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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 8/29/14

September 02
00:01 2014

1020805_25983300_Trending_Topics_2014.09.02_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:
The Rise and Fall of the American Pension,” (, August 26, 2014); “The Golden Goose Lays an Egg: Fiduciary Issues with Public Pensions,” (, August 27, 2014); and, “Are Pensions Merely Ponzi Schemes?” (, August 28, 2014). Once the mainstay of corporate benefits, pensions calcified into boulder-like burdens dangling from a noose around the neck of their company sponsors. Would the DOL allow a private plan sponsor to use retirement funds for his own personal benefit like politicians use public pensions? Are pensions worse than Ponzi Schemes? And why would anyone think the government can run a retirement plan in the first place?

Compliance – Municipality Madness:
When you learn about what’s really going on with public pension money, you don’t have to be the Howard Beale among your network of friends and co-worker to want to stand up and shout “I’m as mad as H-E-double toothpicks and I’m not going to take this anymore!” But it might help get positive things started.
CalPERS Decision Will Increase State Pension Liabilities,” (PLANSPONSOR, August 25, 2014) When will this madness ever stop?
Ban public pension plans now!” (BenefitsPro, August 28, 2014) The case is compelling, but a measured approach is acceptable.
The case against state-run retirement plans,” (InvestmentNews, August 28, 2014) A milder version of the above story, but with the same objective.
DOL Questions 401k Brokerage Windows,” (Forbes, August 28, 2014) This story is inching up the media food chain – as well it should. According to one study, this investment option has grown from 17% of all plans in 2007 to 40% in 2013. This option actually doubles the fiduciary burden on plan sponsors. Worse, while the mutual fund industry is highly regulated with standardized disclosure forms, private portfolio managers are not.
Is a country-wide pension system the answer to America s retirement woes?” (Employee Benefit Adviser, August 29, 2014)

Fiduciary – The Supreme Fiduciary:
We’ll see how much of a no-brainer the whole concept of “continually watching out for the best interests of the beneficiaries” really is. Ten to one if the entrenched industry interests (i.e., those not inclined to watch of for the best interest of the beneficiaries) lose this case, they’ll see its irrelevant because the new DOL fee disclosure rule will prevent this from happening in the future. Note to the rest of the world. Don’t buy it.
Supreme Court urged to hear fiduciary case,” (BenefitsPro, August 25, 2014) Asking and receiving are two entirely different things. The issue at hand, however, is monumental. Currently, lower courts have ruled that fiduciary decisions have a statute of limitations. At question is whether one’s fiduciary duty is ongoing or not. To give you a better sense of where the lower court came down, its decision is like saying a serial murderer can go scot free if his first murder occurred beyond the statute of limitations.
401k fiduciary breach lawsuit heads to the Supreme Court,” (InvestmentNews, August 27, 2014) A different perspective on the same story.

Fees – Can You Handle the Truth?:
Are folks beginning to see the light? Are they beginning to understand it’s not the mutual fund expense ratio itself, it’s what’s inside that ratio that matters?
Government Backs Top Court Review of 401k Plan Fee Case,” (PLANSPONSOR, August 27, 2014) In case you missed it able, this is a fiduciary case wrapped up in a fee case.
How to Navigate the Complicated World of 401k Fees,” (US News, August 28, 2014) Hold on to your hats folks, but this just might be the first ever mainstream media article about 401k fees that doesn’t list the mutual fund expense ratio as one of them. It correctly identifies “revenue sharing fees” as the relevant portion of the mutual fund expense ratio, not the expense ratio itself. Of course, this article was written by an industry practitioner, so maybe, despite its publication venue, doesn’t quite count as “mainstream media.”

Investments – Danger! Danger! Danger, Will Robinson!:
Signs of reaching for return are all around us. That’s usually not a good thing. Trouble is, until the whole house of cards comes tumbling down, record highs will only continue to fuel this fire. And you know what they say. “The bigger they are, the harder they fall.”
Michael Kitches: Smarter Retirement Portfolio Glidepath,” (Financial Planning, August 25, 2014) Surprise! This isn’t about target date funds. It’s about investing the old fashioned way – with your own portfolio of stocks and bonds. It may take another market crash, but sooner or later folks will learn it’s better to invest directly instead of through mutual funds.
This is the chart that stock bulls don’t want you to see,” (MarketWatch, August 26, 2014) Or, as some like to call it, “the reversion to the mean.” Read it and weep. And while you’re at it, you might want to reconsider your investment in unmanaged products.
Picking the right annuity is a ‘lifestyle’ choice,” (MarketWatch, August 26, 2014) About the best advice this annuity expert gives is to say no one should ever expect an annuity to perform better than standard investment products.
Apples or oranges in your 401k?” (BenefitsPro, August 27, 2014) A thoughtful response to the much abused marketing debate between the managed and unmanaged (i.e., active and passive) styles of investing.
Retirement Withdrawal Strategies: Should Clients Use Annuities?” (Financial Planning, August 28, 2014) Another annuity expert admits he tells client “are not guaranteed of any gains and their account value can go down.” For real entertainment, though, read the comments after the article.
Private Equity Is Coming to a 401k Near You,” (Wall Street Journal, August 28, 2014) Industry veterans will recognize this as another sign of a market top. Plan fiduciaries will recognize this as yet another difficult and complex thing they’ll have to deal with. Retirement investors, well, the smart ones will simply look the other way.

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.
Is It Time For A Hands-Off 401k?” (Forbes, August 22, 2014)
3 Things to Know About Your 401k’s Escape Hatch,” (Money, August 22, 2014)
Naming an IRA Beneficiary: Spouse or Trust?” (On Wall Street, August 22, 2014)
When it’s smart – if ever – to tap your retirement accounts,” (US News, August 23, 2014)
Insurance Against Outliving Your Retirement Savings,” (Wall Street Journal, August 23, 2014)
Why it’s so difficult to raise kids — and save for retirement,” (MarketWatch, August 24, 2014)
The Secret To Building A Bigger 401k,” (Money, August 25, 2014)
Smart Ways to Set Safe Withdrawal Rates,” (On Wall Street, August 25, 2014)
Changing Jobs? What To Do With An Old 401k,” (Forbes, August 25, 2014)
Retirement Planning for Small Business Owners and Self-Employed,” (MainStreet, August 25, 2014)
Despite Saving More, Workers Still Face Retirement Shortfalls,” (ThinkAdvisor, August 25, 2014)
Investors increasingly turning to advisers for help with retirement,” (Employee Benefit Adviser, August 26, 2014)
Why your baby needs a retirement account,” (The Washington Post, August 26, 2014)
Gender gap in financial literacy shrinks, work remains on retirement planning,” (Employee Benefit News, August 27, 2014)
What top 401k plans do differently,” (InvestmentNews, August 27, 2014)
5 factors to help employees target their retirement savings goals,” (Employee Benefit News, August 28, 2014)
7 Retirement Mistakes Gen X Is Making,” (Forbes, August 29, 2014)


Wisdom from Some of Our Favorite Blogs:
The Trust Advisor: Nevada, Alaska Win for Top Choices as Best Trust States in America |
ERISA Lawyer Blog: Eighth Circuit Rules That The Taxpayer Made A Rollover Contribution To An IRA, Thereby Offsetting Income From An Earlier IRA Withdrawal |
Boston ERISA Law Blog: Notes on DRI’s Upcoming Data Breach & Privacy Law Conference |
Squared Away Blog: A Financial Plan for Alzheimer’s |
Behavior Gap: One Sample Size Rarely Justifies a Big Money Decision  |
The Trust Advisor: With Rise of Wealth Management, A Call For More RIA Audits |
The Chicago Financial Planner: Eight Financial To Do Items for the Rest of 2014 |
Squared Away Blog: Stark Differences in U.S. Cost of Living |
Frugal Fiduciary: The Power of The “All-In” 401k Fee |
Behavior Gap Newsletter: Plans Only Work if You Make Them |
Pension Risk Matters: Foreign Corrupt Practices Act and Implications for Institutional Investors |
The Trust Advisor: Inheriting In Trust Can Protect Beneficiary |
Scholarly Financial Planner: College Students: I Failed. I Had Many Doubts. Yet, I Persevered. So Can You. |

Hot Tips from Popular Web Resources:
NAPA Net: What’s Driving — and Not Driving — 401k Fees? |
Morningstar: A 401k Rollover Checklist |
Motley Fool: Retire at 62: 5 Simple Reasons Why You Shouldn’t |
Kiplinger: Retirees Fare Poorly in Pension Advance Deals |
NAPA Net: Workplace Penchants |
NAPA Net: Survey Finds Advised Participants More Likely to Save, Have Goals |
NAPA Net: Council Considers Lifetime Plan Participation Options |
Motley Fool: Need Social Security Advice? Don’t Just Go to the Obvious Source |
NAPA Net: IRS Updates its 401k Plan Fix-It Guide |
NAPA Net: DOL Offers Some ‘Friendly’ Advice to Supremes on 401k Fee Case |
NAPA Net: What’s the Right Number of Funds in a Core Lineup? |
NAPA Net: Bankruptcy Judge Blocks 401k Participants’ Madoff Recovery Claims |
NAPA Net: Are Public Pensions Ponzi Schemes? |
NAPA Net: Kodak Changes Retirement Plan Strategy, Boosts DB Plan |
NAPA Net: Executive Benefits in the Wake of Pension Plan Freezes |
NAPA Net: 7 Steps to Building a Better Retirement World |
Kiplinger: How 6 Types of Retirement Income Are Taxed |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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