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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 11/7/14

November 10
00:02 2014

1020805_25983300_Trending_Topics_2014.11.10_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:
Retirement Saving: How Responsible is the 401k Fiduciary?” (FiduciaryNews.com, November 4, 2014). Welcome to the new three-legged stool: Employee, Employer, Government.

Compliance – Change is in the Air:
But, will it matter?
6 Questions for Sen. Hatch on Retirement and the Election,” (ThinkAdvisor, November 5, 2014) Pay close attention to the last question. After getting past all the evidence that the insurance lobby is quite potent in the first few questions, the final one has the earmarks of a watershed change in the way the 401k is delivered to employees.
Why do some hate the 401k?” (BenefitsPro, November 6, 2014) A sneak peek at what to expect from a Republican-controlled Senate?
Republicans expected to tackle retirement issues in 2015,” (InvestmentNews, November 6, 2014) There’s a lot of bipartisan support for “reform,” thanks mostly to the dollars flowing from the insurance lobby. Ironically, the most innocuous of items – one not supported or opposed by the industry – may be the one thing that frees abused retirement savers from the stranglehold of the “too-big-to-fail” club.
IRS Simplifies Filing for Americans in Canadian Retirement Plans,” (ThinkAdvisor, November 6, 2014) There are 1 million Americans living and working in Canada that this applies to.

Fiduciary – Does it Even Matter Anymore?:
It becomes clear this was never really a serious initiative, just a bone used for political purposes. Too bad.
New DOL Fiduciary Rule Before Obama Leaves Office? Maybe Not,” (ThinkAdvisor, November 4, 2014) Here’s red meat for the foes of fiduciary compliance courtesy of the annual SPARK Institute meeting. It outlines a strategy for using the newly minted Republican majorities to stymie Phyllis Borzi’s efforts. It could, and probably will, work. On to Plan B for the advocates.
Plan Fiduciaries Liable for Mispriced ESOP Stock Purchase,” (PLANSPONSOR, November 5, 2014) How many times have we seen this happen?

Fees – Why Not?:
Does this mean the DOL is also looking at conflict-of-interest fees?
DOL Intensifying Scrutiny Of Advisor Retirement Plan Fees,” (Financial Advisor, November 4, 2014) Not a lot of meat in this article, despite its length. No real hint at benchmarks, guidelines, or smoking guns.

Investments – The Reign of Stupidity:
Risk doesn’t matter, only returns can put food on the table. Likewise, annuities usually can’t put food on the table, either (unless you’re rich enough not to need them). Saving for tomorrow will always put folks ahead of those who don’t save. ‘nuf said.
How 401k Plans Have Fueled Inequality in America,” (Businessweek, November 3, 2014) A headline like this usually entails a story about those bad, bad people who dare save too much in their retirement plan; thus, selfishly reaping the rewards for delayed gratification while simultaneously those who “lived for today” instead of “saved for tomorrow” wallow in their supposed poverty. That would have placed this article in the “Compliance” category above. Instead, this article entertains us with the story of those bad, bad people who dare not sell when the market bottomed in 2009; thus. Selfishly reaping the rewards of emotional discipline while simultaneously those poor souls who gave in to irrational emotion suffer the consequences of “safe” investing. You read it here first folks.
Now that annuities are OK in retirement plans, what strategy is best?” (InvestmentNews, November 4, 2014) As you might expect, annuities now become part of one’s asset allocation. There’s only one problem – they’re generally illiquid. And you need a lot of money for them to make sense.
Will Retirees Come To Love Longevity Annuities?” (Forbes, November 4, 2014) It looks like this is a solution that satisfies the insurance salesmen more than consumers. Could Longevity Annuities be the next target date funds?
A step closer to fixing a serious 401k flaw,” (CBS News, November 5, 2014) So, here’s the deal. If there was a “serious” flaw in 401k plans not offering annuities, then why haven’t a lot of people bought them once they retired and their money could have been easily taken out of their 401k? See the Forbes article above.
Investors find better balance in their 401ks,” (CNBC, November 6, 2014) This has been a popular meme across the mass media. It really began with the market drop in 2009 and re-intensified with the market swoon in October. There’s only one problem with it – it’s totally wrong. It forgets the main problem with the 401k plan in going into the 2000s was that savers were too conservative. That’s what the Pension Protection Act of 2006 was supposed to address (and it did to some extent). Here’s the reason for the problem: People should focus less on risk and more on return. The best way to get long-term returns is through investing in stocks.
Primal Fear: Thinking Differently About Risk Tolerance,” (Financial Planning, November 6, 2014) If you want to know what’s wrong with the way the industry looks at risk, read this article. Not because it will tell you, but because, in condemning the industry’s view of risk, it advocates that very same view – albeit with more nuanced psychological jargon. It enables investors to allow their fears to overtake their needs. It ignores the need for investor discipline and the primacy of the role of the advisor to coach the investor to stick to that discipline.

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 underserved market in retirement advising,” (Employee Benefit Adviser, October 31, 2014)
Finding the Perfect Balance Between Work and Fun in Retirement,” (Money, October 31, 2104)
Many baby boomers will move into a bigger home for retirement,” (MarketWatch, October 31, 2104)
Will You Pay Taxes On Retirement Income? – You Decide,” (Forbes, October 31, 2014)
How companies can improve their 401k plans,” (USA Today, November 1, 2014)
Study shows women are better at saving for retirement than men,” (New York Post, November 2, 2014)
Supporting adult children, aging parents poses risks to retirement savings,” (Employee Benefit News, November 3, 2014)
Plan sponsors need strategies to prevent fiduciary lawsuits, investigations,” (Employee Benefit News, November 3, 2014)
Why you shouldn’t use retirement savings to pay off debt,” (The Washington Post, November 4, 2014)
8 solutions for retirement savings that are too low,” (MarketWatch, November 4, 2014)
Should you pay off your mortgage when retiring?” (USA Today, November 4, 2014)
DOL Files $7M Improper Investment Suit,” (PLANSPONSOR, November 4, 2014)
Parents Hurt Selves By Helping Adult Children,” (Financial Advisor, November 4, 2014)
5 low-cost ways to make your 401k plan better,” (Employee Benefit News, November 4, 2014)
Retirement Withdrawal Strategies That Can Pay Off Big,” (Money, November 5, 2014)
An Easy Way To Pick Your Retirement Age,” (Forbes, November 5, 2014)
Female-focused benefits education can transform women s health, retirement outcomes,” (Employee Benefit News, November 6, 2014)
What Are the Biggest Surprises in Retirement? The Experts Weigh In,” (Money, November 6, 2014)
Your parent’s expenses can take a big bite out of your retirement,” (MarketWatch, November 6, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: What I’m Reading: Stock Market Highs – Trick-or-Treat Edition |
The Pension Protection Act Blog: 6th Circuit Says Girl Scouts Trapped in Hotel California-Style MEP |
Fiduciary Matters Blog: MassMutual Settles Excessive Fee Lawsuit |
Pension Risk Matters: Retail Investors and Derivatives Trading |
Squared Away Blog: 5 Signs of Financial Impairment |
The Trust Advisor: States Are Lowering Their Estate Taxes to Lure Retirees |
ERISA Lawyer Blog: IRS Announces 2015 Pension Plan Limitations |
Scholarly Financial Planner: Less Use of Financial Advisors Due to Distrust: Exploring Potential Solutions |
Business of Benefits: Notice 2014-66 Addresses Lifetime Income’s “Relevancy” Problem |
The Chicago Financial Planner: What Should I Do With My 401k? – An Illustration |
Proskauer’s ERISA Practice Center Blog: View From Proskauer: The Availability of Surcharge as Relief for Individual ERISA Fiduciary Breach Claims |
Scholarly Financial Planner: Should We Rally Around the CFP Board’s Rules of Conduct? |
Business of Benefits: “Hidden” New MEP 5500 Legislation Requires Substantial New Reporting for 2014 Plan Year |

Hot Tips from Popular Web Resources:
NAPA Net: How to Close the Gender Gap in Retirement Confidence |
Daily Finance: Why Your Financial Plan Needs Both a 401k and a Roth IRA |
Motley Fool: Social Security: The Startling Truth About Your Benefits |
NAPA Net: Access Able? The Retirement Plan Access Gap |
NAPA Net: A Nice October Surprise for 401k Balances |
Morningstar: A Conservative Retirement Saver Portfolio |
Motley Fool: What’s Happening to Your Social Security in 2015? |
NAPA Net: How Much Will Health Care Cost in Retirement? |
NAPA Net: Case of the Week: IRA One-Rollover Rule |
Morningstar: A Low-Cost Investment Option for Some 401k Savers |
NAPA Net: Advisor-managed Investments May Violate ERISA |
NAPA Net: Borzi, ERISA Advisory Council Exchange Updates |
NAPA Net: State(s) of Participation: Where is Retirement Plan Participation Best? |
Kiplinger: Retirees, Protect Yourself From Fraudsters-Kiplinger |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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