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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/24/14

October 27
00:02 2014

1020805_25983300_Trending_Topics_2014.10.27_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:
Exclusive Interview: Jerry Schlichter Reveals 3 Ways 401k Plan Sponsors Can Avoid a Fiduciary Breach,” (, October 21, 2014). “If diversification of products in the annuity is limited, the product may result in a fiduciary breach because…”

Compliance – The Supremacy of the 401k:
For all the bad stuff about the 401k, it turns out things aren’t as bad as the pundits and politicians have made it sound. It makes you kind of kinda wonder. Ya think there’s an agenda being their constant slamming of the 401k? And why are they so sure they can dupe the masses? Do these elites thing those masses are unenlightened?
Forget pensions, retirees better off with 401k plans, ICI says,” (BenefitsPro, October 20, 2014) Well, lookee, lookee, we finally have the real numbers. Remember all those muckity-mucks that pretend things were so much better in the “good old days when everyone had a pension”? Turns out things are a lot better for retirees today now that we have 401k plans instead of pension plans. And by “better,” the data shows a greater percentage of people are covered and they are receiving more money in real terms. Anyone still want to go “Back to the 70’s”?
10 mistakes that may trigger a 401k plan audit,” (Employee Benefit News, October 21, 2014) The great thing about this article is that, not only does it have a list of 10 mistakes, it starts with a separate list of 4 up-and-coming issues that might set off some red flags.
Labor, business urge Congress to act on MEPs,” (BenefitsPro, October 21, 2014) Really, it’s only a matter of time.
Social Security Benefits Rising 1.7% For 2015, Top Tax Up 1.3%,” (Forbes, October 22, 2014) Hmm, is this a good or a bad sign?
Should insurers handle public-pension payouts?” (MarketWatch, October 22, 2014) Don’t be fooled by this smoke and mirrors trick. Although it sounds like we’d be privatizing public pensions, who’s left holding the bag if the private insurance company goes under? The taxpayers, that’s who. And now we’ve just given these private insurance companies the house money to play with. It’s all upside and no downside. Kinda sounds like the S&L scandal of 20+ years ago.
401k contribution limits raised to $18K,” (BenefitsPro, October 23, 2014) And oddly, the politicians are talking about doing away with these things altogether. The key point here, by the way, is the increase in the catch-up provision and the need to perhaps increase it even further in the future.
Treasury, IRS OK annuities in 401k target date funds,” (InvestmentNews, October 24, 2014) This is a huge win for the insurance industry. And to think, less than a generation ago it was illegal to use retirement funds to buy annuities. Something about double dipping…

Fiduciary – “You Say Toe-mae-Toe, I Say Toe-mah-Toe,..”:
“You say adviser, I say advisor…” When the Grey Lady doesn’t know the difference, how can you expect the unenlightened masses to?
Before the Advice, Check Out the Adviser,” (New York Times, October 10, 2014) Wow, this article makes us cringe. The headline makes us cringe. Although a valiant effort to bring the issue of the fiduciary standard into the mainstream, and the reporter definitely knows her stuff, the editors failed her by using an “er” instead of an “or” at the end of the word “advisor.” They were correct to use the “er” ending when talking about Registered Investment Advisers, but they failed by also referring to broker advisors as “advisers” (they’re not “advisers,” they’re “advisors”). So, they’re headline inadvertently indicts the very service providers they intend to laud. What they really meant was to “check out the advisor” and, as implied by the content of the piece, make sure they’re an “adviser.” Even more cringe worthy – the article references with a link the fact that Merrill Lynch calls themselves a “trusted adviser” when the link (and therefore Merrill Lynch) correctly uses the term “trusted advisor.” I remember the days when you would never see an editing error of this magnitude in the New York Times.
Do we really need more deliberation on the fiduciary standard, commissioner?” (InvestmentNews, October 19, 2014) Barbara Roper takes the gloves off and she really lays it into SEC Commissioner Michael Piwowar for refusing to see the obvious. Let’s restate that: She really, really, really lays it into him. (You’ll have to read the article to get the joke here.) The best thing Roper says? This broker/Adviser confusing didn’t evolve naturally, it’s all the SEC’s fault. The confusion didn’t exist before the SEC mindlessly allowed it to exist.
Borzi taking a back seat on fiduciary,” (Investment News, October 21, 2014) But only because the new Secretary of the DOL promised to listen to the “industry.” And by the “industry” he means that portion of the financial community opposed to Borzi’s efforts. I’m sure he’d listen to the investment advisers in favor of the rule, but they are part of the “too big to fail” (meaning, they’re too small to contribute to PACs) crowd that is steering the regulators in their direction. Remember when government used to be the champion of the little guy? Apparently, those days are passed.
Fiduciary Rule to Snag BDs on IRA Rollovers,” (ThinkAdvisor, October 21, 2014) Yeah, baby! Level that playing field!
What constitutes misuse of an adviser or other expert by a fiduciary?” (Employee Benefit Adviser, October 24, 2014) Pretty sound advice from an ERISA attorney.

Fees – Speak No Fees, Hear No Fees, See No Fees:
And it’s funny just how unenlightened those masses are.
Half of Baby Boomers Don’t Know They Pay IRA, 401k Fees,” (DailyFinance, October 22, 2014) No, really, people think they get their 401k taken care of by professionals simply out of the kindness of those professionals hearts. Of course, for the tone of this article (and the fact that it quoted last year’s discredited Frontline episode “The Retirement Gamble,” you’d think the author feels professionals shouldn’t get paid at all.
Has the well run dry for Schlichter?” (BenefitsPro, October 23, 2014) Why Jerry Schlichter might be a victim of his own success – and why retirement investors should be grateful.

Investments – Condemned to Repeat It:
So much of investing success relies on discipline. Without it, history will repeat itself, as it usually does, and the masses will pay for that infamous unenlightenment.
Q&A: Retirement investing advice in volatile market,” (USA Today, October 17, 2014) The view from the mass media.
Why I Won’t Own Bond Funds in My Retirement Portfolio,” (Money, October 20, 2014) If you’re an investment adviser of the portfolio manager ilk, you already know the answer to this question. If you aren’t, then you better read this a lot closer. This is not what they taught you in asset allocation class.
Market volatility: 5 things to tell 401k plan participants,”  (Employee Benefit News, October 21, 2014) If you’re a pro, you already know this. If not, you better know this.
Are You Getting It Wrong on Risk Tolerance?” (Financial Planning, October 21, 2014) And the first comment reads, “OK. We all know the old system doesn’t work but does where do we find the new way of quantifying a client’s risk? Does anyone have a solution that isn’t just theory?” In the spirit of shameless self-promotion, yes, there is a solution. It’s in the forthcoming book by someone we all know titled, “Hey! What’s My Number?” Here’s a hint: Given the vast over use and abuse of the word “risk,” when need to find a new term. The book not only offers a more appropriate candidate, it explains why that word is better and shows you how to use it in real life. There’s even a free web-app to help.
3 Steps Retirement Investors Must Take Now To Survive This Market,” (Money, October 22, 2014) Sigh… Yet another example of what’s wrong with the mainstream media. Here’s an article that purports to be about investing but it’s really about self-analysis. Worse, it steers the reader away from the correct way of achieving financial goals (by figuring out what your need) and back to the failed “risk tolerance” motif. Can’t we just bury this bad idea once and for all!
Cheap oil presents opportunity for retirement portfolios,” (MarketWatch, October 23, 2014) By golly! An investment article that actually talks about investments!

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.
Accelerating auto-escalation,” (Employee Benefit Adviser, October 15, 2014)
Four Ways to Save for an Early Retirement,” (Wealth Management, October 17, 2014)
Easing Into Your Retirement Role,” (US News, October 17, 2104) – Yahoo Finance
How to Make Your Savings Outlive You,” (Wall Street Journal, October 18, 2014)
The Retirement Readiness Challenge: Five Ways Employers Can Improve Their 401k Plans,” (Voluntary Benefits Resource, October 20, 2014)
5 Career Checkpoints on the Road to Retirement,” (US News, October 20, 2014) –
How retirees can tend their mutual fund ‘garden’,” (MarketWatch, October 20, 2014)
Retirement-Age Probe Could Affect Firms: Business of Law,” (Businessweek, October 21, 2014)
Will your retirement savings last?” (CNN, October 21, 2014)
How To Find Out What You’re Paying For Your Retirement Account,” (Money, October 21, 2014)
How to benefit from new IRS ruling on Roth IRA conversions,” (MarketWatch, October 22, 2014)
Americans procrastinating on retirement savings,” (CNBC, October 22, 2014)
How to avoid running out of money in retirement,” (USA Today, October 22, 2014)
For Older Middle-Class Americans, Retirement Reality Check Kicks In,” (On Wall Street, October 22, 2014)
A Financial Adviser Sends His Clients on a Road Trip,” (Wall Street Journal, October 23, 2014)

Wisdom from Some of Our Favorite Blogs:
Pension Risk Matters: ERISA Plan Investment Committee Governance |
Pension Risk Matters: UK Survey Highlights Fiduciary Management Trend |
TrustAdvisor: Department of Labor’s Advisor Crackdown Speeding Out of Control |
ERISA Lawyer Blog: Sixth Circuit Holds That The Plan’s Venue Selection Clause Is Valid And Enforceable Against The Plaintiff |
The Chicago Financial Planner: Is the Dow Jones Industrial Average Still a Relevant Stock Market Index? |
TrustAdvisor: The $7 Trillion Opportunity: Money Management Tips From The Financial Advisors Of The Future |
ERISA Lawyer Blog: IRS Provides Guidance On Directing Distributions To Multiple IRAs |
Boston ERISA Law Blog: An Overview of 401k Litigation, Courtesy of Chris Carosa’s Excellent Interview with Jerry Schlichter |
Squared Away Blog: How Emotions Meddle with Money |
Boston ERISA Law Blog: Church Plan Litigation and My New Article On It |
Proskauer’s ERISA Practice Center Blog: Sixth Circuit Declines Deference to DOL and Enforces Venue Selection Clause |

Hot Tips from Popular Web Resources:
NAPA Net: Participants Fall for Lifestyle Funds in September |
NAPA Net: Bankruptcy Law Trumps State Protection of Pensions in City Bankruptcy |
NAPA Net: ‘Just’ Because |
NAPA Net: The New York Times Takes 401k Industry to Task on Edison Case |
NAPA Net: Connecticut Seeks Input on State-sponsored Retirement Plan |
Motley Fool: 3 Social Security Myths You Can’t Afford to Believe |
NAPA Net: Three Reasons Managed Accounts Are in Demand |
NAPA Net: Case of the Week: The PBGC and QDROs |
NAPA Net: Retirement and Health Plans Can Intersect |
NAPA Net: Retirement ‘Not Happening’ — For Those With No Retirement Plan |
NAPA Net: A Challenge for TDFs: Cash Outs |
NAPA Net: Is DOL ‘Out of Control’? |
NAPA Net: Senators Call for Guidance on Pension De-risking |
NAPA Net: IRS, SSA Announce Adjusted Limits for 2015 |
NAPA Net: IRS, EBSA Give Boost to TDF/Deferred Annuity Combinations |
NAPA Net: Are Auto Features Moving Millennials? |
Morningstar: Navigating the New Retirement World |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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