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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/22/15

May 26
00:07 2015

1020805_25983300_Trending_Topics_2015.05.26_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
Exclusive Interview: David Huntley Explains Fees Just One Component of Value,” (FiduciaryNews.com, May 19, 2015) “Price (fees) are a component of value. There are many other components that make up value and the relative weight will vary from plan to plan.”

Compliance – Lots of Noise, Little Music:
Everybody’s got an idea of what to do. Wouldn’t it be easier just to let what works, work? Or, how about just making what’s out there work better?
Shift to 401k Plans Increasing Income Inequality: Study,” (Wall Street Journal, May 15, 2015) But not for the reasons that you may think. It turns out, unlike other “studies” that blame 401k plans for allowing the “rich” to save more; hence, widening the wealth “gap,” this instead blames “high fees” in 401k plans (as opposed to other savings vehicles) and conservative investing. Thankfully, these two scourges do not apply to all – even most – 401k savers.
Bipartisan bill promotes lifetime income illustrations on retirement plan statements,” (Benefit News, May 18, 2015) How many ways can this go wrong? One, it will encourage employees to believe the estimate is actually the amount of money they’ll receive. Two, for most people this will be a discouragingly low number that may very well, uh, discourage them from further participation. Can’t these politicos get anything write? Can’t they at least ask behavioral finance researchers for some input (and not the researchers paid by firms selling income products)?
DB plans fall as DC plans rise,” (BenefitsPro, May 18, 2015) Why would any company want the liability associated with a DB plan and why would any retirement saver want to suffer the limited growth possibilities of a DB plan? It’s better on both counts for employees to embrace their self-discipline and take full responsibility for their own retirement. Don’t be a Blanche Dubois. Don’t always depend on the kindness of strangers.
Washington latest state to encourage workplace retirement plans,” (InvestmentNews, May 19, 2015) The DOL better do something quick or it may find itself out of a job.
Powell: How to fix America’s retirement problems,” (USA Today, May 21, 2015) Here’s a slew of ideas, some bad, some worse. OK, maybe there’s a good one in there (or two).
Retirement Plans Paid $820M After Failing Nondiscrimination Testing,” (ThinkAdvisor, May 22, 2015) More than 54,000 plans were involved. This could be an example of poor plan design (i.e., not enough employees contributing) or simply poor execution.

Fiduciary – The Votes are In…:
This is the week we’ve been waiting for as the Supreme Court has made its decision on Tibble v. Edison. In the end, it came out pretty much as expected, including the post-decision hype.
Sec. Perez addresses fiduciary standard during CEO roundtable,” (Employee Benefit News, May 18, 2015) Direct from the Secretary’s mouth – the complete inside scoop, or about as complete as you can expect.
Supreme Court rules for plaintiffs in Tibble vs. Edison,” (BenefitsPro, May 18, 2015) This should surprise no one. But it also shouldn’t excite anyone, because all it means is the statute of limitations does not apply to this specific case. The case goes back to the lower court which still must rule whether a fiduciary breach occurred. Still, to say an ongoing duty is not subject to a statute of limitations is significant.
U.S. Top Court Hands Win To Employees In Edison International 401k Dispute,” (Financial Advisor, May 18, 2015) More on the story.
SCOTUS decision opens door to more 401k lawsuits,” (Benefit News, May 18, 2015) Maybe. Maybe not.
Tibble vs. Edison ruling turns up the heat on plan sponsors,” (Employee Benefit News, May 19, 2015) Again, maybe yes, maybe no.
How the Supreme Court Just Improved Your Retirement,” (Money, May 19, 2015) Here’s the main stream media’s take on the issue.
Clients Deserve a Clear Choice Between Sales and Advice,” (ThinkAdvisor, May 20, 2015) A great summation of all that’s important in the fiduciary debate.
7 signs the fiduciary movement is coming to an end,” (InvestmentNews, May 20, 2015) Excellent article that speaks the truth many might be afraid to hear.
Casady: Better DOL Rule Needs Only ‘A Couple’ Of Improvements,” (WealthManagement, May 21, 2015) Like we said when it was announced, the DOL gave the brokerage industry everything it wanted.
U.S. Courts Order 401k Sponsors To Do the Right Thing,” (WealthManagement, May 21, 2015) The most comprehensive article yet.
The silver lining in 401k Supreme Court decision,” (Benefit News, May 21, 2015) We read the article three times and still couldn’t find the “silver lining” the headline promised.

Fees – Why Do Fees Get Such a Bad Name?:
Look, it you don’t pay a fee, you won’t get the service. It’s only about making sure the quality of the service justifying the level of the fees being paid. Sometime, paying a higher fee is good. Sometimes, paying a lower fee is bad. There’s no rule. Worse, the right fee and the right service may be in the eye of the beholder.
Are Asset-Based Fees Becoming Obsolete?” (Financial Advisor, May 15, 2015) For financial planners this is likely the case; For portfolio managers, probably not. There’s always been a question why product pickers got compensated the same way stock pickers did – clients need only pay an asset management to one provider, and that would be the stock pickers.
Anyone really surprised by Tibble v. Edison? Anyone?” (BenefitsPro, May 21, 2015) Will start off a “race to the bottom” when it comes to fees, or will it merely make life more difficult for certain plan service providers?
Bigger retirement paychecks for those with access to institutional pricing,” (Benefit News, May 21, 2015) This is a killer. It’s based on a study that assumes it costs 1% more if you don’t have institutional pricing. Why make this assumption. Why make any assumption at all, when real data is available.

Investments – What Comes Around…:
…Goes Around. Trees can never be assumed to grow to the sky when it comes to investments. Markets by their very nature, move in cycles. That means individual investments must also move in cycles.
Human Stock Pickers Gain Against Indexes,” (Wall Street Journal, May 17, 2015) This is a pendulum that swings back and forth. It’s now the actives’ turn. Will we see as many headlines like this one as we did during the most recent reign of the index fund?
Can Anyone Make Your Retirement Money Last for Life?” (ThinkAdvisor, May 19, 2015) A look beyond annuities and towards something more akin to managed accounts.
‘*8% guaranteed’? Follow the asterisk before buying,” (MarketWatch, May 19, 2015) Better read this. The author spills the beans.
Employer stock in 401k plans down but not out,” (Benefit News, May 20, 2015) The headline appears more generous than the article.

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.
The Surprising New Company Benefit That’s Helping Americans Retire Richer,” (Money, May 14, 2015)
How gamification can help get clients to plan for retirement,” (InvestmentNews, May 15, 2015)
401k Administrators Urged To Look At Big Picture,” (Financial Advisor, May 18, 2015)
Record keepers can influence 401k contributions,” (BenefitsPro, May 19, 2015)
How auto-enrollment can be enhanced with auto-portability,” (Employee Benefit News, May 22, 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.
Adding A Psychological Edge To Retirement,” (Financial Advisor, May 13, 2015)
Gen X More Hopeless Than Boomers About Retirement,” (Fox Business, May 14, 2015)
Are Employees Leaving 401k Matching Funds on the Table?” (WealthManagement, May 15, 2015)
Tips on drawing down your retirement funds,” (USA Today, May 17, 2015)
IRA Rollover Goofs to Avoid,” (Employee Benefit News, May 18, 2015)
Why you shouldn’t rollover a late spouse’s IRA into your own,” (MarketWatch, May 18, 2015)
Saving for retirement should be advisers’ top priority: Wharton’s Marston,” (InvestmentNews, May 19, 2015)
Early Retirement Withdrawals Could Fuel Risky Behavior, New Paper Says,” (Wall Street Journal, May 19, 2015)
How to Plan for Semi-Retirement,” (Yahoo, May 19, 2015)
When downsizing is the best move for retirees,” (MarketWatch, May 20, 2015)
3 steps to a safer retirement stash,” (CNN, May 20, 2015)
One-in-four people overestimate their retirement knowledge. How much do you know?” (The Washington Post, May 20, 2015)
3 Ways to Build a $1 Million Nest Egg Despite Lower Investment Returns,” (Money, May 20, 2015)
Six Questions to Ask Before Rolling Over a Retirement Account,” (WealthManagement, May 21, 2015)

Wisdom from Some of Our Favorite Blogs:
Data “Points”: The “New” Math? |
Pension Risk Matters: Public Pension Funds and Municipal Bond Issuance |
Scholarly Financial Planner: DOL Fiduciary Rule Proposal: Questions for Readers |
The Retirement Plan Blog: Who is responsible for service provider mistakes? |
Fiduciary Matters Blog: Plaintiffs Score Victory Before Supreme Court in Tibble v. Edison |
Behavior Gap: Understand the Emotion in Your Financial Decisions |
Proskauer’s ERISA Practice Center Blog: U.S. Supreme Court Sends ERISA Investment Fee Case Back For Further Review |
Scholarly Financial Planner: Tibble v. Edison: Lessons for DOL Rule-making? |
ERISA Lawyer Blog: Supreme Court Rules That Fiduciaries Have A Continuing Duty To Monitor Plan Investments For Purposes Of Determining Whether ERISA’s Statute Of Limitations Has Expired |
The Trusted Advisor: 401k Plans Must Monitor Investments, U.S. High Court Rules |
fi360: What’s in an expense ratio? |
Boston ERISA Law Blog: Initial Thoughts on the Supreme Court’s Opinion in Tibble v. Edison |
The Trust Advisor: Good News for Advisors of IRA and Qualified Retirement Plans: Choate’s Bible Now Is Available in the Cloud |
Behavior Gap: Do the Drill: A Lifeboat for Investors |
ERISA Lawyer Blog: Fifth Circuit Rules That Administrator Is Not An ERISA Fiduciary |
Business of Benefits: The 403(b) QLAC |
Behavior Gap: Ideas for People Who Use Money: Save More & You’ll Impress People |
Data “Points”: 3 Things You Should Know About Automatic Enrollment |

Hot Tips from Popular Web Resources:
NAPA Net: DOL Extends Comment Period on Fiduciary Reproposal |
NAPA Net: An Astronomer, a Broadcaster and an Investment Manager Walk Into a Bar… |
NAPA Net: Market Share of Proprietary TDFs Eroding |
NAPA Net: Citing Requirement for Regular Review, Supremes Remand Tibble |
NAPA Net: 3 Things You Should Know About Automatic Enrollment |
NAPA Net: Study: Diminished Investment Brands Pose Challenge for Advisors |
NAPA Net: Chalk: Is it Time for Corporate Fiduciary Education? |
Morningstar: Why Retirees Should Consider Investing Abroad |
Motley Fool: 10 Easy Ways You Can Save an Extra $1 Million for Retirement |
NAPA Net: 26 Senators Ask Obama to Remove Barriers to State-Based Initiatives |
NAPA Net: Case of the Week: Controlled Groups |
NAPA Net: Why the Industry Cares More About Plan Outcomes Than Plan Sponsors Do |
NAPA Net: Retirement Spurs Most Advisor Relationships, But… |
Morningstar: Social Security: 4 Filing Pitfalls |
Motley Fool: Americans Are Making a $24 Billion Retirement Mistake |
NAPA Net: Washington State Opens Small Biz Retirement Marketplace |
NAPA Net: DCIIA Outlines DC Plan Success Factors |
NAPA Net: What Drives Cashouts? |
Kiplinger: 10 Reasons Millennials Need to Own Stocks |
NAPA Net: The Retirement Landscape of the Future |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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