income can pay for the expenses, it’s not envy, it math. On the other hand, as this author points out, most Americans are funding public employee pensions while at the same time they have a hard time contributing to their own 401k plan.
‘Pension-smoothing’ survives transportation vote,” (BenefitsPro, August 1, 2014) Many feel this is budget gimmickry with Congress merely moving around money buckets in order to squeeze money for some pet project, in this case transportation. What retirement plans have to do with transportation is anyone’s guess, but it’s a patch that’ll keep things calm until they’re not.
Not so golden: Wealth gap lasting into retirement,” (Yahoo Finance, August 3, 2014) Here’s another one of those “warning shots across the bow” political pieces masquerading as an “objective” news story. The fact that people with more money can make more money is an ancient story. In fact, if memory serves, there’s actually a story about that in the bible. Ironically, the biblical story, unlike the message implied in this article, lauds those that use their wealth to create greater wealth. (It’s actually a fiduciary story.) The point isn’t that there’s a growing wealth gap, it’s whether lower income people can afford to retire. With the current safety nets in place, the answer is an overwhelming “Yes!” The real issue, however, is whether the middle class – those who don’t save and aren’t covered by government safety nets – can afford to retire. The jury remains out on that one.

Fiduciary – Peals of Thunder on the Horizon:
We see the concept of “Fiduciary” brewing on the horizon. Is it to make one last gasp of trying what has failed for the past five years? Or are we about to see the unveiling of “Fiduciary 2.0”?
Industry Gears Up for Fiduciary September,” (, August 4, 2014) A rundown of events, happenings, and, of course, issues. This is turning into a big thing.
Hope to hide from fiduciary risk? Fuggedaboutit,” (BenefitsPro, August 6, 2014) Some very good points on the difference between reducing fiduciary risk and eliminating fiduciary risk.
Quiz Helps Plan Sponsors Understand Fiduciary Role,” (PLANSPONSOR, August 6, 2014) Nice try. The article contains no examples. Skip this article and read the next one.
Fiduciary Responsibility for Investments a Serious Matter,” (PLANSPONSOR, August 8, 2014) This article is much better than the quiz article. It contains meaty examples that are sure to titillate even the most discerning of fiduciaries.

Fees – Getting What You Pay For:
There’s an increasing realization in the media that “low fees” don’t necessarily translate into “quality service.” Maybe this will become the fiduciary equivalent of the camel’s nose under the tent.
401k ‘Managed Accounts’ Mean Higher Fees for Investors,” (Wall Street Journal, August 6, 2014) Sometimes headline writers don’t read the article – and sometimes they do and just don’t care. According to the article, the official report also said managed accounts yield high returns and lower the risk. That’s just what the doctored ordered. The headline could have easily been written as “401k ‘Managed Accounts’ Mean Higher Returns/Less Risk for Investors.

Investments – Questioning Orthodoxy:
Everywhere you turned last week, you saw articles – many in the mainstream press – questioning the standard beliefs that veterans knew were wrong all the time. This is a good thing.
‘Index funds beat active 90% of the time.’ Really?” (MarketWatch, August 1, 2014) This is old news. Neither active nor passive significantly beats the other. This author, though, adds another layer to the analysis. His study shows the unmanaged index funds are only “average” performers compared to actively managed funds. This is precisely what the statistical models would predict.
Millennials End Up in Stocks for Retirement Head Start: Economy, Center for Retirement Research at Boston College,” (On Wall Street, August 4, 2014) And they’re better off for it.
Better Benchmarks Through Behavioral Finance?” (ThinkAdvisor, August 4, 2014) This isn’t about research that has been done. This is about research that will be done. What’s not clear is whether this will focus on merely making the investor comfortable or whether it will actually coax the investor towards achieving goals (and, we all know, rather than comfort, this focuses on discipline).
How Advisors Allocate Retiree Portfolios,” (On Wall Street, August 4, 2014) Well, maybe at least one advisor,… and an old fashioned one at that.
More Plan Sponsors Considering Re-Enrollment into TDFs,” (PLANSPONSOR, August 4, 2014) Like so many lemmings…
Despite recession, target-date funds aid retirement plan growth,” (Employee Benefit Adviser, August 5, 2014) To be fair, this article is less about the investing aspect of target date funds and more about them being among the factors that have led to growth in 401k plans since the market crash of 2008/2009.
Is 10 percent reasonable?” (BenefitsPro, August 5, 2014) Here’s a look at what is – and what isn’t – a reasonable annual return assumption. Hint: It’s not the historic average return (and the article explains why).
Changing the Name of the Game: A Look into the Future of Investing,” (Forbes, August 5, 2014) Could the millennials do to investing what the baby boomers did to rock and roll.
Why Workers and Retirees Missed the Roaring Bull Market,” (CNN, August 6, 2014) Wow. People are really ignorant. This study should be used as a reason why investors need to assume they aren’t as aware of the markets as they think they are.
How 401k Investors Can Beat a Bear Market,” (MainStreet, August 6, 2014)
Retire On $500,000? This Advisor Thinks Clients Can,” (Financial Advisor, August 7, 2014)

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.
IRA Contributions: The Perils of Procrastination,” (WealthManagement, July 24, 2014)
Millennials and Gen X Have Different Savings Goals,” (PLANSPONSOR, August 1, 2014)
When Roth IRA Conversions Aren’t Tax Friendly,” (On Wall Street, August 1, 2014)
Social Security Q&A: Will My Federal Retirement Wipe Out My Social Security?” (Forbes, August 1, 2014)
It Is Difficult to Factor Social Security into Retirement Planning,” (PLANSPONSOR, August 1, 2014)
20 Percent Rule: How Much Should Clients Be Saving?” (Financial Planning, August 4, 2014)
Older Workers More Anxious Than Retirees About Financial Future,” (ThinkAdvisor, August 4, 2014)
A Retirement Plan Sponsor Uses the Power of Inertia,” (PLANSPONSOR, August 4, 2014)
Increased retirement plan complexity underscores need for adviser assistance,” (Employee Benefit Adviser, August 4, 2014)
Most IRA Investors Withdraw the Bare Minimum: EBRI,” (ThinkAdvisor, August 5, 2014)
Get started now on 401k plan changes for 2015,” (Employee Benefit News, August 5, 2014)
Five Reasons Not to Despair About Retirement,” (Bloomberg, August 5, 2014)
With a Few Extra Steps, Advisors Can Help Increase 401k Plan Deferral Rates,” (WealthManagement, August 5, 2014)
How Much Do You Need for a Satisfying Retirement?” (MainStreet, August 5, 2014)
When Clients Working After Retirement,” (On Wall Street, August 5, 2014)
Lockheed Martin retirement plan case gets trial date,” (InvestmentNews, August 6, 2014)
Social Security Q&A: Can I File and Suspend at 62?” (Forbes, August 6, 2014)
Companies Lag in Matching 401k Programs,” (MainStreet, August 6, 2014)
Unexpected Consequences of Early Retirement,” (US News, August 6, 2014)
Retiring to the commune,” (BenefitsPro, August 6, 2014)
How diverse savings goals eat away at retirement plan participation,” (Employee Benefit Adviser, August 7, 2104)
Many Americans are not prepared for retirement: Fed survey,” (MarketWatch, August 7, 2014)
Smartphone Use Soars for DC Plan Participants,” (PLANSPONSOR, August 7, 2014)
BlackRock’s Larry Fink on the Retirement Savings Crisis,” (Businessweek, August 8, 2014)
Longevity Annuity Rules: What Advisors Should Know,” (On Wall Street, August 8, 2014)
Fiduciary responsibility: 4 areas to watch,” (Employee Benefit News, August 8, 2014)
IRA moves that won’t get you in trouble,” (InvestmentNews, August 8, 2014)
Better Ways to Work With Retired Women,” (On Wall Street, August 8, 2014)
Litigators Call for Supreme Court Review of Tussey Case,” (PLANSPONSOR, August 8, 2014)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: Rights of the Clients of Financial Advisors to Good Faith During Relationship Formation |
The Retirement Plan Blog: U.S. Supreme Court and Department of Labor Provide New Guidelines for ESOP Trustees |
ERISA Lawyer Blog: Second Circuit Rules That New York Law Prohibiting Insurer Subrogation Is Not Preempted By ERISA |
Boston ERISA Law Blog: Did the First Circuit Just Change its Test for Preemption? |
The Trusted Advisor: Wealth Managers Enlist Savvy Spy Software to Map Portfolios |
ERISA Lawyer Blog: Seventh Circuit Rules That Companies, Which Were Under Common Control With An Employer That Incurred Withdrawal Liability, Are Jointly and Severally Liable For The Withdrawal Liability |
Squared Away Blog: A Short-lived Retirement |
Pension Risk Matters: New is Not Necessarily Better and Could be Worse |
Behavior Gap: The Cost of Being Bad at Math |
ERISA Lawyer Blog: IRS Provides Guidance On Retirement Plan Terminations |
Squared Away Blog: An Anti-Retirement Advocate |
The Frugal Fiduciary: Plan re-enrollment: The “Wonder Drug” for your company’s retirement plan |
Behavior Gap Newsletter: Short-Term Feedback, Long-Term Impact |
The Chicago Financial Planner: 6 Signs of a Good 401k Plan | Lessons Learned |

Hot Tips from Popular Web Resources:
NAPA Net: No, Virginia, There Is No ‘Lock-box’ |
NAPA Net: The Status Quo |
ICI: Unconventional Wisdom on Retirement Preparedness |
NAPA Net: BPC Panel: One-size-fits-all Solutions — Won’t |
NAPA Net: ‘Robin Hood of Fees’ Aims to Poach 401k Plans |
NAPA Net: Case of the Week: Leased Employees — To Cover or Not to Cover |
NAPA Net: Pre-retirees More Optimistic — Retirees Not So Much |
NAPA Net: Are Smaller Plans “Better?” |
NAPA Net: N.Y. City Pensions a Victim of Politics and Mismanagement |
NAPA Net: “Repeat” Performance |
NAPA Net: Md. Gov. O’Malley Names Members For Retirement Security Task Force |
NAPA Net: Kids’ College or Your Retirement? Single Parents Struggle |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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