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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 1/9/15

January 12
00:02 2015

1020805_25983300_Trending_Topics_2015.01.12_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
5 Articles that Define the Most Important Issues for the 401k Plan Sponsor and Fiduciary,” (FiduciaryNews.com, January 6, 2015). You must read these because everyone else is. And if everyone else is and you’re not, they’ll know more than you. Is that what you want?

Compliance – The Definition of Insanity:
Einstein famously said the definition of insanity is trying the same thing over and over again and expecting a different result. It’s been repeatedly demonstrated the government just can’t get retirement right (the Social Security Ponzi Scheme, the public employee pension Ponzi Scheme, etc…). So, why would any sane person think the government can effectively take over the private pension business?
A Sobering Perspective on a Looming Retirement Crisis,” (New York Times, January 2, 2015) More from the “glass half empty” crowd. The bottom-line is some people have demonstrated they don’t do things they should. The best incentive is what? To enable them? That would only teach people to depend on the kindness of strangers, and we all know what they got Blanche.
2015 resolution: Avoid 60-day rollovers,” (InvestmentNews, January 4, 2015) Just another example of why “We’re from the government and we’re here to help” remains the most frightening phrase ever uttered.
DOL Investigating RadioShack 401k Plan,” (Plansponsor, January 5, 2015) Uh, Oh! Trouble!
Meet myRA, and beat CD rates tax-free,” (BenefitsPro, January 5, 2015) Wasn’t it PT Barnum who once said something about there always being at least someone willing to swim upstream? Maybe he said something else. In either case, what’s not to like about a retirement plan that’s limited to 30 years, $15,000, and an annual return of 2.3%? If this is our government idea of solving the “retirement crisis,” then they might also be interested in buying a certain bridge in Brooklyn.
How one state is taking a crack at the retirement crisis,” (CBS News, January 6, 2015) Notice the headline. Now look at the publisher. What does this tell you? This is really an advocacy piece under the guise of journalism. The trouble is, nobody knows this. Why not? Because the “retirement crisis” chicken littles have the bully pulpit. Yes, there are some people who aren’t saving for retirement, but that’s not because there aren’t retirement savings alternatives. You don’t need a 401k to save for retirement. In fact, some would say at ROTH is a better retirement savings vehicle, especially for the young. If there’s any problem with the existing system, it’s that the limits of traditional IRA contributions are hard dollars, not percentage of earnings like you see in 401k plans and SEP IRAs. Government created the problem. Government should first fix the government problem before it tries to address any “retirement crisis.”
ERISA settlements top $1 billion,” (BenefitsPro, January 6, 2015) Mind you, this is not the DOL obtaining these settlements. These are class-action lawsuits. It leaves you wondering two things: Why don’t plan sponsors want to learn how to address their fiduciary duty (it’s not as hard as you think)? And, at what point do plan sponsors throw up their hands and say, “It’s not worth the risk anymore” and simply close their plans?
For 2015, contribution caps rise for 401k plans,” (CBS News, January 7, 2015) For those of you only paying attention to this now, here’s a good rundown, and not just of 401k plan caps.
What Canada Can Teach the U.S. About Retirement Savings,” (Wall Street Journal, January 8, 2015) This answer offered by the author is simple: Just raise the contribution limit. Of course, he didn’t have to look to the Great White North for the answer. He could have merely look at retirement savings rates in the early 1980s when there was no contribution cap. This is an incredibly simple fix to the problem. The question is: Why doesn’t the government do it? Oh, wait. It’s an incredibly simple fix. That’s why.
Illinois moves on retirement readiness,” (Employee Benefit Adviser, January 9, 2015) Call it the “myRA epidemic” where each state tries to get in on the retirement game. In this case, the poorly written law no places those with solid plans at risk. Mid-sized business owners might be tempted to close their higher-cost 401k plans, leaving employees in the cold with only the state-sponsored plan. Of course, smart employees might be better off just going the IRA route.
Auto IRAs in Illinois: Can small-plan private sector 401k plans coexist?” (InvestmentNews, January 9, 2015) No sooner did I write the above paragraph then what appeared in my email inbox than this article. Great minds think alike.

Fiduciary – The Kiss of Death:
This can’t be good for fans of the Fiduciary Standard.
White House Pressures DOL For Fiduciary Rule, Says Schwab Lobbyist,” (Financial Advisor, January 6, 2015) And just as Obama’s poll numbers at dipping. Is this the kiss of death to the Fiduciary Rule?

Fees – Hiding the Fees, Fantastic:
The answer is too simple. Why doesn’t the DOL do it? Oh, yeah. The DOL is part of the government. (See “Definition of Insanity” above.)
DOL urged to hold off on proposed fee guide,” (BenefitsPro, January 6, 2015) Before you think this is merely the usual lobbyist suspects up to their usual lobbyist tricks, take a look at the organizations making this request. It’s a list of strange bedfellows. Clearly, the DOL made a mistake in not providing a fee disclosure template. This proposal may compound the error. Whereas, today, instead of a simple one-page “plain English” listing of fees like you find in a mutual fund prospectus, we have a hodge-podge of reams of paperwork, unlinked incredibly long URL codes, and industry jargon all claiming to “disclose” fees. The reality is, it’s like finding a needle in the haystack. It appears the DOL proposal would create a treasure map that would turn this escapade into scavenger hunt. We repeat: What’s wrong with requiring a simple one-page “plain English” table like we see in a mutual fund prospectus?

Investments – Growing Trends:
Looks like Santa left some great gifts in the stockings of retirement savers.
What are the top 401k asset investments?” (Employee Benefit News, January 6, 2015) Don’t despair, this article contains welcome news. Apparently, the long term view prevails.
Double-digit gains for many 401k accounts,” (BenefitsPro, January 6, 2015) Don’t get too excited. This figure includes contributions as well as investment performance.
Are actively managed funds still worth owning?” (CNBC, January 6, 2015) To every thing: Turn, turn, turn. How come we never saw, throughout the first decade of the new millennium, headlines asking if unmanaged (i.e., passive) funds were worth owning? After all, most actively managed funds beat the popular index funds during that era. There is a season. Turn, turn, turn.

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.
Why 2014 Was Tough for Corporate Pensions,” (Wall Street Journal, January 2, 2015)
Target Chief’s $47 Million Retirement and America’s 401k Gap,” (Businessweek, January 5, 2015)
Retirement readiness: 15% salary deferrals are the new 10% for 401k plans, (InvestmentNews, January 5, 2015)
Goodbye, traditional retirement,” (MarketWatch, January 5, 2015)
Why all 401k employee education will soon be online,” (Employee Benefit News, January 6, 2015)
Gender-specific retirement education fills void, boosts workplace diversity,” (Employee Benefit News, January 6, 2015)
How to know what 401k sponsors are thinking,” (BenefitsPro, January 7, 2015)
The Single Biggest Retirement Mistake,” (Money, January 7, 2015)
How to use your HSA as an investment tool,” (MarketWatch, January 7, 2015)

Trends and News for Retirement Savers:
If you’re a retirement plan fiduciary – whether a plan sponsor or a financial professional, don’t you think it’s a good idea to keep up on the topics retirement savers are most interested in? That’s what the media tries to do. Here’s what they think is on the mind of the people saving for retirement.
The Single Woman’s Path to a Happy Retirement,” (DailyFinance, January 2, 2015)
The ‘shock’ that awaits pensioners at retirement,” (BBC News, January 5, 2015)
7 Ways to Jump-Start Your Retirement Savings in 2015,” (Yahoo Finance, January 5, 2015)
The Best Place to Retire? What Kind of Life Do You Want?” (Daily Finance, January 5, 2015)
Five Steps for Gen Xers Turning 50,” (Wall Street Journal, January 7, 2015)
Don’t Fall Into These 5 Spending Traps In Retirement,” (Forbes, January 8, 2015)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Are Brokerage Wrap Accounts a Good Idea? |
Pension Risk Matters: Hamsters , Cyber Security and Retirement Plans |
Fiduciary Matters Blog: Another Court Finds Church Affiliated Hospital Pension Plan Subject to ERISA |
The Trusted Advisor: The Trouble With Obama’s myRA Retirement Program |
Fiduciary Matters Blog: Court in Boeing Excessive Fee Case Rules for Plaintiffs, Sets Trial Date |
ERISA Lawyer Blog: Second Circuit Offers Next Decision On Amara, And Says That Reformation Of The Plan Is An Appropriate Remedy |
Scholarly Financial Planner: Should A New, Higher Certification for Financial/Investment Advisers Exist? |
The Frugal Fiduciary: MyRAs are not the answer for expanding retirement plan coverage |
ERISA Lawyer Blog: IRS Provides Year End Reminders For IRAs |
fi360: Fiduciary momentum from the industry, FINRA outstrip SEC’s pace |
ERISA Lawyer Blog: IRS Discusses IRA One-Rollover- Per-Year Rule |
The 401k Plan Blog: 2014 ERISA settlements top $1.3 billion |
Fred Reish: Did you know…? |
The Chicago Financial Planner: 10 Planning Steps to Take Within 10 Years of Retirement |
Proskauer’s ERISA Practice Center Blog: In-Plan Roth Rollovers and After-Tax Contributions: Maximizing Deferrals with Limited Future Tax Liability |
Boston ERISA Law Blog: What Does Spano v. Boeing Foretell About the Future of Excessive Fee Litigation (and about the Future Ruling in Tibble As Well)? |
ERISA Lawyer Blog: IRS Provides Reminder On Required Distributions From Retirement Plans and IRAs |

 

Hot Tips from Popular Web Resources:
Morningstar: Managing Real Estate Assets in Your Retirement Portfolio |
Motley Fool: Why You Should Consider Working in Retirement |
NAPA Net: How Did Consistent 401k Participants Fare in 2014? |
NAPA Net: 5 Things Plan Sponsors Should Know |
NAPA Net: Illinois First State to Put State-Run Retirement Plan in Place |
NAPA Net: Primer: Annuities With GMIB Riders |
Kiplinger: Do-It-Yourself Retirement Plans |
Motley Fool: 3 Ways to Retire Early |
NAPA Net: FINRA Exam Priorities Include Warning on Fiduciary Duty |
NAPA Net: Case of the Week: Don’t Forget Retirement Plan Tax Credits for 2014 |
NAPA Net: Who is in Better Financial Shape — Millennials or Gen X? |
NAPA Net: DIY Public Pension Plan |
NAPA Net: House Adopts Dynamic Scoring |
NAPA Net: U.S. Equities 10 Years Out: 50% Lower? |
NAPA Net: Longer Lives, Lower Rates Weigh on Pensions |
Motley Fool: The Retirement of the Traditional Retirement |
NAPA Net: Did the Great Recession Lock in Higher 401k Loan Volumes? |
NAPA Net: Merriman vs. Bogle: It’s On! |
NAPA Net: Will 2015 Be the Year of Smart Beta? |
Motley Fool: The Biggest Threat to Your Retirement: Your Kids? |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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