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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/4/15

FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/4/15
September 08
00:03 2015

1020805_25983300_Trending_Topics_2015.09.08_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:
A Growing Fiduciary Concern: Have ‘State-of-the-Art’ Investment Menus Backfired?” (, September 1, 2015) Keeping the investment option menu simple not only increases the odds employees will retire in comfort, it also helps reduce fiduciary liability for plan sponsors.

Compliance – The Camel’s Nose Under the Tent?:
They say governments don’t strip the people of their freedom in one quick slice, they do so with a thousand tiny cuts. Are we in the midst of seeing this very thing happen to private retirement accountants? Will individuals no longer be able to control their own destiny? Only time will tell.
What Americans need: An ‘idiot-proof’ retirement system,” (Los Angeles Times, August 28, 2015) Wow, is the world upside down or what? Only idiots buy Ponzi Schemes, usually when the perp tells them it’s an “idiot-proof” way to make money.
Brokers Fume As U.S. Looks To Protect Investors From Expensive Duds,” (Financial Advisor, September 1, 2015) The DOL is going back to what the IRS used to do – prevent IRAs from investing in illiquid assets that require money be sent out of the trust to a third party.
IRS Inaction Affects Pension Plans in 2016,” (Wall Street Journal, September 2, 2015) Well isn’t that surprising.
DOL Advances State-Based Retirement Plan Rule,” (ThinkAdvisor, September 3, 2015) Is this the beginning of the end of the private retirement plan industry?

Fiduciary – A Standard Only Orwell Would Be Proud Of:
As we sit, the term “Fiduciary” and what was once known as the “Fiduciary Standard” is going through a transition that can best be described as “Orwellian.”
The Fiduciary Rule Should Be Education,” (WealthManagement, August 31, 2015) Not a bad idea, although the article itself comes up short when it fails to spell investment “adviser” (the SEC registered kind) correctly.
DOL Fiduciary Proposal: How Tech is a Game Changer,” (OnWallStreet, September 1, 2015) If humans don’t want to serve smaller accounts, the robots will be more than happy to fill in.
Fiduciary September 2015: A Historic Time for Fiduciary Advice,” (ThinkAdvisor, September 1, 2015) Check it out for all the exciting events this month.
7 things fiduciaries shouldn’t say in court,” (BenefitsPro, September 2, 2015) Not George Carlin funny but good enough for an afternoon chuckle.
A Fiduciary Dystopia,” (WealthManagement, September 4, 2015) Ron Rhoades hits this one out of the park with this eerie look into the not-too-distant future.

Fees – Oops! They Did It Again!:
We’re getting sick and tired of correcting people on this. Does anyone mind giving us a spell and being the monitor for a while?
DOL fiduciary proposal neglects several hidden fees,” (Employee Benefit News, September 2, 2015) While the headline repeats what we’ve been saying since Day 1 of the proposal, the actual content of the article is, well, a tad odd. It’s premise (apparently based on something John Bogle is said to have written) claims that mutual funds generate 1.15% in trading commissions. If true, that means most mutual fund portfolio managers are at the very least incompetent and, at worst, liable to be sued for malpractice. Trading commissions have gone down considerably since the 1980s and, for institutional portfolio managers like those who run mutual funds, they’ve gone down even more. In order to generate 1.1% in trading commissions, the funds must have tremendous turnover (an easily discoverable number since it’s disclosed at least twice a year by mutual funds). That kind of turnover, moreover, better be generating out-sized returns or it’s simply not justifiable. Finally, like a mutual fund expense ratio, the trading commissions are reflected in the performance of the fund. If the fund consistently performs poorly, why would a fiduciary even consider placing it in a retirement plan? Think, people, think, before spouting nonsense on fees.

Investments – How Ostriches Win:
When the market swoons like it’s been doing, it’s too late to react defensively. That time has long passed and was best done when the market tipped at all-time highs. No, now is the time to attack. Remember how it was to respond aggressively? Or is that considered a form of bullying now?
Market volatility’s silver lining for retirement investors,” (CNBC, August 27, 2015) We used to teach investors about this fellow called “Mr. Market” and how, every once in a while, he’d offer a really big sale. That was in the day when investments ruled. Today, products rule, and nobody knows a sale when they see it.
3 moves to make in a crazy market,” (CNN, August 27, 2015) This article is what’s wrong with the media. When the market goes crazy, the last thing you should do is react – unless you’ve been preparing to buy stocks on the dip. If you’re retirement strategy doesn’t account for market volatility, then get a new game plan.
Is a target-date fund a bull’s-eye for your retirement plan?” (CNBC, August 28, 2015) The article includes a list of negatives as well as positives.
Some target-date funds miss in the market turmoil,” (CNBC, August 31, 2015) Well, this really isn’t news – at least for the reason implied by the headline. It turns out TDFs with more bonds don’t fall as much when stocks fall. And the sun rises in the east and sets in the west. The real news is the revelation that 2015 TDFs can be up to 70% invested in bonds, not stocks. Let’s see, if you’re retiring this year (2015) you should plan on living another 30 years. Are bonds really the best long-term investment?
Fatal Retirement Portfolio Mistake: Confusing ‘Optimized’ With ‘Safe’,” (ThinkAdvisor, August 31, 2015) This isn’t about what you think, it’s about the downside of annuities.
Retirement Savers: Panic Selling Hurt 401k Plans,” (Time, September 1, 2015) Those that fail to remember the lessons of 2008/09 are doomed to repeat them.
401k investment menus,” (BenefitsPro, September 2, 2015) For so many reasons, simpler is better, less is more, and why we’re finally starting to see a return to the three option menu.
A New Way to Make Your Money Last in Retirement,” (Money, September 2, 2015) The PR departments of the insurance companies will find an extra something special in their paycheck this week after seeing this article. Remember, this piece is written for the hoi polloi – they don’t know the downside of QLACs.
Is market volatility spooking 401k investors?” (BenefitsPro, September 3, 2015)

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 plan sponsor interest in managed accounts is growing,” (Benefit News, August 28, 2015)
Retirement confidence drops,” (Benefit News, August 31, 2015)
Why 4% Could Fail,” (Financial Advisor, September 2, 2015)
Do Retirement Plan Sponsors Need a Policy for Education?” (PLAN SPONSOR, September 3, 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.
Gen X: Sleeping Through The Retirement Wake-Up Call,” (Forbes, August 27, 2015)
Don’t Overlook the Big City for Your Retirement Home,” (U.S. News, August 27, 2015)
Facing Retirement, but Easing Your Way Out the Door,” (The New York Times, August 28, 2015)
Early Social Security Claims Are Hurting Retirees,” (ThinkAdvisor, August 31, 2015)
Avoiding Pre-Retirement Rollover Traps: The Pro Rata Rule,” (ThinkAdvisor, August 31, 2015)
The average American is just plain wrong on Social Security,” (USA Today, August 31, 2015)
10 Ways to Make Extra Money in Retirement,” (U.S. News, August 31, 2015)
A Millennial’s Guide to Planning for Retirement,” (VICE, September 1, 2015)
Americans In The Dark On Retirement, Survey Says,” (Financial Advisor, September 1, 2015)
4 Ways to Protect Your Retirement Money From Scammers (and Your Future Self),” (Money, September 1, 2015)
For retirees, the death of the 4% rule has been greatly exaggerated,” (MarketWatch, September 1, 2015)
Cautionary tales for baby boomers without enough money for retirement,” (Los Angeles Times, September 2, 2015)
Why Planning To Work In Retirement Is A Risky Business,” (Financial Advisor, September 3, 2015)

Wisdom from Some of Our Favorite Blogs:
Data “Points”: ‘Tipping’ Points: 4 Ways to Tell a Fad from a Trend |
Boston ERISA Law Blog: What Does Retaliation under ERISA Look Like? |
Behavior Gap: The Best Thing to Do During a Scary Market |
Scholarly Financial Planner: Stop Wall Street’s Rape of America |
Nerd’s Eye View: Designing Goals-Based Portfolios Requires Assessing Goal Risk Tolerance First! |
Scholarly Financial Planner: Stop Wall Street’s Sacking of America: Take This Simple Act, Today. |
Proskauer’s ERISA Practice Center Blog: Plan Administrator’s ERISA Declaratory Judgment Action Dismissed for Lack of Jurisdiction |
RetirementRevised: Premature retirement: Who faces the greatest risk? |
The Retirement Plan Blog: Tax planning for 2014 isn’t over until it’s over |

Hot Tips from Popular Web Resources:
NAPA Net: The Death of Blind Squirrels Is Greatly Exaggerated |
NAPA Net: Participant Trading Spikes Amid Market Volatility |
NAPA Net: Who’s the Best Advisor — R2D2 or C-3PO? |
NAPA Net: 5 Things You CAN Do After a Market Correction |
NAPA Net: Could QLACs Close the Retirement Savings Gap? |
NAPA Net: 5th Circuit Okays Annuity De-risking |
Kiplinger: How to Fix 3 Retirement-Savings Flaws |
NAPA Net: Does an 80% Replacement Rate Still Make Sense? |
NAPA Net: Case of the Week: The 80-120 Participant Rule |
NAPA Net: Market Downdraft Pulled 401k Plans Down in August |
NAPA Net: Court Rebuffs Plan Suit to Recover Overpayments | Congressional Spending Still Runs Amok | Retirement Reform Policy |
Morningstar: Active vs. Passive Investing in Retirement |
Kiplinger: Should I Take the Lump Sum on My Pension? |
NAPA Net: DOL Sends Proposed Rule on State Plans to OMB |
NAPA Net: Social Selling Catapults Your Social Capital |
NAPA Net: Is a Retirement Income Option Right for Your Clients? |
NAPA Net: A Shift From Revenue-Sharing Shares? |
NAPA Net: Garbage In? Bad, Missing Data Biggest Conversion Complication |
NAPA Net: House Committee to Hold Hearing on Fiduciary Proposal Bill |
NCPA Retirement Reform Policy: Administration Efforts to Halt Tax Inversions Fall Short |
fi360: An IPS is about Policy |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Michael Schellinger
    Michael Schellinger September 09, 12:01

    The new fiduciary regulations will impact the type of assets that are available to retirement investors if the regulations are enacted as proposed. OTC Securities, options, & futures are impacted. I wrote about this issue here:

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