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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 4/17/15

April 20
00:09 2015

1020805_25983300_Trending_Topics_2015.04.20_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
Top Ten Reasons Why 401k Participant Fee Disclosure Hurts Employees’ Retirement Prospects,” (, April 14, 2015) If fee disclosure is a disease, education is the cure.

Compliance – Out of the Blue and Intro the Black:
They give you this, but you pay for that. In the end, Rube Goldberg solution are only one thing: Entertaining on paper, impossible in real life.
No buzz over Obama’s myRA retirement savings plan,” (CNBC, April 11, 2015) Just another Edsel from a long list of failed ideas.
Corporate pensions plans bleeding through falling interest rates,” (Benefit News, April 16, 2015) Among other things.

Fiduciary – There’s More to the Picture:
Than meets the eye. The DOL comes through with a big dud. It’s amazing how many don’t realize that.
Plaintiffs appeal decision in Fidelity case on 401k float income,” (InvestmentNews, April 13, 2015) Who owns the float? That’s the center of this fiduciary question. It’s sort of the same thing as the question of who owns the right to lend securities from a couple of decades ago. On that one, custodians were freely lending securities of clients and banking the interest. Today, the practice is only done with explicit permission, if at all.
DOL Fiduciary Rule Fast-Tracked and Released Publicly Tuesday,” (WealthManagement, April 13, 2015) Remember what Christmas morning felt like – before you got out of bed?
DOL Releases Fiduciary Plan,” (ThinkAdvisor, April 14, 2015) Mostly what the DOL said in its press conference an hour before the official release. A couple of “we’ll comment later” quotes from industry groups.
Labor Department proposes controversial fiduciary rule,” (InvestmentNews, April 14, 2015) A quick rundown of the DOL talking points. Not much substance in the main article, but the sidebar might be of interest.
Merrill seeks to be leader on fiduciary,” (Investment News, April 14, 2015) Last week we thought John Thiel blinked. Now it looks like he had inside information. What a scam.
Tougher Rules But Flexible Comp Under New Fiduciary Proposal,” (Financial Planning, April 14, 2015) The title promises more than the article delivers, although it does offer two things the other articles haven’t: A source that actually says the new rule doesn’t give the industry much to complain about and the dilemma of enforcement – namely, there is no good way to enforce the new rule.
DOL broker rule offers ‘guardrails, not straight-jackets’,” (BenefitsPro, April 14, 2015) Not much in terms of third-party quotes, but by far the meatiest article in the lot.
DOL Releases Rule Aimed at Curbing Advisor Conflicts,” (WealthManagement, April 14, 2015) Lather. Rinse. Repeat.
6 ways the DOL says its fiduciary rule is new, improved,” (BenefitsPro, April 14, 2015) Quick, easy to follow break-down of the proposed rule.
Watering Down the Fiduciary Standard?” (Employee Benefit News, April 15, 2015) Ron Rhoades writes a comprehensive piece on why the DOL proposal is flawed. The biggest issue: It relies on disclosures, and we all know what that means.
Proposed DOL fiduciary rules positive for plan sponsors,” (Benefit News, April 15, 2015) This op-ed is a quick and easy read that poses something interesting to consider.
Contract exemption could be as important as DOL fiduciary rule,” (BeAdvised, April 15, 2015) A good breakdown of the practical impact for both providers and plan sponsors. Of particular note is the parts where the proposed rule exemptions do not apply to 401k plan option menus.
Following fiduciary rule, more adviser disclosure regs to come,” (Employee Benefit News, April 15, 2015) Call it the “paperwork augmentation act.” About the only thing this proposed rule guarantees is broker will need to vastly increase the amount of compliance reporting they’ll be doing and that includes more disclosures to clients.
Already Contentious Fiduciary Debate Gets Hotter,” (Financial Planning, April 15, 2015) This is a good article with lots of original quotes.
Worried About Fiduciary Rule? 2 Options for Brokers,” (Financial Planning, April 15, 2015) Be prepared to see more articles like these.
DOL fiduciary rule falls flat,” (Employee Benefit News, April 15, 2015) This article is worth it if only for the “lipstick on a pig” quote.
Expect tumult for broker-dealers if DOL fiduciary plan goes through,” (InvestmentNews, April 15, 2015) This article contains the quotes you were waiting for from the usual names of ERISA attorneys. Not sure about the conclusion, though. Yes, compliance costs will increase, but it’s doubtful it will have an impact on compensation structures.
What it takes to be a fiduciary,” (InvestmentNews, April 15, 2015) Will the old five part test become the new four part test?
A fiduciary’s perspective on the DOL’s Consumer Protection Proposal,” (Employee Benefit News, April 15, 2015) Not sure if this one’s worth it, especially for its incorrect claim that the proposal requires level fees.
Benefits experts debate long-term impact of fiduciary rules on employers,” (Benefit News, April 15, 2105) A very broad swath at the whole thing. Lots of different voices. Lots of opinions.
Is Your Rollover Business at Risk Under Fiduciary Plan?” (Financial Planning, April 16, 2015) This may sound like it’s written just for the practitioner, but it contains plenty for retirement savers, too, including many quotes from practitioners on both sides of the issue.
DOL fiduciary rule: A step in the right direction,” (Employee Benefit News, April 16, 2015) The op-ed feels the DOL’s proposed rule changes things, which is precisely what the DOL wants you to feel.

Fees – And Once Your Gone:
You can never come back. The genie is out of the bottle. The horse is out of the barn. We’ll all be chasing that genie who’s chasing that horse. Meanwhile, who cares of the bottle breaks or the barns catches fire?
Reduce plan fees by increasing account balances,” (Employee Benefit Views, April 13, 2015) While this works at least in theory, it’s not always in the best interests of the ex-employee to stay in the plan.
401k participants doomed by the tree of knowledge,” (BenefitsPro, April 15, 2015) A little knowledge can be a very dangerous thing – such is the dilemma of participant fee disclosure.
DOL fiduciary rule fails by only focusing on fees and expenses,” (InvestmentNews, April 15, 2015) Don Throne presents a compelling case on why fees are merely the tip of the iceberg and should merit less attention than they receive.

Investments – It’s Better to Burn Out:
Than to fade away. Old arguments never die. Apparently, unlike soldiers, they don’t fade away either. They’re only repeated ad nauseam until someone says “Uncle.”
Changing the focus of investment committee meetings,” (Employee Benefit News, April 13, 2015) Very simple stuff that been around for almost a decade now.
Best target-date funds? Fidelity vs. Vanguard,” (MarketWatch, April 15, 2015) The numbers are interesting but the analysis is not since it compares index funds vs. active funds using the infamous snapshot-in-time anomaly found so often in flawed performance analyses.
The One Investment You Need Most For A Successful Retirement,” (Money, April 15, 2015) This article is one of the main reasons the public does trust investment “advisors.” It’s not that they’re malicious, it’s just that so many of them sell the sizzle not the steak. This author states, since the market is headed for lower returns, now is the time to invest in index funds. “You can cut fees by 1%” to paraphrase the writer. That’s mathematically sound, right? Sure, but the logic is mistaken. During periods of low markets, actively managed funds historically outperform index funds.
CITs get big boost from 401k plaintiff’s lawyers,” (BenefitsPro, April 16, 2015) Could be true, but only if the value proposition makes sense.
In Labor Department’s fiduciary proposal, a nod to passive investing,” (InvestmentNews, April 17, 2015) Unfortunately, the author of this article misinterprets the true consequences of the DOL’s proposed rule. If It stands, the new rule will force consolidation within the passive investing product universe, as firm’s will now need to positively show it’s in the client’s best interests to pay more for the identical portfolio that could be found for a lesser price at Vanguard and Fidelity. Since it’s easier to justify higher fees for actively managed funds (e.g., they historically have offered better downside protection than index funds), and it’s almost impossible to disprove “best interest” when comparing one actively managed fund with another (since no two actively managed portfolios are identical), this proposal will probably have little impact on actively managed funds (although, just as today, it will tend to discourage higher cost share classes within a single fund).

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.
Boomer retirement confidence at 5-year low,” (BenefitsPro, April 13, 2015)
Are employer savings on health care being reinvested in retirement plans?” (InvestmentNews, April 13, 2015)
401k plans unlikely to see much of Americans’ tax refunds,” (BenefitsPro, April 13, 2015)
Plan sponsors action critical in 401k participant success,” (Benefit News, April 14, 2015)
Overcoming retirement challenges in the non-profit sector,” (Employee Benefit News, April 14, 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.
Retiring well? Not most baby boomers,” (CNBC, April 13, 2015)
5 Common Client Pitfalls in Retirement Planning,” (InvestmentNews, April 13, 2015)
Earlier savings can help avoid boomer retirement fears,” (Benefit News, April 14, 2015)
Some retirees say: ‘Retire as soon as you can’,” (CBS News, April 14, 2105)
Cookie-cutter solutions won’t get you to retirement,” (MarketWatch, April 14, 2015)
4 Questions Everyone Must Ask Their Retirement Advisor,” (Forbes, April 14, 2015)
Nearly half of retirees wish they had retired earlier,” (InvestmentNews, April 15, 2015)
Do A Retirement Dress Rehearsal Now So You Don’t Blow It Later,” (Forbes, April 15, 2015)
Behind on retirement savings? Here are 3 ways to catch up,” (CNN, April 15, 2015)
The 4% Rule Is Dead: PwC,” (ThinkAdvisor, April 16, 2015)

Wisdom from Some of Our Favorite Blogs:
The Trust Advisor: Three Things the Wealth Management Industry Isn’t Telling You |
ERISA Lawyer Blog: IRS Discusses Keeping Records For Hardship Withdrawals And Plan Loans |
The Trust Advisor: US Labor Department Seeks Public Comment on Proposal to Protect Consumers From Conflicts of Interest in Retirement Advice |
Behavior Gap: Financial Prescriptions: Proceed with Caution |
Proskauer’s ERISA Practice Center Blog: U.S. Department of Labor Issues Proposed Fiduciary Rules |
fi360: Your Primer on the DOL’s Fiduciary Rule Proposal |
Pension Risk Matters: Pension Risk Management For Public Plans |
Squared Away Blog: Will Boomers Delay Social Security? |
Data “Points”: 3 (More) Pervasive Retirement Myths – an Academic Perspective |

Hot Tips from Popular Web Resources:
NAPA Net: Retirement Legislation Springing Forth in Massachusetts |
NAPA Net: Could Obamacare Lead to Higher Retirement Plan Contributions? |
NAPA Net: 3 (More) Pervasive Retirement Myths — an Academic Perspective |
NAPA Net: Senate Finance Report Calls for More NQDC Limits |
NAPA Net: DOL Issues ‘Conflicted Advice’ Proposal |
NAPA Net: DOL ‘Conflicted Advice’ Rule a Game Changer |
NAPA Net: Case of the Week: Top 11 IRS Plan Compliance Concerns |
NAPA Net: ICI: Fiduciary Reproposal Relies on ‘Fatally Flawed’ Research |
NAPA Net: DOL’s Fiduciary Proposal Preserves Advice — But at What Cost? |
NAPA Net: Gamification Changing How Advisors Engage with Participants |
NAPA Net: New TDF Rating: Beyond Performance |
NAPA Net: Financial Stress Taking a Toll at Work |
Kiplinger: Rules for Converting Money From a Traditional IRA to a Roth |
NAPA Net: If You Could Be a Doorknob or a Blade of Grass… |
NAPA Net: Warren’s ‘Smart Regulation’ Theme May Presage Campaign Issue in 2016 |
Kiplinger: Costly Danger of Putting Extra Money in IRA |

Miss anything? Feel free to add a comment below.


About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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