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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/13/15

February 17
00:02 2015

1020805_25983300_Trending_Topics_2015.02.16_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
Are Target Date Funds a Ticking Time Bomb?” (, February 10, 2015) Like lemmings to the sea, retirement savers default to a controversial product.

Compliance – Just Stop Listening:
When the world goes into advocacy mode, it’s best just to turn off the volume. It’s not like anyone’s saying anything that will matter.
The good, bad of Obama’s retirement proposals,” (BenefitsPro, February 9, 2015) You might be tempted to look at this headline and think to yourself, “Hey, even a broken clock is right twice a day.” Truth be told, though, the author himself must tweak the “good” parts of the proposal.
Study says 401k-style public pensions cost more than traditional plans,” (Reuters, February 11, 2015) So a pro-public employee pension plan “non-profit” (although apparently not necessarily non-partisan) organization releases a report saying the thing its fighting against “costs more” and subsequent research makes it look like their cooking the numbers? (e.g., the added the cost of the legacy pension plans to the cost of the 401k public programs they oppose.) Imagine the outcry if a private industry organization coming out with “research” that warps data for its political purposes. Oh. Wait…

Fiduciary – When Will They Ever Learn?:
Who still has an ESOP option in their 401k plan? Color Tile, Global Crossing, Enron, and, now, Radio Shack. It’s a wall of shame. And speaking of shame, are the gloves finally coming off in the fiduciary debate?
RadioShack facing 401k suits,” (BenefitsPro, February 8, 2015) Could this finally be the final nail in the coffin of 401k plans offering company stock? How many times does this same scenario need to play out before plan fiduciaries understand the incredibly high level of risk this poses both to them and their employees.
Ex-SEC Chief: White House Memo on Broker-Dealers Shocking,” (On Wall Street, February 9, 2015) We had long thought Mary Shapiro had “left the building” but – voila! – here she is again. It’s unclear from this article if she’s shocked at the amount of money that’s being lost because there’s no uniform fiduciary standard or if she’s shocked that someone (presumably other than her beloved SEC) would propose a uniform fiduciary standard. Earth to Shapiro: Perhaps you wouldn’t have been shocked today if you did your job at the SEC when you had the chance.
FSI sets advocacy priorities for 2015,” (InvestmentNews, February 10, 2015) That’s their story and they’re sticking to it.
Wall Street Finally Blinks in Fiduciary Standoff,” (ThinkAdvisor, February 11, 2015) A brilliantly written synopsis of the famous White House memo and the industry’s guilt-ridden response.
Fighting the fiduciary rule,” (BenefitsPro, February 11, 2015) Homeland Security? Just what does that have to do with the Fiduciary Rule?

Fees – It’s Backwards Day:
“Avast ye swabs!” But this times, it’s not the pirates getting the booty, it’s the victims getting their booty back. Maybe it should be “!sbaws ey tsavA”
Aegon sued over alleged excessive fees in 401k,” (BenefitsPro, February 9, 2015) The claim is Aegon is charging 1.6% (in investment management fees alone) vs. the industry average of 30 basis points for similarly-sized accounts. It’s all due to what the claimant calls “layered fees.” This could have broad repercussions if the judge allows it to move forward.
Raymond James Backtracks on Clawbacks,” (WealthManagement, February 9, 2015) Not really. Clients will still get reimbursed. Only it’ll be coming out of the pocket of the firm rather than the advisors employed by the firm.

Investments – It’s Upside Down Day:
The investing world has historically been at constant war. This style versus that style, Graham vs. Fisher, a little of everything vs. a disciplined commitment. It all makes for great marketing, but it has absolutely nothing to do with getting the job done.
Industry pressing the case for income solutions for DC plans,” (Employee Benefit News, February 9, 2015) And by “industry” the article is referring to insurance companies. This drip, drip, drip is necessary to convince retirement savers to do something their gut is telling them isn’t in their best interest. To be honest, every individual’s circumstance is unique. What’s in one person’s best interest may not be in the best interest of another. This is why arguing for or advocating “universal” solutions is a false pursuit. It makes one sound like – dare we say it – the government.
Maybe the Young Shouldn’t Dive Into Stocks,” (New York Times, February 9, 2015) Leave to the Old Grey Lady ignore the wisdom of “two wrongs don’t make a right.” Tactical asset allocation is market timing, pure and simple, so why encourage inexperienced investors to go down that road. Why encourage them to focus on anything other than saving? And that includes not taking money out of your 401k when you switch jobs. A 401k is not a bank savings account, and that’s the message they should consistently receive.
The Case for Actively Managed Funds,” (Wall Street Journal, February 9, 2015) This is big. A major publication is telling the truth about the fallibility of the “index funds are all you ever need” story.
Why risk dating?” (BenefitsPro, February 11, 2015) This is all about target date funds. Well, not really. It’s about what will eventually replace target date funds. The amazing truth: The foundation of these replacements have been around longer than target date funds.
10 things every investor should know about asset classes,” (MarketWatch, February 11, 2015) The author left our #11: Twice in the last 15 years we’ve seen when the market tanks big time, all asset classes are 100% correlated.
In target date funds, performance starts to trump risk management as assets balloon,” (InvestmentNews, February 12, 2015) More gasoline on the flames. Not only do different fund companies treat dates differently, but so do investors. Look for an explosion when the market drops as it regularly does.
Target Date Fund Inflows Not What They Used to Be: Morningstar,” (ThinkAdvisor, February 13, 2015) Well, no one expected this tree to grow to the sky. Look to some of the articles this week to help explain why target date funds aren’t growing as fast.
The paradox of choice: Can you have too many investment options?” (InvestmentNews, February 13, 2015) Hmm, haven’t we seen this before? The fact the story still needs to be told means people still aren’t getting it. Get it people. It’s important.
Why Active Managers Fail (and Why You Shouldn’t Fire Them),” (ThinkAdvisor, February 13, 2015) Here’s the bottom-line: Most managers don’t use a single index as a benchmark. Active management adds a valuable diversification that can help reduce the downside, something no index can ever do.

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.
Retirement funds set record highs,” (BenefitsPro, February 9, 2015)
Watch out for these sneaky leaks in your retirement savings,” (MarketWatch, February 9, 2015)
Beware of In-Service 401k Rollovers,” (Wall Street Journal, February 9, 2015)
11 elements of a good enrollment plan,” (BenefitsPro, February 9, 2015)
Top 1 percent holds most 401k assets,” (BenefitsPro, February 10, 2015)
401k plan leakage undermines employee retirement security,” (Employee Benefit News, February 11, 2015)
“$380 billion in 401k rollovers on the way,” (BenefitsPro, February 11, 2015)
The hazards of securities-based lending as a source of retirement income,”(InvestmentNews, February 11, 2105)
Share of 401k loans drop in 2014,” (BenefitsPro, February 12, 2015)
How to maximize clients retirement resources,” (Employee Benefit Adviser, February 13, 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.
Should You Save More For Retirement Or Pay Off Your Mortgage Early?” (Forbes, February 6, 2015)
Consulting as a Bridge Between Full-Time Work and Retirement,” (New York Times, February 6, 2015)
Golden Rules for Your Golden Years,” (Wall Street Journal, February 8, 2015)
The Number of 401k Millionaires Has Doubled. Are You on Track to Be One?” (Time, February 9, 2015)
5 Harmful Retirement Misconceptions To Avoid,” (Forbes, February 9, 2015)
Put your teen’s lawn-mowing money into a Roth IRA,” (MarketWatch, February 9, 2015)
Your 3 biggest Social Security questions answered,” (CNN, February 10, 2015)
5 Investment Assumptions That Will Cost You in Retirement,” (US News, February 11, 2015)
Retirement income funds can make withdrawals simple,” (USA Today, February 12, 2105)
Women mum about money, worry about retirement savings,” (USA Today, February 12, 2015)
Auto-Retirement Investing: Will It Be Enough?” (Wall Street Journal, February 12, 2015)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: IRA Contribution Guide for Tax Year 2014 – An Illustration |
The Retirement Plan Blog: 401k Loans: A “Temporary Band-Aid”? |
Behavior Gap Newsletter: How to Find Your Money Why |
Fred Reish: Managing Defined Contribution Plan Investment Policy Statements |
The Frugal Fiduciary: Evaluating 401k Providers |
fi360: Seven qualitative factors for evaluating investments |
fi360: Santomenno court case a window into debate over DOL fiduciary rulemaking |
The Chicago Financial Planner: What I’m Reading – Winter Chill Edition |
Scholarly Financial Planner: The Recent Rise in the U.S. Dollar: What Should U.S. Investors Do Now? |

Hot Tips from Popular Web Resources:
NAPA Net: Biggest Small Plan Barrier? Burdensome Administration |
NAPA Net: BD Proactively Rebating Mutual Fund Fees in Qualified Plans |
NAPA Net: Local Government DB Generosity Affects Supplemental Contributions |
Morningstar: 5 Ways to Improve the President’s Retirement Initiative |
NAPA Net: Senate Committee Wants Details on Fiduciary Proposal |
NAPA Net: The Impact of Assumptions on the Impact of Leakage |
NAPA Net: Shift to DC a Global Trend |
NAPA Net: Graff: Greater Life Expectancies Complicate the Retirement Discussion |
NAPA Net: Case of the Week: The Automatic IRA Act of 2015 |
NAPA Net: ‘Generation D’ Rethinking Advisor Relationships |
NAPA Net: Fewer Plans Offering Investment Advice |
Kiplinger: Consolidate Individual Retirement Accounts |
NAPA Net: Oregon Takes Another Step Toward State-Run Retirement Plan |
NAPA Net: Meeting the Lifetime Income Challenge |
NAPA Net: IRA Rollovers Ramping Up |
NAPA Net: Retirement Income Options Still MIA for Most Plans |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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