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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 11/28/14

December 01
00:39 2014

1020805_25983300_Trending_Topics_2014.12.01_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:
10 Insider Blogs Every 401k Plan Sponsor & Fiduciary Must Read (Part I),” (, November 25, 2014). If you were stranded on a desert island and only had enough internet capacity to read 10 blogs, you wouldn’t go wrong reading these.

Compliance – Dumbest. Idea. Ever.:
They say that those that can, do and those that can’t, teach. We should add a third branch to that tree: Those that simply don’t know, govern.
Closing the Loophole Behind $10 Million Tax-Free Retirement Accounts,” (Money, November 24, 2014) Wow. All we can say is read the story below on the 2015 Retirement Plan Turkey Award.
PBGC guarantees 401k rollovers to pensions,” (USA Today, November 24, 2014) Seriously? We thought the entire point of defined contribution plans (like 401k plans) was to eliminate the liability wrought by defined benefit (i.e., “pension”) plans. Might this be example of de-evolution?
Strategy Spurs Rethink on San Diego Pension’s Oversight,” (Wall Street Journal, November 24, 2014) Apparently, they didn’t learn anything from the S&L scandal in the early 1990s. When a government entity offers a guarantee, and you fall behind, there’s no downside betting it all on riskier investments in a desperate chance to catch up. Hmm, perhaps we should let the PBGC in on this one.
The 2014 Retirement Plan Turkey Award,” (BenefitsPro, November 26, 2014) And the winner is… You’ve already had a big hint above. This article explains why.

Fiduciary – This Means War!:
Proponents of the fiduciary standard finally discover the other side doesn’t play by the Marquis de Queensbury Rules. But, is it too late?
‘Faulty’ Analysis Could Torpedo an SEC Fiduciary Rule: Advocates,” (ThinkAdvisor, November 25, 2014) Fiduciary advocates finally go on the offensive and demand the SEC address 6 key points before issuing any new statement on the Fiduciary Standard. More significantly, they’re referring to the talking points of those opposed to the fiduciary standard as the language of the “extremist anti-fiduciary” crowd. Cool.
DOL fiduciary rule expected in January,” (BenefitsPro, November 26, 2014) Here’s the most significant development revealed in the story: The DOL is no longer calling it the “Fiduciary Rule,” it’s now called the “Conflict of Interest Rule.” Regular folks understand the concept of “Conflict of Interest” far better than “fiduciary.” Kudos to Phyllis Borzi & company.

Fees – Uh, Oh, Could Be Trouble:
More of this can really be damaging!
DOL to review documents in 401k excessive fee suit,” (InvestmentNews, November 21, 2014) Schlichter rides again! This case – Grabek et al v. Northrop Grumman – involves a company stock option that, get this, charged a management fee! If this doesn’t smell, what does?

Investments – Now You’re Talking:
Finally, the truth comes out. Of course, it was always there. But who cares? It’s out again!
Industry Divided on How to Manage Retirement Plans,” (WealthManagement, November 20, 2014) A better title would have been “A Cornucopia of Styles When It Comes to Managing Retirement Plans.” There’s nothing wrong with giving consumers a choice, and it certainly isn’t a “divided” industry. It’s not even Coke vs. Pepsi. It’s more like the variety of automobile solutions drivers have to choose from. Certain cars might be more appropriate given specific circumstances, but to force everyone to drive the same car just doesn’t make sense. Just ask any Soviet-era survivor.
A Stock Test for Millennials,” (Wall Street Journal, November 23, 2014) This article would have been more appropriate in 2009 than 2014. Who are we kidding? This article would never have been appropriate. It’s a continuation of the stock fear mongering that goes back to the earliest days of capital markets and was reignited twice in a single decade (2002 and 2009) as a result of extending bear markets (which had never been experienced by a generation of young (and not-so-young) investors. Sure, these folks are naïve and notoriously overconfident when it comes to picking “sure winner” stocks, but the article goes overboard. The author, with (willing?) support of industry experts who should know better, promotes the meme that “you can lose it all” in stocks. While theoretically possible, there are a number of well-tested and proven methods to reduce downside risk. It’s not rocket science, but it’s also not sexy. Ironically, one of the sources says, “There’s no need to swing for the fences.”  A good sentiment, but then he recommends twenty-somethings invest a third of their portfolios in bonds. Wow. Talk about naïve.
Broker-dealers sound off as AIG leads off with first annuity for 401k plans,” (InvestmentNews, November 25, 2014) Be honest, did anyone not see this coming? The frank truth is an annuity is not an investment, it is insurance. It is not a bond, you can lose everything if you die early. Of course, you can buy insurance to get at least some of your money back, but then the yield on the total “investment” is reduced. If we’ve said it once, we’ve said it a thousand times, caveat emptor.
4 Reasons Diversification Could Hurt Your Portfolio,” (US News, November 27, 2014) You may have seen the first two reasons here (“Overdiversification and the 401k Investor – Too Many Stocks Spoil the Portfolio,”, October 27, 2011) and here (“How Many Investment Options Should 401k Plan Sponsors Offer?, October 18, 2011).

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.
8 things for investors to be thankful for,” (MarketWatch, November 22, 2104)
Government workers get first crack at phased retirement,” (InvestmentNews, November 23, 2014)
4 reasons to be thankful for 401k plans,” (Employee Benefit News, November 25, 2014)
Individual Retirement Plan Ownership Trending Down as Assets Climb,” (On Wall Street, November 25, 2014)
‘What the heck is defined contribution?’” (Employee Benefit Adviser, November 25, 2014)
No Black Friday bargains on Roth IRA conversions,” (MarketWatch, November 25, 2014)
Make Your Money Last In Retirement (Pt. 2),” (Forbes, November 25, 2014)
3 Smart Year-End Moves for Retirement Savers of All Ages,” (Money, November 26, 2014)
Help moms worry less about retirement,” (BenefitsPro, November 26, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: What I’m Reading: Pre-Thanksgiving Edition |
The Chicago Financial Planner: 7 Retirement Savings Tips to Help Avoid Regret |
The Trust Advisor: Longer Life Expectancies Raise the Bar on Pensions |
Squared Away Blog: Alzheimer’s: a Financial Plan Revamped |
Boston ERISA Law Blog: A Nuanced Look at the Attorney-Client Privilege? |
The Chicago Financial Planner: Are You Ready For Retirement? |
Pension Risk Matters: Longevity Trends and Pension Costs |
RetirementRevised: Retirement planning for singles: Three must-do items  |

Hot Tips from Popular Web Resources:
NAPA Net: Change is Coming to the World of DC-oriented BDs and RIAs |
NAPA Net: Wanted: Feasibility Study Consultant for California IRA Program |
NAPA Net: Labor ‘Stay’ |
Kiplinger: Find the Right Nursing Home|
Morningstar: A Moderate Retirement Saver Portfolio for ETF Investors |
NAPA Net: Which Retirement Risk Trumps Longevity, Leakage and LTC? |
NAPA Net: Thanks Giving — A Retirement Plan Professional’s List |
NAPA Net: Confidence, Performance Rise at Public Pension Funds |
NAPA Net: Maryland Auto-IRA Task Force Ponders Future Under GOP Governor |
Motley Fool: 6 Ways You Can Make a Penalty-Free 401k Withdrawal |
NAPA Net: TDFs to Garner Nearly 90% of New Contributions by 2019 |
NAPA Net: Case of the Week: Obtaining ERISA Fidelity Bonds |
NAPA Net: Are Longevity Trends Leveling Off? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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