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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/10/14

October 13
00:03 2014

1020805_25983300_Trending_Topics_2014.10.13_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:
What’s Really Wrong with 401k Employee/Trustee Education,” (, October 7, 2014). Forget focusing on content, it’s time to use proven psychological techniques to reframe the nature of employee and trustee education.

Compliance – Is Washington Listening?:
It doesn’t take a rocket scientist to figure out how to help and encourage retirement saving. It does, however, take a politician to really muck things up. First, they ignore common sense. Second, they make things worse.
8 retirement plan fixes Congress should consider,” (Employee Benefit News, October 7, 2014) A fairly comprehensive – and common-sense – list.
Pension Dropouts Cause Pinch,” (Wall Street Journal, October 6, 2014) Well, what do you know? It turns out the pension insurance program created by ERISA 40 years ago (the PBGC) to prop up the legal Ponzi Schemes known as “pension plans” is itself a legal Ponzi Scheme. As more and more corporations do the right thing and convert their defined benefit Ponzi Schemes into honest defined contribution plans, the PBGC finds itself with fewer and fewer “marks” to pay its premiums. Sooner or later, someone’s not going to get paid because all the money will be gone. But, isn’t that what happens in all Ponzi Schemes?

Fiduciary – Must have Spent Too Much Ink Last Week:
Amazing how quiet this area is, although, truth be told, the Supreme Court Tibble case isn’t really about fees, it’s about one’s fiduciary duty. But that’s too arcane for most reporters, so instead they focus on the fee issue.

Fees – The Pendulum Swings Further:
We’re getting more fallout. Last week it was the Supreme Court and the Tibble v. Edison. This week it’s Citigroup. Have fun.
Supreme Court decision on landmark 401k fee case could have domino effect,” (InvestmentNews, October 6, 2014) As we said last week, this case isn’t directly about excessive fees, it’s about the statute of limitations on one’s fiduciary duty. If the Supreme Court agrees one’s fiduciary duty is ongoing (in favor of the plaintiff), then look for broad changes in the industry – much broader changes than any SEC or DOL fiat would accomplish.
Judge rejects Citigroup bid to dismiss 401k fee case,” (BenefitsPro, October 8, 2014) Is it possible to not win and still not lose? Citigroup is trying its best in this case, now almost seven years old. On the face of it, it appears to have all the elements of a classic fiduciary breach: self-dealing by placing your own products in your own retirement plan. Who know? By the time the court decides, the original plaintiffs’ grandchildren may have a few pittance to split between them.

Investments – Common Sense in a Sea of Theory:
There’s a lot of surprisingly good stuff this week, along with the usual mumbo jumbo tripe about various investment fads.
The Perils of Indexing,” (Research Magazine, October 2014) The more this story gets out, the more interesting the debate will become. But remember one thing, you read about it in first, on May 12, 2010 in “3 Reasons to Outlaw Index Investing Right Now (and One Selfish Reason Not To) in 5 Acts.”
The Hidden Risks and Costs of ETFs,” (US News, October 7, 2014) Has the shine come off the rose? ETFs are not the slam dunk some headlines would have you believe. In fact, this article explains why good old-fashioned index funds might be better.
Capital from Self-Directed IRAs Flows to Real Estate,” (WealthManagement, October 8, 2014) As more and more baby boomers leave the cocoon of corporate comfort to relax and retire, we’re seeing an increase in IRA Rollovers. These now “self-directed” IRAs have traditionally been invested in exchange traded securities (including mutual funds). Interest is growing, however, in alternative investments like real estate. Sign of a market top?
Bond bears are right — and wrong,” (MarketWatch, October 8, 2014) Sure, lots of people have been warning about bonds crashing once interest rates rise. That doesn’t mean interest rates will rise soon. It also doesn’t mean bonds won’t crash once they do.
How best to generate lifetime retirement income?” (CBS News, October 8, 2104) Can’t decide between a systematic withdrawal and an annuity? This author explains the advantages and disadvantages of both.
Stop tinkering with your retirement portfolio,” (MarketWatch, October 9, 2014) We know it, but do they know it? Financial professionals have long warned against over-analyzing a portfolio in the short-term. But, still, investors want to react to their monthly or quarterly statement.
Retirees Should Invest for Total Return,” (US News, October 9, 2014) Makes sense. Now, the article does go into the differences between investing for growth and investing for income. That’s good, but it’s less clear why this should be emphasized instead of a simple statement on total return.

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.
AdviceIQ: The 401k ignorance factor,” (USA Today, October 4, 2014)
Retirement-Planning Tips for Singles,” (Wall Street Journal, October 5, 2014)
Heard Off the Street: Retirement crisis? Statistics say yes — and no,” (Pittsburgh Post-Gazette, October 5, 2014)
Top 10 Social Security Myths: Part 2,” (ThinkAdvisor, October 6, 2014)
4 scams that target boomers,” (MarketWatch, October 6, 2014)
Why I Want a Real Retirement, And You Should Too,” (Money, October 6, 2014)
A 401k Conundrum: Can You Make Cash Pile Last for Life?” (Businessweek, October 6, 2014)
What To Do When Your Pension Is Frozen,” (Money, October 7, 2014)
8 tips to maximize your 401k for retirement,” (USA Today, October 7, 2014)
Should boomers give millennials money advice?” (MarketWatch, October 8, 2014)
Why 401k education has failed,” (BenefitsPro, October 9, 2014)
3 biggest risks every retirement saver should know about,” (CNN, October, 8, 2014)
Here’s the Only State Where Retirees Have Enough Income,” (Money, October 9, 2014)
Lackluster savings tarnishing seniors’ golden years,” (CNBC, October 9, 2014)
How Long Will Your 401k Funds Last In Retirement?” (Forbes, October 9, 2014)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: Gresham’s Dynamic: Why Bad Actors Dominate Financial Services |
Behavior Gap: Investing in Real Estate: Rarely a Good Idea |
Scholarly Financial Planner: Tibble v. Edison Reviewed by U.S. Supreme Court – But Are the Right Facts Being Considered? |
Frugal Fiduciary: Financial wellness is impossible to achieve without plan participation |
ERISA Lawyer Blog: IRS Discussed Retirement Plans Startup Costs Tax Credit |
The Chicago Financial Planner: 5 Mutual Fund Investing Lessons from the Bill Gross Saga |
ERISA Lawyer Blog: IRS Says It’s Not Too Late for a Tax Break – Start a SEP Retirement Plan for 2013 |
The Trust Advisor: Ten Things To Do With Your Finances Before Year-End |

Hot Tips from Popular Web Resources:
NAPA Net: Abstract ‘Art’: 401k Plans, Participants Continue to Expand |
NAPA Net: Participant Balances Slip Some in September |
Morningstar: 5 Keys to Retirement Investing |
NAPA Net: Are Plan Sponsors Considering a More Customized Approach? |
NAPA Net: Ghilarducci: Retirement Crisis is Real — Really? |
NAPA Net: EBSA Focused on Disclosure as 408(b)(2) Turns 2 |
Motley Fool: 5 Things to Know Before Applying for Social Security Benefits |
NAPA Net: Can We Fix Participant Education? |
NAPA Net: Case of the Week: Recharacterizing a Conversion |
NAPA Net: Sized Up: Firm Size and Plan Sponsorship Rates |
Morningstar: Unpacking the 4% Rule for Retirement-Portfolio Withdrawals |
NAPA Net: How to Hire the Next Generation of Advisors |
NAPA Net: Frontier Markets: An ‘Emerging’ Asset Class? |
NAPA Net: Small Biz Owners Say Workers Should Be Saving 10%-19% of Pay |
Kiplinger: The Pros and Cons of Cash Balance Pension Plans  |
NAPA Net: How Many Are Covered by a Retirement Plan? |
NAPA Net: Connecting Personal Budgeting and Deferral Rates |
NAPA Net: Road Ragers: Where Are the Biggest Hater-Drivers? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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