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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/23/15

FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/23/15
October 26
00:04 2015

Welcome 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. “When everybody’s a fiduciary…  no one is.”

FiduciaryNews Lead:
Exclusive Interview: ERISA Attorney Stephen Rosenberg Says Litigation’s Legacy is Improved Plan Design,” (FiduciaryNews.com, October 20, 2015) Comments on the fiduciary standard, reducing liability, and what his clients are asking..

Compliance – They Say the 401k is the Root of All our Nation’s Retirement Problems:
Of course, they say a lot of things. The bigger question is: “Why are they saying this?” And it’s too much of a coincidence that they are all saying the same thing.
Future military retirees in for controversial choice,” (BenefitsPro, October 16, 2015) Seems like a pretty obvious choice: Either take a 20% haircut in the current pension payout or get a lump sum based on the full current payout and manage it in a 401k style alternative. But, then again, some consider the 401k “controversial.” Maybe they don’t like the whole idea of the “millionaire next door.”
Pension accounting: A return to the Wild West?” (BeAdvised, October 16, 2015) That had us at the Blazing Saddles reference in the opening paragraph.
The biggest government backlog is getting worse, watchdog says, but Social Security has a plan,” (The Washington Post, October 19, 2015) This is about the disability side of the Social Security ledger.
IRS 2016 cost-of-living adjustments for retirement plan contributions,” (BenefitsPro, October 21, 2015) What’s good for Social Security recipients is good for retirement savers. No Change.
The 401k Crisis Is Getting Worse,” (Bloomberg, October 21, 2015) It’s odd that they say “401k” when then really mean “retirement.” Maybe the headline editor was short on space. Or, maybe, “retirement” doesn’t fit the meme de jour of isolating and eviscerating the defined contribution plan.
With more workers lacking 401k plans, retirement savings crisis grows,” (InvestmentNews, October 21, 2015) Same story, more accurate title.
401k plans beat pensions for higher income replacement rates,” (BenefitsPro, October 21, 2015) This is a new study from EBRI. After the Center for Retirement Research came out with their study saying 401k plans were just as good as replacements, this completes the “2” of the 1 – 2 punch clobbering opponents of defined contribution plans.
401k plans often provide greater chance for retirement savings than pensions: EBRI,” (InvestmentNews, October 21, 2015) Same story, different take.
Retirement around the world: Lessons learned,” (Benefit News, October 21, 2015) Food for thought: Will policymakers be cheery picking this data to promote their agenda?
Steve Rattner: 401k Plans One Of The Worst Ideas Ever,” (Financial Advisor, October 22, 2015) Again, we don’t normally link to videos, but this one’s for all you out there in FiduciaryNews.com-Land that find it surprising anyone would talk down the concept of the 401k plan. Look, here’s the truth: There’s a concerted political effort to eliminate defined contribution plans and place the control of peoples’ retirement within the hands of a few (i.e., the “government”). This is an issue that should be of growing concern. Instead, the industry is being diverted into a civil war arguing over a moot point (what is a “fiduciary”).

Fiduciary – An Elaborate Head Fake?:
It looks like the DOL will come up with something, but is that really what they’re aiming for?
Expect Largely Unchanged DOL Rule in Early 2016,” (WealthManagement, October 15, 2015) A report on fi360’s recent webinar featuring Blain Aikin and Duane Thompson. While they don’t expect the wording of the final rule to be much different, they do expect some changes to prevent RIAs from being deemed to entering into a prohibited transaction when they accept IRA Rollovers. They’re not promising, as they feel there’s still a chance that particular language won’t be changed.
DOL, industry spar over cost estimates for fiduciary rule,” (InvestmentNews, October 16, 2015) As long-time readers of FiduciaryNews.com understand, they’re both wrong.
Perez: Industry Can Adapt to Fiduciary Rule,” (WealthManagement, October 16, 2015) He’s giving several private firms a lot of publicity.
Pension trade group believes DOL fiduciary rule is all but inevitable,” (InvestmentNews, October 19, 2015) ASPPA flips from opposing it to wordsmithing it.
DOL to ‘Simplify and Streamline’ Fiduciary Rule: Borzi,” (ThinkAdvisor, October 20, 2015) The more interesting content is in page two of this article.
Is fiduciary the new floor?” (BenefitsPro, October 21, 2015) Once an ideal to aspire to, we may soon find “fiduciary” a diminished minimum that even the lowliest can claim the mantle of.
Why the Industry, and Consumers, Need Best Practices for Financial Advisors,” (ThinkAdvisor, October 21, 2015) Knut Rostad continues to warn of the problems with defining “fiduciary” down.
Borzi Says DOL Fiduciary Rule Will Have Legal Teeth,” (WealthManagement, October 21, 2015) The industry is worried the plaintiff bar will have a field day with the BICE. Well, yeah. Who didn’t see that coming?
Advisers missing major wrinkle in DOL’s fiduciary rule,” (InvestmentNews, October 22, 2015) Well, this is certain a meme from one point of view. Others might have a different interpretation.
Lawmakers chafe at SEC’s slog through fiduciary rule process,” (InvestmentNews, October 23, 2015) Yep, Congress is saying the SEC is moving too slow.
SEC Fiduciary Rule Still a Long Way Off,” (ThinkAdvisor, October 23, 2015) Maybe that’s why the SEC is so mad.
DOL Secretary Rebuts Criticism That Officials Don’t Understand the Business,” (Employee Benefit News, October 23, 2015) Well they better understand it because they’re taking it over.

Fees – The Eye of the Beholder:
Some people would rather pay for luxury than skimp through their years wondering “what if?” Others prefer a life of frugal happiness. Neither is right or wrong.
Middle Age Workers Happier With 401k Fees Than Boomers, Retirees,” (Financial Advisor, October 22, 2015) Could fees be a cultural thing?

Investments – If You Liked the Coincidence of “The 401k is Evil” Headlines…:
You’ll love the coincidence of “The QLAC is our savior” headline. We don’t make this stuff up. Although we wish we did.
What advisers need to know about the most complex type of annuity,” (InvestmentNews, October 16, 2015) If professionals advisers can’t understand them, how can we expect regular everyday investors to understand them?
QLACs Could Be the Next Big Thing,” (OnWallStreet, October 19, 2015) Seriously? How many times do we have to see this headline? About the only headline to give it a run for its money is the main stream media’s incessant “Trump Fades” motif. Maybe Trump will quit and start selling QLACs. Yeah, that’s the ticket. His whole campaign has been an elaborate ruse to generate publicity for his latest reality TV show: QLAC Survivor.
QLACs Can Simplify the Retirement Income Planning Game,” (ThinkAdvisor, October 20, 2015) …unless they don’t. We see what’s going on here. Once again, an enterprising PR effort yields serial headlines.
Clients Need To Understand Longevity Risk To Their Portfolios,” (Financial Advisor, October 20, 2015) Give the meme of the week, are you surprised to find someone wrote this article?
DOL supports ESG fund use in 401k plans,” (InvestmentNews, October 22, 2015) There was a reason why these funds were discouraged. That reason hasn’t changed.
DOL Clears Way for Impact Investing in Retirement Plans,” (ThinkAdvisor, October 22, 2015) Let’s put it another way: Would you like someone else to use our retirement savings to make a political point you may or may not agree with?

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.
Top 5 retirement advisor comments,” (BenefitsPro, October 15, 2015)
Retirement Saving: Companies Trying To Make Employees Save More,” (Fortune, October 15, 2015)
How Much Retirement Income Will You Need? Maybe Less Than You Think,” (Wall Street Journal, October 18, 2015)
Gen Y gets an A in 401k plan participation: Study,” (CNBC, October 19, 2015)
Most 401k Investors Want Fiduciary Advisers, Survey Finds,” (Bloomberg, October 19, 2015)
4 keys for near retirees investing in today’s market,” (MarketWatch, October 19, 2015)
Can better enrollment communications really increase employee engagement?” (Benefit News, October 20, 2015)
How to effectively talk about retirement across generations,” (Benefit News, October 20, 2015)
Where does the U.S. rank in global retirement security?” (Employee Benefit News, October 20, 2015)
Show clients why retirement inflation is not dead,” (BenefitsPro, October 20, 2015)
Use of dollar-for-dollar 401k matching grows,” (Benefit News, October 21, 2015)
Health issues affecting retirement decisions,” (Benefit News, October 22, 2015)
File-And-Suspend No More?” (WealthManagement, October 23, 2015)
Fiduciaries Ordered to Restore Withheld 401k Contributions,” (PLANSPONSOR, October 23, 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.
The Right Way to Take Your IRA Withdrawals,” (Money, October 14, 2015)
The Cost-of-Living Adjustment Is What Really Needs Adjustment,” (Money, October 15, 2015)
When should children and retiring parents have ‘The Talk’?” (MarketWatch, October 15, 2015)
White House says looking to resolve lack of Social Security increase,” (CNBC, October 15, 2015)
Social Security Won’t Provide Cost of Living Increase Next Year,” (Financial Planning, October 16, 2015)
Tips for Social Security recipients worried about no COLA for 2016,” (USA Today, October 16, 2015)
Advisers tell clients: Think of retirement as ‘35 years of unemployment’,” (InvestmentNews, October 16, 2015)
The key to a good retirement plan is in your mind’s eye,” (USA Today, October 16, 2015)
The Pros and Cons of IRA Charitable Rollovers,” (OnWallStreet, October 19, 2015)
12 Common IRA Mistakes To Avoid That Could Cost You Thousands,” (Forbes, October 19, 2015)
Northeast better suited for retirement than rest of country: Personal Capital,” (InvestmentNews, October 19, 2015)
How Boomers Can Close the Retirement Income Gap,” (ThinkAdvisor, October 20, 2015)
Don’t let higher Medicare premiums derail your Social Security plan,” (MarketWatch, October, 20, 2015)
8 Ways to Build More Retirement Wealth,” (Money, October 20, 2015)
A Social Security Quirk That Affects Spouses,” (Wall Street Journal, October 21, 2015)
Competing financial priorities challenge millennials retirement savings,” (Benefit News, October 21, 2015)
10 states best prepared for retirement,” (BenefitsPro, October 23, 2015)

Wisdom from Some of Our Favorite Blogs:
Behavior Gap: Sinking Under the Anchor of Our Thoughts |
The 401k Plan Blog: New COLA for 2016 – Err, there is NO COLA since there was no increase in the index |
Squared Away Blog: Straightest Course to Riches – Parents |
The Chicago Financial Planner: Smart Beta ETFs the Next Big Thing? |
Behavior Gap: Pay Attention! A Way to Solve Our Overspending Problem |
fi360: DOL Webinar:  Your Fiduciary Rule Questions Answered |
Boston ERISA Law Blog: My Exclusive Interview with Fiduciary News on ERISA Litigation |
Pension Risk Matters: ERISA Litigation and Investment Monitoring |
The Chicago Financial Planner: Open Enrollment Exploring Your Employee Benefits |
RetirementRevised: New findings on long-term care policy lapse rates raise questions |
fi360: Understanding Marketing Volume VIII: Direct Mail Marketing |
Behavior Gap: The Uncertainty of Starting Something New |
RetirementRevised: Can state auto-IRA plans improve retirement security? |

Hot Tips from Popular Web Resources:
NAPA Net: Plan Sponsor Loses Suit Based on Misleading Plan Communications |
NAPA Net: Are Plans Dumping Proprietary TDFs? |
NAPA Net: An Active Year for Target Date Funds |
NAPA Net: 4 Reasons Why Plan Sponsors Should Care About the Fiduciary Proposal |
NAPA Net: ARA Seeks Level Playing Field in Upcoming DOL Rules on State-Run Plans |
NAPA Net: Pension Reform Proposal May Go to California Voters |
Kiplinger: Pump Up Your 401k Now |
The Motley Fool: The Immediate Annuity: Instant Retirement Income and Peace of Mind |
NAPA Net: 7 Behavioral Science Lessons on Communication |
NAPA Net: Case of the Week: Is My Client Required to Have an IPS? |
NAPA Net: Survey Finds Improvement in Auto Rates, Matches, Re-enrollments |
NAPA Net: Cost of California Dream: $75,000 |
NAPA Net: It’s Official: IRS Announces Contribution, Benefit Limits for 2016 |
NAPA Net: DC Beats DB – For the Most Part |
NAPA Net: How Much Savings Justifies an Advisor? |
NAPA Net: Stout: Advisors Must Help Participants Solve Debt Issues |
NAPA Net: DOL Looks to Give ETIs a Boost |
NAPA Net: Reader Poll: More Options Fueling Move From Proprietary TDFs |
NAPA Net: Borzi: DOL Seeks Easier State Embrace of ERISA |

Miss anything? Feel free to add a comment below.

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About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Jack Towarnicky
    Jack Towarnicky October 27, 21:51

    So, with regard to the crisis resulting from the widespread adoption of 401k plans in the past 30 or so years …

    According to DOL data, in the 1st 40 years after ERISA, 1975 thru 2005, we saw the number of DB plans decline by 75%, but, the number of participants only declined about 25% (most DB plan terminations were smaller employers). During the same period, the number of DC plans increased over 240% and the number of participants increased over 400%.

    At the same time, the percentage of Age 65+ Americans receiving payouts from pension plans grew significantly, from 19.1% in 1979 to 30.5% in 2013; while the average dollar amount of benefit per year increased 25% from $7,406 (1979) to $9,228 (2013) (in 2013 Dollars).

    According to the ICI factbook, “… although most U.S. households are eligible to make contributions to IRAs, few do so. Indeed, only 12 percent of U.S. households contributed to any type of IRA in tax year 2013….” Similarly, the factbook also notes that 87% of traditional IRAs opened in 2012 were opened with rollovers from 401(k) plans or DB lump sums.

    Bottom line, those who argue America is in a “Retirement Crisis” often focus solely on 401(k) average account balances. That focus ignores various facts:
    – The rollover assets in IRAs,
    – The fact that averages are deceiving as they include new hires, recent entrants, etc., and
    – The fact that the average tenure of Americans is consistently between 5 – 6 years; so, the average balance may well reflect less than 5 years of 401k accumulations – generally ignoring accumulated assets from prior employers and the fact that unless the employer has adopted automatic enrollment, participation rates in 401(k) plan are generally much less for short service employees.

    Fact is, regular consistent saving, in a 401(k) and/or IRA, allows for sufficient asset accumulation to supplement Social Security – creating a financially successful retirement (in terms of income replacement) for almost all Americans except for those consistently in the top 10% of earners.

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