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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/12/14

September 15
00:02 2014

1020805_25983300_Trending_Topics_2014.09.15_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:
Have You Seen this “‘Vanity’ Paper” Purporting to Solve 401k Fiduciary Issues?” (FiduciaryNews.com, September 9, 2014). Proof again that what gets repeated in the media is not the same thing as a fact.

Compliance – Pension Plan Perplexity:
How many Band-Aids will it take to stop the bleeding? How many of you can count to infinity?
Frustrated States Push to Fill Small-Business Retirement Gap,” (ThinkAdvisor, September 4, 2014) Apparently the available of IRAs isn’t good enough and we need to force workers to save. What if they don’t want to? Haven’t they already made that choice? And why not pass legislation to bypass the DOLs handcuffing of MEPs? Isn’t that the quickest and most effective way to deal with the problem of lack of availability of retirement plans for smaller employers?
Forks in the road for ERISA,” (BenefitsPro, September 5, 2014) One last stab at ERISA’s 40th.
Can this government bailout be avoided?” (BenefitsPro, September 8, 2014) There are good MEPs (“Multiple Employer Plans”) and bad MEPs (“Multi-Employer Plans”). The former are 401k plans. They are good. The latter are pensions. They are bad. This article is about the pension ones. It’s not looking good. But that’s the problem with pensions.
ERISA amendment would save sponsors millions,” (BenefitsPro, September 10, 2014) This is again about pensions. Interestingly, there’s a bipartisan effort in the Senate to make it easier for companies to close portions of their business without paying a price for it with their pension obligations. It certainly sounds good for the company. Not so sure if it’s good for employees. But it was a bi-partisan plan whose lead sponsor is a Democrat.

Fiduciary – Fiduciary Standard? We Don’t Need No Stinkin’ Fiduciary Standard:
Surprise, there already is a Fiduciary Standard. The only question that remains is who will do a better job enforcing it – regulators or the market place?
Why the Existing Fiduciary Rule Won’t Work for Brokerages,” (Indie Advisor, September 9, 2014) The Fiduciary Rule (as opposed to the Fiduciary Standard), by definition, is not appropriate for the brokerage model. This article misses that point and so does the individual making the case against the Fiduciary Rule. When it comes to advising retirement plans (which the Fiduciary Rule, being that it comes from the DOL, is limited to) ought to prohibit all conflicts-of-interest. Yes, that includes ones that appear to be less expensive to the client. Why? Because the client is free to make the choice to use a broker for the less expensive but conflicted option in exchange for assuming the fiduciary liability for that choice. That means the client has the fiduciary liability, not the broker. That’s why the argument presented in this article is an apples-to-oranges argument. Of course, the debate referenced in the article was on the “Fiduciary Standard” not the “Fiduciary Rule,” but the same applies.
Vanguard Founder John Bogle Calls for Less Trading, Fiduciary Standard,” (On Wall Street, September 10, 2014) Bogle, in his usually inimitable way, is two smart by half again. He sends mixed messages in this article. On one hand, he says all the right things about why the Fiduciary Standard benefits investors. But then he needlessly slams commission-based brokers and goes into his typical index fund salesman mode. The Fiduciary Standard should not address traditional brokerage services. People should continue to have the right to engage a commission-based broker. Bogle confuses things by lumping this with commission-based advisers, something that certainly doesn’t pass the Fiduciary Standard test. And the thing about index funds? When will proponents of the Fiduciary Standard grasp that it’s a legal definition, not an investment definition. It has nothing to do with investment philosophy or types of investments. Indeed, as many have shown time and time again, you can just as easily violate the Fiduciary Standard with unmanaged (i.e., “index”) funds as you can with actively managed funds.
Covering the ‘naked’ fiduciary,” (BenefitsPro, September 11, 2014) This is about fiduciary insurance, and why plan sponsors might not be getting what they think they’re getting from their insurance carrier. Hint: A “Warranty” is not the same as “Fiduciary Insurance.” Here’s a second hint from the article: Hiring a 3(38) adviser helps reduce the plan sponsor’s personal fiduciary responsibility.
Signature Authority May Trigger ERISA Fiduciary Status,” (PLANSPONSOR, September 11, 2014) So you think you’re NOT a fiduciary? Not so fast…
Fiduciary Advocates Push for Best Practices,” (Financial Planning, September 12, 2014) The Institute for the Fiduciary Standard isn’t waiting for any regulator to declare all advice givers must follow fiduciary guidelines, they’re teaming up with NAPFA to create a “To-Do” list that’s easy to understand for everyday investors. Now, if only the word can get out to the mainstream press, where most everyday investors hang out.

Fees – Fees! Glorious Fees!:
If there’s one thing that makes Oliver twist more than Chubby Checker, it’s trying to find where all those hidden fees are, well, hidden.
3 steps to take when reviewing fee disclosures,” (Employee Benefit Adviser, September 8, 2014) If spring cleaning fits so well with the vernal equinox, then fall 401k reviews must be what fits so well with the autumnal equinox. This article is a good overview for newcomers and folks looking for a review.
New broker working group aims for easy-to-read fee disclosure,” (InvestmentNews, September 11, 2014) This might be one of those “believe it when you see it” sort of things as the idea is coming from an industry group.

Investments – Should I Stay or Should I Go?:
Investment-related articles have more to do with bellwethers than opening or closing bells. Like many market items, stock investing goes in cycles. Sometimes people buy short skirts. Sometimes they buy long skirts. The trick is to not rely on only one kind of skirt in your wardrobe.
3 Investments Retirees Should Avoid: Morningstar’s Benz,” (ThinkAdvisor, September 3, 2014) This just makes common sense, but, if we need to generalize it, it’s “avoid anything that sounds sexy, is a fad, and is recommended by your barber.”
Target-date funds reveal shift in retirement adviser value proposition,” (Employee Benefit Adviser, September 8, 2014) Fund companies are looking to these vehicles as a way of accumulating assets. Does this goal in anyway sound like it has something to do with the client’s best interest?
Where To Put A Spare $100,000 (for Retirement),” (Forbes, September 10, 2014) It’s important to see what the mainstream press considers to be good investment advice. Not because it’s “good,” but because it permits you to ponder further and deeper than you normally might.
401k Participants Turned Back to Fixed Income in August,” (PLANSPONSOR, September 10, 2014) Just when things (some would say “finally”) start to look convincingly bearish in the equity markets, this bullish indicator pops up.
5 Ways to Prepare Yourself for Retiring in a Bear Market,” (US News, September 12, 2014) Something tells us we weren’t reading these headlines in the fifth year of the Reagan administration. And believe us, in this case the headline is more significant than whatever the article might or might not have to say.

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.
5, 2014)
There’s More to Estate Planning Than Just the Will,” (New York Times, September 5, 2014)
Social Security Claiming Options: Don’t ‘Save the Date’,” (ThinkAdvisor, September 5, 2014)
How to phase into retirement,” (MarketWatch, September 6, 2014)
The Retirement X Factor: Longevity,” (Wall Street Journal, September 7, 2014)
How working in retirement impacts Social Security,” (MarketWatch, September 8, 2014)
You don’t need a fortune to retire happy,” (MarketWatch, September 8, 2014)
How much can I spend during my retirement?” (CBS MoneyWatch, September 8, 2014)
Which Findings About Retirement Readiness Are Right,” (PLANSPONSOR, September 8, 2014)
4 ways your 401k participants can save more,” (Employee Benefit Adviser, September 9, 2014)
How to Prepare for Retirement on a Low Income,” (US News, September 9, 2014)
The Economic Recovery Hasn’t Been Kind to Baby Boomers,” (Businessweek, September 9, 2014)
Job-hopping Millennials are losing big on retirement savings,” (CNN, September 9, 2014)
5 Tips to Help Your Income Last for Decades in Retirement,” (US News, September 9, 2014)
Employer Claims Against Fiduciary Liability Insurer Can Proceed,” (PLANSPONSOR, September 9, 2014)
Are you healthy enough to delay retirement?” (CBSMoneyWatch, September 10, 2014)
Not too late for Gen Xers to save for retirement,” (CBSMoneyWatch, September 10, 2014)
7 fatal flaws in America’s 401k plans,” (MarketWatch, September 10, 2014)
Retirement expectations remain low, global outlook foresees longer working careers,” (Employee Benefit News, September 11, 2014)
How the Financial Crisis Put Up Two More Barriers to a Secure Retirement,” (Reuters, September 11, 2014)
Thrift savings plan targets retirement messages to younger generation,” (Employee Benefit News, September 11, 2014)
Personal Finance: Does a Roth IRA affect a 401k plan?” (USA Today, September 12, 2014)

Wisdom from Some of Our Favorite Blogs:
Squared Away Blog: How Much For the 401k? Depends. |
Frugal Fiduciary: Brokerage Windows in 401k Plans: Nope. Not even if they say “pretty please.” |
Boston ERISA Law Blog: Administrative Exhaustion, Futility and the Last Refuge of the Scoundrel |
The Trusted Advisor: The Estate Settlement Process |
Squared Away Blog: Life Spans Not Falling for Less Educated |
Boston ERISA Law Blog: Real Knowledge, Fake Knowledge, and the Duty to Inquire: Time Limitations in ERISA Litigation |
Behavior Gap Newsletter: The Power of Reflection |

Hot Tips from Popular Web Resources:
NAPA Net: Where’s the Best Place to Retire? |
NAPA Net: Under Covered |
NAPA Net: Buffett-Backed Pension, 401k Cuts Draw Lawsuit |
Motley Fool: Social Security Benefits: How Much Do You Really Gain by Waiting? |
NAPA Net: Senate Finance to Focus on Retirement Policy |
NAPA Net: Case of the Week: Top Candidates for Cash Balance Plans |
NAPA Net: Is Fee Equalization the Next Wave after Fee Disclosure? |
NAPA Net: Survey Finds More Interested in Advice — But Most (Still) Aren’t |
NAPA Net: Now DB Plans Draw Hill’s Attention |
NAPA Net: Responding to Lower Investment Returns |
Morningstar: Want Help With the Big Social Security Decision? |
NAPA Net: Changes to Money Market Funds Will Affect DC Plans |
NAPA Net: ‘Good Will’ Hinting? Borzi Chides Congress, Hints at Executive Actions |
NAPA Net: IRS Tells Plan Sponsors What They “Have to” Do About HATFA |
NAPA Net: Roth IRAs: Who’s Contributing and How Much? |

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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