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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 11/21/14

November 24
12:13 2014

1020805_25983300_Trending_Topics_2014.11.24_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: Don Trone Reveals 401k Plan Sponsors Want This Instead of a Fiduciary,” (, November 18, 2014). Discover why “fiduciary” is the last word you want to bring up to 401k plan sponsors.

Compliance – “Life, Liberty…”:
But not your property, which means your money, which means your IRA. John Locke must be turning over in his grave. Tom Jefferson isn’t, though, because, after all, we all know money can’t buy happiness.
How Executive Ended Up With $196 Million in an IRA,” (Bloomberg, November 19, 2014) As the article implies, why is this news? This is exactly the way the law works. You might not agree with it, but it’s the law. In fact, for traditional IRAs, this is a non-story. The government stands to benefit from almost double the taxes when the money is taken out and taxed at the income tax rate rather than the capital gains tax rate (this is the hidden secret deception of the IRA “tax advantage”). On the other hand, this really is the long-stated advantage of ROTH IRAs. That’s why Roth and Kemp pushed for this new form of retirement savings vehicle. Indeed, this was the compromise – they really wanted no taxation on any form of retirement savings, including traditional IRAs.
IRS Urged to Crack Down on Multimillion-Dollar IRAs,” (On Wall Street, November 20, 2014) We could be wrong, but the way we were brought up said that Congress makes the laws and the only thing the Executive Branch can do is enforce them. It’s impossible to understand how the IRS can “crack down” on law-abiding citizens, even if the IRS doesn’t like the law.

Fiduciary – Turn the Page…:
It’s not quite “turn out the lights,” it’s more on the order of Plan B.
Veres: Give Up the Fiduciary Fight,” (Financial Planning, November 17, 2014) Veres suggests three solutions: stop calling brokers “advisors” (as we already know, this won’t work – see “401k Plan Sponsors Not Only Ones Affected by ‘Adviser’/‘Advisor’ Fiduciary Confusion,”, October 28, 2014); adopt a Fiduciary Oath (Veres mention Harold Evensky’s but Ron Rhoades has written extensively one this); and, create a consensus-based definition of what a fiduciary adviser really is.
The Wall Street ‘Election’ Campaign Is On. How Will You Respond?” (ThinkAdvisor, November 18, 2014) Almost as if in response to Veres, Knut Rostad puts a stake in the ground and declares, “We have not yet begun to fight!”
To fiduciary and beyond! (Before It’s Too Late!),” (BenefitsPro, November 19, 2014) Will the financial services industry realize it’s being played with a divide and conquer strategy before everyone loses everything?

Fees – Never Forget…:
It doesn’t matter if there are no stories this week. What matters is we must remain diligent. We must continue to fight against this insipid “high fees” mantra and emphasize the ongoing danger and damage caused by “bad fees.”

Investments – Must Ado About Nothing:
There should be a rule. If you’re selling a product, you can’t publicly position yourself as offering advice. You are free to offer any opinion about any topic you want, you just can’t call it “advice.”
ETFs becoming popular in 401k plans,” (Dallas Morning News, November 14, 2014) The mainstream media is so cute when it tries to report on financial issues. For instance, in this article, it fails to mention most ETFs are index funds (although it does mention most “track” indexes). It also repeats to common trope about index funds having lower fees, even claiming that’s something investors are paying particular attention to now. It, of course, fails to mention how index investors lagged active managers for the first decade of the new millennium. Finally, and with exquisite irony, the article ends with this warning: just because you can trade during the day doesn’t mean you should. It leaves the reader asking, “So, then, why not just invest in a low cost index mutual fund and remove all the bid/ask risk and other potential transaction costs associated with ETFs?”
Target-Date Funds’ Distorted Investing Strategy: Research Affiliates,” (ThinkAdvisor, November 14, 2014) A very good argument why bond exposure – any bond exposure – is dangerous for retirees and young investors alike. For retirees, Social Security already acts like a bond and it often provides at least a third of your retirement income. If you have a pension, another bond-like instrument, you’d have a total of half your retirement income covered. That means, right from the get-go, you’ve got a 50% exposure to fixed-income even before you account for your retirement assets. That’s probably more than early retirees should have, and target date funds, with their increasing bond exposure, make it all the worse.
13 reasons why a QLAC belongs in your IRA,” (MarketWatch, November 18, 2014) Major caveat emptor here: The writer is an annuity salesman. He also calls himself an “annuity critic,” but he’s still an annuity salesman. Not that it means anything, but, as always, eyes wide open.

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.
The hard truth about Americans’ retirement options,” (Los Angeles Times, November 14, 2014)
Why Phased Retirement May Become the Hottest Boomer Benefit,” (Money, November 14, 2014)
Choosing to Live Abroad in Retirement,” (New York Times, November 14, 2014)
How Social Security raise impacts retirees,” (USA Today, November 14, 2014)
Social Security Q&A: Should My Lower-Earnings Husband File Early then Switch to Spousal at 66?” (Forbes, November 15, 2014)
Laid Off At 60? How To Plan For An Unplanned Retirement,” (Forbes, November 17, 2014)
Keep your retirement accounts safe from cyber attacks,” (MarketWatch, November 17, 2014)
Boomer? Retiring soon? Here’s how to get ready,” (CNBC, November 17, 2014)
How Behavioral Biases Affect Social Security Claiming Strategies,” (ThinkAdvisor, November 17, 2014)
4 retirement plan design trends to watch in 2015,” (Employee Benefit Adviser, November 18, 2014)
Millennials want to save, many can’t,” (USA Today, November 19, 2014)
Millennials Aren’t Meeting Their Match (in 401ks),” (ThinkAdvisor, November 18, 2014)
Finding a Retirement Haven to Suit You,” (New York Times, November 18, 2104)
Social Security Q&A: If I Delay Benefits till 70, Can I Get 100% of My Husband’s After 66?” (Forbes, November 18, 2014)
Jumbo-Loan Challenges for Retirees,” (Wall Street Journal, November 19, 2014)
How advisers can engage millennials to maximize retirement savings,” (Employee Benefit Adviser, November 19, 2014)
5 things to do now if you’re near retirement,” (USA Today, November 19, 2014)
Employers see role for more tech in retirement plan communications,” (Employee Benefit News, November 19, 2014)
The Real Retirement Crisis,” (Yahoo Finance, November 19, 2014)
New 401k plan features alone aren’t enough,” (BenefitsPro, November 19, 2014)
How to stop adult children from derailing your retirement goals,” (MarketWatch, November 20, 2014)
Staying in the plan, post-retirement,” (BenefitsPro, November 20, 2014)
Retirement plan sponsors want more from advisers,” (InvestmentNews, November 20, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Financial Independence or Retirement – Which is the Better Goal? |
TrustAdvisor: Finding, and Battling, Hidden Costs of 401k Plans |
Scholarly Financial Planner: A Blunt Refusal to be Compromised |
Pension Risk Matters: ERISA Plan Investment Committee Governance |
TrustAdvisor: Why Aren’t Millennials [Under 35] Saving Money? |
Squared Away Blog: Pension Cuts Could Hurt Worker Quality |
Boston ERISA Law Blog: Tetreault, Gabriel, and the First Circuit’s Reluctance to Recognize Equitable Estoppel in ERISA Cases |
Pension Risk Matters: ERISA Whistle Blowers |
ERISA Lawyer Blog: Employment-First Circuit Holds That Plaintiffs Are Highly Compensated Employees And Therefore Are Not Entitled To Overtime |
Frugal Fiduciary: Reforming Roth provisions may be key to improving savings rates for Millennials |
Boston ERISA Law Blog: Three for Thursday |
Boston ERISA Law Blog: The Wall Street Journal on Increased Oversight of ESOP Transactions |

Hot Tips from Popular Web Resources:
NAPA Net: Knowing Your Audience: Why DC Advisor Segmentation Matters |
NAPA Net: Want to Discourage 401k Loans? |
NAPA Net: Will Retirement Legislation Get a Restart in 2015? |
NAPA Net: The Cost of Living |
NAPA Net: October Turns Out To Be a Big Month for Participant Transfers |
NAPA Net: Match Less? Millennials Missing Out on Match |
DailyFinance: Before Getting Out of Debt, We Started to Save for Retirement |
Motley Fool: 4 Reasons Retirement Saving Strategies Fail |
NAPA Net: Senators Ask Treasury for ‘Commonsense’ Relief for Small Retirement Plans |
NAPA Net: Case of the Week: IRA Distributions and Charitable Organizations |
NAPA Net: The Folklore of Finance, or Why Most Investors Fail |
Yahoo Finance: These are the best U.S. cities to grow old in |
NAPA Net: GAO Has IRA Recommendations for IRS, Congress |
NAPA Net: Target Date Funds and Managed Accounts: What’s Next? |
NAPA Net: SEC’s 2015 Plans Unclear on Fiduciary Standard |
NAPA Net: Participant Benefit Statements May Be Changing |
NAPA Net: Prof. Ayres Wants Your 401k Participants to Take His Test |
NAPA Net: NAPA GAC Submits Comment Letter on Brokerage Windows |
NAPA Net: No Retirement Plan? Better Rethink That Retirement Date |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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