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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 12/12/14

December 15
00:14 2014

1020805_25983300_Trending_Topics_2014.12.15_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
Why Longevity Annuities aren’t as Popular with 401k Fiduciaries as Regulators Think,” (, December 9, 2014). If the product is so “pro-consumer” why are consumers not pro-product?

Compliance – Waiting for the Dust to Settle:
Let’s see what really comes out of this CROMNIBUS bill.

Fiduciary – Will She Say or Will She Go?:
Phyllis Borzi remains confident she will make a proposal in January. The industry remains just as confident it will thwart her efforts.
SIFMA Gears Up for Regulatory Battles,” (Financial Planning, December 5, 2014) The kinds words of diplomacy have been discarded. Now, SIFMA is saying the DOL’s Fiduciary Rule will harm investors.
Don’t let inertia sink 401k plans,” (USA Today, December 7, 2014) This is all about avoiding “affiliated” funds, or, as the DOL might call them in their new rule, funds with a “conflict-of-interest.”
Financial planning issues wrapped into government spending bill?” (InvestmentNews, December 8, 2014) Rumors have it that Congress will add a rider to the appropriations bill that will prohibit the DOL from issuing any new “fiduciary” rule (the DOL is not calling it that anymore) until the SEC does. The Senate is not expected to approve that rider.
Congress set to pass bill giving SEC a budget boost, leaving DOL fiduciary rule alone,” (InvestmentNews, December 10, 2014) Whoops! Turns out the previous article jumped the gun reporting that rumor. It didn’t make it into the final version of the bill.

Fees – Do You Really Know Your 401k Fees…:
…or do you only THINK you really know your 401k fees? It’s becoming more apparent, for most plan sponsors and employees, the answer is the second option.
Study Finds 401k Fees Are Falling,” (WealthManagement, December 9, 2014) Unlike other headlines on this report, this one is most fair. The reports highlight 4 areas where “fees” are falling, although only three actually have to do with fees. The fourth deals with mutual fund expense ratios, which many people confuse with fees (they’re actually part of the fund’s performance). More plans are including index funds (which is generally considered a good idea for the Do-It-Yourself investors in the plan). Expense ratios for index funds are generally lower because they don’t have to pay for security analysts. Unfortunately, the headlines of at least two major trade journals cited index funds as the reason for lower fees. Granted, the report did, too, but that’s the report writer’s fault. The headline editors didn’t need to compound it.
401k Plans Are Still a Problem, But They’re Getting Better,” (TIME, December 9, 2014) Here’s the mass media version of the same story as above. Notice the different tone in the title (remember, about 5 years ago TIME infamously wrote a story about the “failure” of the 401k). The article does also play up the false statement that mutual fund expense ratios are fee. It even invokes the name of John Bogle to make the point.
Still clueless about 401k fees,” (BenefitsPro, December 10, 2014) The article speaks only of the participants’ ignorance, but, trust us, it goes well beyond that.
Edison case exposes deceptive practice of revenue sharing,” (Employee Benefit News, December 11, 2014) For a flavor of this article, here’s a quote: “My personal definition of revenue sharing is a deliberate overcharge at the fund level (which means participants are paying the overcharge) in an attempt to hide compensation for other vendors and the middlemen involved with the plan.”

Investments – Ouch!:
Just when you thought it was safe to put “safe” options on your 401k menu, a slew of articles question the very same practice.
This New Retirement Income Solution May Be Headed for Your 401k,” (Money, December 5, 2014) Trouble is, the only ones that could afford them don’t need them and the ones that need them can’t afford them. And we’re not necessarily talking about price.
Retirees’ Target Date Funds Making Hedge Fund Style Bets,” (WealthManagement, December 8, 2014) And this surprises who? Large mutual fund companies have by using hedging strategies for years. They haven’t always worked (as the article states), but sometimes they do. Besides, they’re not new.
Active vs. Passive: When Both Perform Well,” (On Wall Street, December 10, 2014) There you have it. In a sea of “active always performs better” articles, this one stands out at exposing the truth.
Why sponsors won’t dive into guaranteed income options,” (BenefitsPro, December 10, 2014) If you don’t know the obvious reading, then you better read this article.
There’s a lot not to trust about annuities,” (MarketWatch, December 10, 2014) Here’s more annuity caveat emptor warnings from “Stan the Annuity Man.”
High Yield Grandma: How One Retiree Earns 8% On Her $3 Million Nest Egg,” (Forbes, December 10, 2014) Read this article carefully. You’ll quickly discover: a) She’s probably not earning 8% anymore; and, b) Her nest egg is probably not $3 million anymore.

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.
How to calculate RMD on multiple accounts,” (MarketWatch, December 5, 2014)
Advisers must help clients decide how HSAs fit in their plans,” (InvestmentNews, December 7, 2014)
The New Way to Measure Your 401k,” (Wall Street Journal, December 7, 2014)
Clients Overconfident About Retirement Plan Knowledge,” (WealthManagement, December 8, 2014)
5 Biggest Retirement Planning Changes for 2015,” (Forbes, December 8, 2014)
When can I get my inherited Roth IRA?” (MarketWatch, December 8, 2014)
How not to outlive your retirement savings,” (CBS News, December 8, 2014)
7 Facts About After-Tax IRA Rollovers,” (ThinkAdvisor, December 8, 2014)
Ditch ‘The Number’ and find a realistic retirement savings goal,” (CNN, December 9, 2014)
8 tips for people who will retire in 2015,” (US News, December 9, 2014)
Millennials will get shortchanged in retirement,” (CNBC, December 9, 2014)
Part-time employment adds leg to traditional retirement stool,” (Employee Benefit News, December 10, 2014)
65 No Longer the Magic Age for Retirement,” (Employee Benefit News, December 10, 2014)
7 biggest retirement stories of 2014,” (BenefitsPro, December 10, 2014)
You’ll Never Guess Who’s Saving the Most For Retirement,” (Money, December 10, 2014)
5 Ways Your Home Can Help Fund Retirement,” (US News, December 10, 2014)
What will the New Year bring for retirement plans?” (Employee Benefit News, December 11, 2014)
Retirement Calculators Are Wrong—But You Need One Anyway,” (Money, December 11, 2014)
When markets tumble, be like Bogle — ‘Don’t peek’,” (MarketWatch, December 11, 2014)
The Daily Brief: What Retirement Crisis?” (WealthManagement, December 12, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 8 Year-End Financial Planning Tips for 2014 |
Pension Risk Matters: Taxpayer Bailout of Underfunded Pension Plans |
ERISA Lawyer Blog: IRS Updates Its Rollover Chart |
Scholarly Financial Planner: U.S. Equities: Valuations Per P/B Ratios |
Boston ERISA Law Blog: What’s the Difference Between Public Pensions and Union Pensions? |
ERISA Lawyer Blog: IRS Issues 2014 Cumulative List of Changes in Plan Qualification Requirements/Extends Deadlines For Upcoming Filings |
Proskauer’s ERISA Practice Center Blog: Second Circuit Rejects Plan’s Claim For Reimbursement From Another Plan |
Proskauer’s ERISA Practice Center Blog: Second Circuit Holds ERISA Disclosure Claims Are Time-Barred |
Scholarly Financial Planner: My 2015 Wish List for DOL, SEC, States, CFP Board, NAPFA & You |
The Chicago Financial Planner: Tis the Season for Stock Market Predictions |
fi360: A fiduciary approach to fund due diligence and what to do with Pimco funds |
The Frugal Fiduciary: Multiple Employer Plans (MEPs) are a marketing play, not a way to cut costs |
The Chicago Financial Planner: 7 Reasons to Avoid 401k Loans |

Hot Tips from Popular Web Resources:
NAPA Net: More Important Than an Advisor? |
NAPA Net: Plan Sponsors Waking up to Costs of Older Workers who Can’t Retire |
NAPA Net: House Gives Multiemployer Plans Some Breathing Room |
Motley Fool: How Do Your Social Security Benefits Measure Up? |
NAPA Net: How Do Plan Sponsors Measure Success? |
NAPA Net: A Second Opinion on Self-Medicating Your 401k |
NAPA Net: ’Tis the Season for RMDs, IRS Reminds Advisors |
NAPA Net: Which Rollovers Can Be Made to Which Accounts? |
Motley Fool: 3 Top Dividend Stocks for Retirees to Buy |
NAPA Net: New Tool Will Automatically Adjust Deferral Rates |
NAPA Net: Case of the Week: Salary Deferral Elections for the Self-Employed |
NAPA Net: A Second Opinion on Self-Medicating Your 401k |
NAPA Net: What Are Plan Sponsors Worried Most About? |
NAPA Net: Report: Average 401k Participant, Plan Costs Dropping |
NAPA Net: Emerging Markets: Still An Important Asset Class? |
NAPA Net: More Communication in 2015, Plan Sponsors Say |
NAPA Net: A Link Between Resolutions and Realities? |
Kiplinger: Social Security Strategies for Married Couples  |
NAPA Net: Higher Ed Readier for Retirement? |
NAPA Net: Motor City Engine Begins to Rev as Bankruptcy Ends |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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