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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/3/14

October 06
00:02 2014

1020805_25983300_Trending_Topics_2014.10.06_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 Poor Plan Design Damages Retirement Readiness,” (, September 30, 2014). This is the first of a 4-part series that has drawn many readers. Here are the other parts: “Which Retirement Plan Fiduciary Most Drives 401k Plan Design,” (, October 1, 2014); “Steps the 401k Fiduciary Can Take to Avoid Poor Plan Design,” (, October 2, 2014); and, “Beyond Auto-Mania: The Future of 401k Plan Design,” (, October 3, 2014)

Compliance – The Imaginary World vs. The World of Reality:
While policy wonks bicker on whether the 401k retirement crisis is real or not, the pension retirement crisis continues with fully fury. But the powers-that-be like pensions. Pensions are the collective. The collective is good. 401ks are the individual. “Individuals are bad. Bad, individuals, bad. Why can’t you be more like the collective. Good, collective, good.”
Group annuity, lump sum plan to help Motorola unload pension liability,” (Employee Benefit News, September 26, 2014) Here’s one large company that has figured out a way to get out of the Ponzi Scheme – er – pension business.
Strategies arise to take advantage of new IRS after-tax rollover,” (InvestmentNews, September 27, 2014) The IRS taketh away, but the IRS giveth back. This article is all about the use of ROTHs in 401k plans.
Andrew G. Biggs and Sylvester J. Schieber: The Imaginary Retirement-Income Crisis,” (Wall Street Journal, September 29, 2014) Here’s the opening salvo of a public policy debate that is spilling over into the mainstream from the paneled confines of Capitol Hill. It’s the old “my statistics are better than your statistics” kind of debate. We prefer the kind of data that comes from where the rubber meets the road.
Bankruptcy Judge in California Challenges Sanctity of Pensions,” (New York Times, October 1, 2014) If you can stomach the usual snarky liberal presumptions the Gray Lady has unfortunately become famous for the past couple of decades, this article might be worth reading. It’s very enlightening as it shows how a public entity – CALpers – essentially has used unfair advantages to compete (successfully) against private firms. The judge has basically said, “If you compete in that market, you must take the same risks as that market.”

Fiduciary – There’s Already a Fiduciary Standard, But…:
…it’s unenforceable. Or worse, it’s subject to too many technical loopholes. But now the Supreme Court has inserted itself into the debate. Well, at least part of it.
FSI Warns on DOL Fiduciary, FINRA CARDS Rules,” (Financial Planning, September 29, 2014) It’s all about saving their business model, not doing what is in the best interests of the client.
DOL Chief’s Potential Departure Wouldn’t Stop Fiduciary Plan,” (ThinkAdvisor, September 29, 2014) Look, let’s be honest here. Borzi is a heck of a lot more important than Perez on this.
SEC commissioner Piwowar leans against fiduciary-duty rule,” (InvestmentNews, September 30, 2014) He wants more disclosure instead. Apparently he isn’t up on his Daylain Cain. At least he admits we currently have “disclosure overload.”
Why retirement plan fiduciaries need to be more engaged,” (Employee Benefit Adviser, October 2, 2014) Sorry, but it’s not immediately clear what this headline has to do with the article.
Edison case raises concerns about ERISA statute of limitation protections,” (Employee Benefit News, October 3, 2014) An extremely good rundown of the facts and significance from a knowledgeable attorney.

Fees – Back. Big Time:
The whole fiduciary thing hinges on fees. At least right now it does. Fees represent the weakest link in the fiduciary chain. That’s why all the court cases involving a fiduciary breach revolve around excessive fees.
Supreme Court To Hear Case On 401k Fees,” (Financial Advisor, October 2, 2014) The unfortunate thing is the real villains here – those charging the high fees – have smart lawyers and usually get away relatively unscathed. The plan sponsor – in part the victim here – is usually the one nail for the fiduciary breach.
401k Fees at Issue as High Court Accepts Edison Worker Appeal,” (On Wall Street, October 3, 2014) What else can be side – “fiduciary” has made it to The Show.
Supreme Court to consider workers’ rights to sue 401k plans,” (Investment News, October 3, 2014) Lest you get too excited, this article reminds us the case is merely about the right to sue, not anything about actual culpability.

Investments – The Long Strange Trip:
When the market nears a top, investors start looking at alternatives. They all look good as the market rises. But when it falls, well, you know what they say about “the bigger they are…”
3 Investments Retirees Should Avoid: Morningstar’s Benz,” (ThinkAdvisor, September 29, 2014) Several good reasons why you shouldn’t invest in foreign currency bonds, emerging market funds, and alternative products.
How to reassure retirement plan participants in light of PIMCO moves,” (Employee Benefit News, September 30, 2014) To be honest, there are probably far greater issues if these folks are still investing their retirement money in bond mutual funds thinking that they’re safe.
Should you drink the annuity COLA?” (MarketWatch, September 30, 2014) A pretty thorough, albeit short, article if you’re into that kind of stuff. Personally, we thought the graphic alone was worth the visit. Seriously, who puts this creative much effort into a trade press story that is way above the heads of many investors?
Employers Look to Enhance 401k Investments,” (PLANADVISER, September 30, 2014) Wow! Here’s an example of a great idea ruined by poor execution. For quite a few years now, smarter plan sponsors have been “white labeling” investment options from the brand names of mutual fund companies to generic investment labels (e.g., “Multi-Cap Value”). This is generally considered a good idea since it gives the employee enough information to make an informed decision but not enough to go crazy – or become married to a brand name. This article tells that story – but with an awful twist. It seems some folks want to “diversify” these white label options be loaded them with several – instead of one – mutual fund. Well, la-dee-dah, didn’t we just create a high priced index fund!
Tax Court Rejects Real Estate Move at Schwab IRA,” (Financial Planning, September 30, 2014) Let this be a lesson to all those interested in using alternative investments (of which real estate is considered) in retirement plans.
How preferred stocks add income to your retirement portfolio,” (MarketWatch, October 1, 2014) …since it worked so well during the market crash of 2008/2009.
Is Prepaying A Mortgage A Good Retirement Investment Option?” (Forbes, October 1, 2014) The author takes way too long to say something that could have been said in a couple of paragraphs.

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.
In case you missed it: Retirement,” (Employee Benefit News, September 29, 2014)
How to survive your spouse’s retirement,” (InvestmentNews, September 29, 2014)
Michael Kitces: When Not to Convert to a Roth IRA,” (Financial Planning, September 29, 2014)
Retiring Couples’ Dilemma: The $100,000 Age Difference,” (Forbes, September 29, 2014)
Estate planning: Not just for the 1%,” (CNBC, September 29, 2014)
The Social Security Mistake Even Its Reps Are Making,” (Money, September 30, 2014)
Where DC plan sponsors fall short,” (BenefitsPro, September 30, 2014)
Time to put your 401k plan on ‘auto’?” (BenefitsPro, September 30, 2014)
Federal workers lose big by pulling out of low-cost retirement plans,” (CNN, October 1, 2014)
Borrowing from 401k can cost more than you think,” (USA Today, October 2, 2014)
Third Circuit serves up big win for retirement plan service providers,” (Employee Benefit News, October 2, 2014)
Retirement Planning: Men Can Learn From Women,” (Forbes, October 2, 2014)
A retiree’s dilemma: Spend now or save for later?” (MarketWatch, October 2, 2014)
More have access to retirement plans than thought,” (BenefitsPro, October 2, 2014)

Wisdom from Some of Our Favorite Blogs:
Scholarly Financial Planner: Evidence of Harm, Part 2: “Suitability”? |
The Trust Advisor: Senator Proposes 65% Estate Tax |
ERISA Lawyer Blog: Ninth Circuit Holds That Decision To Prohibit Transfer Of Account Balances From One Plan To Another Did Not Violate Anti-Cutback Rule |
fi360: What’s in an investment policy statement? |
fi360: Is the IPS just ammunition for a lawsuit? |
Behavior Gap: Being Mindful Can Help Guide a Decision |
Fiduciary Matters Blog: John Hancock Dodges ERISA Class Action |
Boston ERISA Law Blog: Santomenno v. John Hancock: Does It Matter That the 401(k) Service Provider Is Not a Fiduciary? |
Fred Reish: Re-Proposal of DOL Fiduciary Advice Regulation |
The Frugal Fiduciary: Why small business retirement plans with high asset balances pay more  |
Fiduciary Matters Blog: Supreme Court Grants Cert in Tibble v. Edison |
Behavior Gap Newsletter: What Do We Really Need?  |

Hot Tips from Popular Web Resources:
NAPA Net: Florida’s Tax on 401k Loans |
NAPA Net: 401k Assets Rise in Q2 |
NAPA Net: Will 2015 Contribution/Benefits Limits Rise? |
NAPA Net: ‘Left’ Overs |
Yahoo: “Broken Eggs”: What happens when your retirement is ambushed   |
Motley Fool: Social Security: How to Collect Benefits From a Past Marriage |
NAPA Net: Congress Must Put Ideology Aside in Pension Debate, Hatch Warns |
NAPA Net: Case of the Week: Converting 401k Plan After-tax Accounts to Roth Assets |
NAPA Net: Moody’s: Public Pension Underfunding Nearly $2 Trillion |
NAPA Net: ESOPs Foibles: Borzi Offers ESOP Tips |
NAPA Net: Disclosure Could Replace Uniform Fiduciary Standard, Piwowar Says |
NAPA Net: 401k Investment Menus: Sans Small-Cap Value, EM and REITs |
NAPA Net: ‘Ultimate’ Authority: Third Circuit Tosses ‘Excessive Fee’ Suit |
NAPA Net: Iwry: Expanding, Enhancing Participation Key to Retirement Saving |
NAPA Net: Is the Time Right for 3(16) Solutions? |
NAPA Net: Supreme Court to Hear Tibble Plan Fee Case |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA


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