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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/19/15

June 22
00:03 2015

1020805_25983300_Trending_Topics_2015.06.22_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: AARP’s David Certner says of DOL’s Proposed Fiduciary Rule: ‘Disclosure Alone Not Enough’,” (, June 16, 2015) What can be done when surveys show the public already believes all investment service providers always act in their best interests?

Compliance – The Truth About Cats and Auto-IRAs:
For once, the tide flows towards reality, with many articles questioning the effectiveness of government “cures” when it comes to retirement.
Self-Directed IRA Firm Should Have Seen Red Flags Of Fraud, SEC Says,” (Financial Advisor, June 16, 2015) If you’ve ever wondered why 401k plan sponsors shouldn’t offer a self-directed option, read this.
Forcing Workers to Save Just 3% Won’t Solve the Retirement Crisis, EBRI Says,” (Wall Street Journal, June 16, 2015) This, as the article states, is the real problem with state sponsored private retirement plans.
Auto-IRAs not necessarily an auto-solution,” (BenefitsPro, June 16, 2015) A different take on the same subject.
Four Changes That Would Simplify Retirement Savings,” (WealthManagement, June 16, 2015) All great ideas, if only Washington wasn’t too busy futzing around with its own tail.
Treasury releases regulations for multiemployer pension plans,” (BenefitsPro, June 17, 2015) Why does “rearranging deck chairs on the Titanic” come to ming?
What if We Replaced IRAs and 401ks?” (ThinkAdvisor, June 18, 2015) You could read this article, but you might already know what the report it talks about says if your read this article in 2010: “401k 2.0 – A Proposal,”, December 7, 2010). The big difference in the newer study has the professors who wrote it saying their proposal would be built around index funds (which, for some reason, they call “low cost”) instead of better performing funds.

Fiduciary – “Best Interests” – But for Who?:
It seems the industry might soon be hoist upon its own petard. This will be fun to watch.
DOL fiduciary rule in crosshairs of new spending bill,” (InvestmentNews, June 16, 2015) Because that worked so well the dozen or so time Congress tried doing this with ObamaCare…
Financial Firms Seek to Scale Back ‘Best Interest’ Proposal,” (Wall Street Journal, June 16, 2015) If you’ve got everything you want, but you don’t want to let people know you’ve got everything you want, negotiating 101 says you should ask for more. The brokers are asking for more. Are they being clever? Or are they too clever by half?
Fiduciary Fight Heats Up on Hill,” (WeathManagement, June 16, 2015) We’re all just waiting to see just how bad Washington can mess up this once great idea.
Why financial literacy is more important than a universal fiduciary standard,” (BenefitsPro, June 17, 2015) Food for thought, but is it really possible to do this?
Key Congressman Says DOL Fiduciary Rule Would Cut Advisors Off From Investors,” (Financial Advisor, June 17, 2015) As Barbara Roper says in the article, if the industry lobbyist says it’s true, it must be true.
Are Clients Interests Really Coming First?” (Benefits News, June 17, 2015) Although a well written piece, the author seems to have a fundamental misunderstanding between providing advice and effecting a transaction. The former entails a fiduciary duty, while the latter is an agency (i.e., brokerage) service.

Fees – Let the Court’s Decide:
As the DOL says, enforcement of any new Fiduciary Rule – and the disposition of fees thereunder – will be left to the courts. That might be the industry’s biggest fear. They can buy off regulators and politicians. It’s a lot harder to buy off a judge.
Supreme Court decision in 401k case may have profound effect on fiduciary debate,” (InvestmentNews, June 12, 2015) Oddly, it’s not the allowance of prohibited transactions that puts the DOL proposed rule in conflict with the Supreme Court’s ruling on Tibble. Instead, it’s the DOL’s apparent creation of a “short-term” fiduciary that contradicts Tibble’s “fiduciary is forever” decision.

Investments – Those that Don’t Learn from History…:
…are condemned to repeat it. Such is the greatest lesson of investing for the long term. Once you separate the sizzle from the steak, things get incredibly easy to understand and simple to execute.
Why ETFs are part of a balanced retirement strategy,” (MarketWatch, June 11, 2015) Here’s an example of what wrong with both the industry and with journalism. This article is essentially a blog. CBS goes out of its way to state “RetireMentors features retirement advice from financial professionals, not staff journalists.” It even goes on to say, “Our corps of RetireMentors is selected and edited by senior MarketWatch editors.” And yet, despite these disclaimers and the alleged oversight, we see this in the article: “The table below confirms this truism by breaking down the determinants of portfolio performance over an average 20-year period: Asset Allocation: 93.3%; Security Selection: 4.6%; Market Timing: 2.1%.” It even sites “Brinson, Hood and Beebower, ‘Determinants of Portfolio Performance,’ 1986, 1991” as the source for this data. If you don’t understand the problem here, then read the lead stories in last week’s Trending Topics.
Hedge-Fund Bet Hits Pensions,” (Wall Street Journal, June 16, 2015) He who lives by the hedge, dies by the hedge.
GAO says market timing not an issue with 401k plans,” (BenefitsPro, June 16, 2015) Two words: QDIOs and two market crashes. Who even thinks of this late 1990s fad anymore? Apparently, three US senators seem to think there are no more pressing issues to look into.
Failure to rebalance, not frequent trading, cited as challenge for 401k plans,” (Employee Benefits Adviser, June 17, 2015) Different take on the same subject as above. It sounds like there aren’t enough retirement savers choosing the “one portfolio” option.
Which Generates More Retirement Income—Annuities or Portfolio Withdrawals?” (Time, June 17, 2015) Well, that depends, are you selling insurance products or not? The bottom-line, though, is that the investing public still holds a wary eye towards annuities.
Managed accounts as QDIAs: rare, but could change,” (Benefit News, June 17, 2015) The article does a good job presenting the problem, and managed accounts are a viable solution. They just might not represent the easiest answer.
How much of your retirement portfolio belongs in bonds?” (MarketWatch, June 17, 2015) This article does a nice job giving the text book answer to this question. The odd thing is, though, as many of you already know, how often does what works in the classroom fail miserably in real life? That’s what we have here. The classic response to this question is to say the answer depends on your age. That’s wrong. The answer depends on how rich you are. If can afford to self-endow at prevailing long term interest rates, then there are bonds in your future. If not, well, that’s when the real world trumps the text book.

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.
How To Avoid A Seductive Trap: The 401k Loan,” (Forbes, June 11, 2015)
Self-employed go it alone,” (CNBC, June 15, 2015)
Bridging the generational financial wellness divide,” (Employee Benefit News, June 15, 2015)
Money Flows Out of 401k Plans as Baby Boomers Age,” (Wall Street Journal, June 15, 2015)
Workers missing out on Roth 401k plans,” (Benefit News, June 16, 2015)
Social Security needs to figure more prominently in retirement plan education,” (Employee Benefit Adviser, June 16, 2015)
Retirement plans increasingly hampered by student loan debt,” (CBS News, June 16, 2015)
Plan sponsors struggle with competing retirement education priorities,” (Employee Benefits News, June 19, 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.
9 False Moves That Could Derail Your Retirement,” (Time, June 11, 2015)
A Way Around Restriction on IRA Rollovers,” (Wall Street Journal, June 14, 2015)
CFPB warns seniors on reverse-mortgage advertising,” (MarketWatch, June 14, 2015)
Americans Are Taking Fewer Crazy Risks With Their Retirement Money,” (Bloomberg Business, June 15, 2015)
The 401k Loan: Friend or Foe for Clients?” (ThinkAdvisor, June 15, 2015)
Women work harder at saving for retirement,” (BenefitsPro, June 15, 2015)
We’re saving more in our IRAs, but we’re not ready to retire,” (MarketWatch, June 15, 2015)
Three letters that spell the perfect graduation gift,” (Rochester Business Journal, June 19, 2015)

Wisdom from Some of Our Favorite Blogs:
Data “Points”: 5 Things You Need to Know About Retirement Readiness |
ERISA Lawyer Blog: Employee Benefits-IRS Announces That Its Pre-Approved Plan Program Is Expanded to Include Cash Balance Plans and ESOPs |
Scholarly Financial Planner: The Unsuitability of “Suitability”: SIFMA’s Deceptive “Best Interests” Proposal |
Behavior Gap: A Summer Without Headlines: The 90-Day Challenge |
Boston ERISA Law Blog: It’s a Top Hat Plan? Prove It |
Behavior Gap: The Alpine-Style Life: What’s Really Necessary? |
ERISA Lawyer Blog: Fourth Circuit Holds That Plaintiffs Have Standing To Pursue Claim For Disgorgement Of Profits |
The 401k Plan Blog: Fiduciary Fight Continues – Could Congress cut off funding? |
The Trust Advisor: Nevada Legislature Allows for Greater Flexibility with Irrevocable Trusts |
Scholarly Financial Planner: Dear “Financial Consultant”: Do You REALLY Act in My “Best Interests”? |
Squared Away Blog: Planning for a Centenarian’s Life |
Boston ERISA Law Blog: Do You “Work For” Uber? |
Scholarly Financial Planner: When Acting in Your “Best Interests” – Isn’t! (A Reply to Pawlenty/Reynolds) |
The 401k Plan Blog: Tibble v. Edison Ruling – Some potential impact to Advisors |
Scholarly Financial Planner: Why You Should Support the DOL’s Conflict of Interest Rule |
fi360: Understanding Marketing Volume I: The Golden Rules |
Behavior Gap: Ideas for People Who Use Money: What Does Happiness Mean to You? |

Hot Tips from Popular Web Resources:
NAPA Net: Managed Accounts: A Better QDIA? |
NAPA Net: Simplicity via Complexity |
NAPA Net: More Than Defaults Funding TDFs |
Morningstar: When Should I Take My IRA RMD? |
Motley Fool: 56% of Americans May Fall Short In Retirement Because of This |
NAPA Net: A Preference on ‘Preferences’? |
NAPA Net: Participant Trading Heats Up |
NAPA Net: Pension Controversy in Garden State Despite Court Ruling |
NAPA Net: DC Households Keep it Together |
Motley Fool: 7 Best Ways Retirees Can Boost Their Income |
NAPA Net: CBO: Retirement Savings Will Boost Future Tax Revenues |
NAPA Net: Case of the Week: Terminating a 403(b) Plan and the Successor Plan Rule |
NAPA Net: Could Congress Cut Off Funding for the Fiduciary Proposal? |
NAPA Net: DOL Schedules Hearings on Fiduciary Rule |
EBRI: “Self-Insured Health Plans: State Variation and Recent Trends by Firm Size, 1996-2013,” and “Auto-IRAs: How Much Would They Increase the Probability of ‘Successful’ Retirements and Decrease Retirement Deficits? Preliminary Evidence from EBRI’s Retirement Security Projection Model®” |
NAPA Net: Lawmakers Grill Perez on DOL Fiduciary Rule |
NAPA Net: How Much Difference Could Auto-IRAs Make? |
NAPA Net: The (New) Phases of Retirement |
NAPA Net: Double Digit DC Record Keeper Turnover Projected |
NAPA Net: Where Managed Accounts Fall Short |
NAPA Net: Withdrawals by Boomers Changing DC Landscape |
NAPA Net: Are Older Americans Transferring Their Retirement Security? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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