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What do you think of our site upgrade? Trending Topics for ERISA Plan Sponsors: Week Ending 5/20/16 Trending Topics for ERISA Plan Sponsors: Week Ending 5/20/16
May 23
00:04 2016

Welcome to 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 Story:
Exclusive Interview with Terrance Power: 401k MEPs Reduce Downside Risk for Company Execs,” (, May 17, 2016) “There is no upside for an employer doing everything perfectly with their retirement plan. The downside risk, however, can be huge. It’s a risk that just isn’t worth the employer taking.”

Compliance – Grasping for Straws:
If it’s not one thing it’s another. From judges overjudging to regulators over regulating to policy wonks over wonking. Oh, well, it’s what keeps the news cycle cycling.
One-IRA-Rollover-Per-Year Rule Doesn’t Always Apply,” (Wealth Management, May 16, 2016) It turns out, according to an IRS release, rollovers to and from qualified plans do not constitute a “rollover” for the purposes of the “one rollover per year” rule.
Teresa Ghilarducci: 401k an ‘Immature, Underdeveloped Child’,” (The 401k Specialist, May 17, 2016) In the words of Ronald Reagan, “There you go again…” Ghilarducci is unrepentant in her hatred of the 401k. (Is 401k-o-phobe” a word yet?) More amazing, she thinks doubling down on Social Security is a serious option. (What’s that they say about trying the same thing and expecting different results?) Will the industry stop laughing long enough to realize this isn’t about the logic of the argument, it’s about the politics of the argument.

Fiduciary – Is it the End of the Fiduciary Era?:
We don’t want to say “we told you so” but,… Both advocates and adversaries of the Fiduciary Standard have begun to realize exactly what the ramifications of the DOL’s new Conflict-of-Interest Rule are. For advocates, it doesn’t look good. For adversaries, that popping sound you hear might just be champagne corks.
It’s not so bad: Most advisers see few negatives in fiduciary reg,” (On Wall Street, May 17, 2016) Well, let’s see… could that be because the Conflict-of-Interest Rule provides a path to continue to exploit conflicts-of-interest or is it because the DOL came out and said they won’t penalize anyone but “help” them?
For IRA Investors, a Warning on DOL Fiduciary Rule,” (ThinkAdviser, May 18, 2016) Or as the tagline reads: “Why the Folks at SIFMA Are Trying Not to Smile.” Like the article above, we’re seeing increasing awareness that the conflict-of-interest industry has effectively won the war. The DOL has given them all that they really wanted, much to the detriment of the no-conflict-of-interest industry.
SEC plans to propose fiduciary rule next April,” (InvestmentNews, May 19, 2016) Let’s see if the SEC puts the final nail in the coffin regarding any real meaning of the term “fiduciary.”
DOL Rule Could Water Down Fiduciary Standard,” (Financial Advisor, May 20, 2016) Only now they’re realizing this? We’ve been sounding this alarm since at least last year.

Fees – They Matter Because They’re Measurable:
No one can argue against the blatant reality of mathematics. That’s why we like to measure things. But there are areas of math (most notably statistics) that rival quantum physics for their fuzziness. In the hands of experienced mathematicians and scientists, this untamed arithmetic becomes a useful tool. In the hands of naïve hoi polloi, it can be a dangerous thing indeed.
401k Fees, Already Low, Are Heading Lower,” (Wall Street Journal, May 15, 2016) An unfortunate tale too often told time and time again about a supposedly Class 1 media outlet that can’t get past the meme. Like so many other articles on this same theme, this Wall Street Journal piece confuses mutual fund expense ratios with fees. Worse, they make the mistake that making an investment decision based on fees is not, ultimately, an investment decision not a pricing decision.
5 Ways You Can Cut Your 401k Fees,” (Wall Street Journal, May 15, 2016) Here’s the simpleton’s version of the above article. It was actually going great until you hit #5, when it falls into the same “mutual fund expense = fee” trap.
Ouch! A $590,000 Fee for Your Client’s 401k,” (The 401k Specialist, May 16, 2016) AAARGH! How many times do we have to read an article mistaking expense ratios for fees? The assumption embedded in the headline is that all mutual funds return the same natural rate. That’s simply not true. In addition, you’re not even allowed to assume past result guarantee future results. In other words, it’s just as legitimate to claim high fee funds add $590,000 to your 401k. How does one justify this? One can’t. Just like one can’t justify high fee funds reducing your 401k by that amount.

Investments – Does Risk Trump Age?:
In another example of “been there, done that, got the t-shirt,” we’re finding more and more articles suggesting risk isn’t what it’s cracked up to be. Worse, it can actually hold back savers from meeting their goals. Keep that one up your sleeves and do a site search on for relevant articles.
Sequence-of-return risk hurts more than just recent retirees,” (Financial Planning, May 15, 2016) More fun with statistics. The basic truth remains that volatility risk (a.k.a. “sequence-of-return” risk) reduces as the length of time increases. That’s generally why reliance on asset allocation models can lead you astray.
Employers advised to weigh all variables in TDF customization,” (Employee Benefit News, May 16, 2016) Seems like folks are finally starting to figure out age isn’t a good criteria for making investment decisions. This article is about how at least some target date funds are trying to evolve into target risk funds.
How to face the challenge of balanced investing for retirement,” (MarketWatch, May 16, 2016) Quite frankly, a plebian approach to the issue. The author has a marketing, not an investing, background, which explains this. On the other hand, how many investing professionals offer the same sapid advice? Are they that uninformed or just simply lazy?

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.
Educating Clients On A 401k Rollover,” (Financial Advisor, May 12, 2016)
‘I’ll never retire’: Americans break record for working past 65,” (Employee Benefit Adviser, May 13, 2016)
Orphaned accounts, and what the DOL may have to reconsider,” (BenefitsPro, May 13, 2016)
Roth 401k options underutilized by employees,” (Employee Benefit Adviser, May 16, 2016)
Why is Jim Cramer ‘Mad’ About 401k Plans?” (The 401k Specialist, May 16, 2016)
Help clients see retirement as the next stage,” (Financial Planning, May 17, 2016)
10 best practices for 401k investment menu selection,” (Employee Benefit News, May 17, 2016)
5 strategies 401k plan fiduciaries are borrowing from pensions,” (BenefitsPro, May 18, 2016)
Why plan sponsors need to prepare now for money market reform,” (Employee Benefit Adviser, May 20, 2016)

Trends and Truths 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.
Why you shouldn’t rush to buy a rental property with retirement funds,” (MarketWatch, May 13, 2016)
How Millennials Are Sabotaging Their Retirement,” (Forbes, May 13, 2016)
How to Overcome ‘Income Shocks’ that Wreck Retirement Security,” (MONEY, May 13, 2016)
Why So Many Americans Work Past 65, in 4 Charts,” (ThinkAdvisor, May 13, 2016)
MONEY TALK: Retirement calculators are a wake-up call for undersavers,” (Los Angeles Times, May 15, 2016)
When Clients Divorce: Avoiding the Retirement Income Trap,” (ThinkAdvisor, May 16, 2106)
Roth conversions can help insure against higher tax rates,” (On Wall Street, May 16, 2016)
A Great Back-Up Social Security Strategy,” (Forbes, May 16, 2016)
What happens to Social Security benefit when your ex dies,” (USA Today, May 16, 2016)
Biggest regret for age 30 and older: Failure to save for retirement,” (BenefitsPro, May 17, 2016)
Why it’s never too early to set a retirement date,” (Financial Planning, May 20, 2016)

Wisdom from Some of Our Favorite Blogs:
A NEW WAY TO FOUR01K: 401k Fees and Courageous Advisors |
The Trust Advisor: ‘I’ll Never Retire’: Americans Break Record for Working Past 65 |
Pension Risk Matters: Fiduciary Certification and Training |
Squared Away Blog: The Secret to Longer Life: Keep Working |
ERISA Lawyer Blog: Fifth Circuit Reviews A Case Involving The Sale By A Corporation’s Owner To Its ESOP |
Behavior Gap: Why I Hired a Real Advisor – Part 1 |
fi360: 7 Actions to Demonstrate Compliance |
Fred Reish: Interesting Angles on the DOL’s Fiduciary Rule #5 |
Nerd’s Eye View: The Problem With Joint Ownership Of An Annuity |
Behavior Gap: Attention! Some Blunt Advice from Your Scary Markets Drill Sergeant |
fi360: Q&A on the DOL’s Fiduciary Rule: Is this covered? |
Pension Risk Matters: The DOL Fiduciary Rule, Seller’s Exception and Independent Fiduciaries |
Squared Away Blog: Quiz: Financial Well-being or Unease? |
Behavior Gap: Why I Hired A Real Advisor – Part 2 |

Hot Tips from Popular Web Resources:
NAPA Net: Proprietary Fund Offerings Draw Participant Lawsuit |
NAPA Net: How Will Managed Accounts Manage? |
NAPA Net: Want to Live Longer? Postpone Retirement |
NAPA Net: Boosting Low DC Savings Rates |
NAPA Net: Practice Management, Teaming Support Need to Expand |
NAPA Net: Could Fees Cost Millennials $590,000 in Retirement Savings? |
NAPA Net: Massachusetts Says Full Robos Can’t Be Fiduciaries |
NAPA Net: Plan Fiduciaries Lose Appeal in Stock Valuation Suit |
NAPA Net: Senate’s Tax Reform Hearing Touches Retirement Incentives |
NAPA Net: CT State-Run Retirement Bill Heads for Governor’s Signature |
NAPA Net: How the DOL Rule Could Change the DC Business |
NAPA Net: Special Considerations for an S-Corp ESOP and NUA |
Morningstar: Is Your Risk Tolerance at War With Your Risk Capacity? |
Kiplinger: Surprising Things You May Not Know About Retirement |
NAPA Net: DC Participants Have a Rosy View of the Future |
NAPA Net: Participant Transfers Take an April ‘Breather’ |
NAPA Net: Time for a Plan Compliance Review? |
NAPA Net: IRS Dumps Allocation Rule for Disbursements From Designated Roth Accounts to Multiple Destinations |
NAPA Net: SEC Plan Includes Investment Advice Standard in April 2017 |
NAPA Net: Are Managed Accounts Making it? |
NAPA Net: Time to Stretch the Match? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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