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Hosting an industry conference? Ask us about including it in this ticker? Trending Topics for ERISA Plan Sponsors: Week Ending 6/17/16 Trending Topics for ERISA Plan Sponsors: Week Ending 6/17/16
June 19
12:16 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:
QDIA Fiduciary Red Flags 401k Plan Sponsors Must Look Out For,” (, June 14, 2016) Do 401k plan sponsors know the fiduciary minefield they’re stepping into when they select a QDIA? Why don’t they? And what can be done to both make them more aware and to reduce their fiduciary liability?

Compliance – A Tug of War Sorts:
On one hand, a movement towards acceptance. On the other hand, the resistance to move away from the past remains depressingly resilient.
IRA rollover under DOL rule: Where to start?” (Financial Planning, June 10, 2016) So it begins, the long hard slog towards adapting to the new compliance regime.
Alicia Munnell is wrong: Social Security needs a quick fix,” (MarketWatch, June 10, 2016) Someone wants to entice Munnell into a verbal contest. Will she take the bait? On the other hand, this is just another example of “Inside the Beltway (Box)” thinking.

Fiduciary – Last Week Was the Week that Was:
John Oliver’s show was the talk of the week as he hit the fiduciary issue head on. Too bad the audience was distracted by the usual meme of “high fees” and “index funds” to remember the more important “fiduciary” point. Then again, those other two have been repeated so often they’re easy for folks to remember. Maybe a few more pop culture shows highlighting “fiduciary” will lead to the same.
Fiduciary duty finally hits mainstream — and Main Street,” (InvestmentNews, June 13, 2016) While the content may have oversimplified things to the point of missing a few good points, overall the John Oliver retirement piece avoided the biggest mistakes of Frontline’s “Retirement Gamble.” More importantly, it may have been instructive when it comes to showing how best to educate retirement savers.
DOL Defines ‘Best Interest’ More Clearly Than Many Think,” (Financial Advisor, June 14, 2016) Harold Evensky does a good job here answering an important question.
401k Flaws Nothing to Laugh At: John Oliver,” (The 401(k) Specialist, June 14, 2016) Based on informal conversations with regular folk, in addressing the three points of this article they remembered the fees, needed to be reminded about the fiduciary, and basically ignored the index vs. passive point.
No SEC Fiduciary Rule Till After Obama Departs: SEC Chief White,” (ThinkAdvisor, June 14, 2016) Surprised, anyone?
What John Oliver got right (and wrong) about the DOL fiduciary rule,” (BenefitsPro, June 15, 2016) From the Point of View of the insurance industry. Again, “surprised, anyone?”
Under new fiduciary rule, DOL has reason to pay attention to reverse churning,” (InvestmentNews, June 16, 2016) “Reverse churning” looks a lot like buy and hold, except it occurs in non-RIA arrangements when there is no formal duty to monitor the portfolio continuously.

Fees – Wow. Simple, “Wow.”:
You know you have a financial literacy problem when retail investors think fees are more important than returns. That’s like saying you don’t want to win the lottery because then you’d have to pay more taxes.
What’s More Important than 401k Fund Performance?” (The 401(k) Specialist, June 12, 2016) In further testament that propaganda works, a new survey reveals 401k participants prefer lower fees to higher investment returns. This is enough to test the mettle of the true fiduciary. Again, the role of the fiduciary is not to accede to the beneficiaries every demand, but to do what’s in the best interests of the beneficiary. Now, ask yourself this question (and to make it easier we’ll use a real life scenario): Is it better for retirement savers to invest in almost no-fee (and absolutely no net return) money market fund or a high-fee (and a net return of 8%) equity fund? Too obvious? What if we replace the money market fund with a low-fee fund that consistently yields a net return of 4%? Is your answer still the same? If you’re a fiduciary, it should be. Believe it or not, not everyone passes this test.
Grappling with fiduciary, active-passive debate and more at Morningstar,” (Financial Planning, June 14, 2016) Here’s a twist, it’s not about active or passive, it’s about low fee or high fee, and plenty of passive funds have conflict-of-interest fees.

Investments – Active & Passive say “Why can’t we be friends?”:
If you’re old enough to remember the song by the group “War” then you’re probably singing the lyrics now to that catchy chorus. Still, the truth is we may have reach a milestone truce this past week. Time will tell.
Socially responsible funds can give your 401k a conscience,” (USA Today, June 11, 2016) SRIs are a lot like longevity annuities, everybody talks about them but nobody asks for them. Most important, there’s a huge fiduciary liability risk to 401k plan sponsors when they try to make (or even accommodate) political points with retirement funds.
How Retirees Can Protect Themselves From Sequence Risk,” (Wall Street Journal, June 12, 2016) A popular concern with a simple solution, although not necessarily the way the article says.
Active Versus Passive Doesn’t Have to Be Either/Or,” (Wealth Management, June 13, 2016) This really isn’t news (see “3 Reasons Why the 401k Fiduciary Should Use Both Active and Passive Funds to Reduce Fiduciary Liability,”, October 28, 2009), but it does offer a different take for individual investors and that might have an impact on plan sponsors.

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.
401k Participants: Loyal or Lazy?” (The 401(k) Specialist, June 9, 2016)
Vanguard Breaks Good News, Bad News on Retirement Savings,” (ThinkAdvisor, June 10, 2016)
7 best practices to boost employee retirement plan participation,” (BenefitsPro, June 13, 2016)
Not all 401k plan withdrawals are the same,” (Employee Benefit Adviser, June 13, 2016)
Employers adding loans to benefits packages,” (BenefitsPro, June 13, 2016)
Keeping assets in plan will cost participants, says think tank,” (BenefitsPro, June 14, 2016)
16 ways to expand employee access to retirement plans,” (BenefitsPro, June 15, 2016)
Plan sponsor lemmings take a bigger chance than they realize with QDIAs,” (BenefitsPro, June 15, 2016)
Employers Overwhelmingly Think 401k Plans Are Critical,” (PLANADVISER, June 15, 2016)
Solving the Retirement Withdrawal Equation,” (Wealth Management, June 15, 2016)
Millennials at high risk of outliving retirement savings,” (Employee Benefit News, June 15, 2016)
Using Behavioral Finance to Help Clients Discover Goals and Set Priorities,” (ThinkAdvisor, June 15, 2016)
Employers starting to realize success with 401k auto features,” (Employee Benefit Adviser, June 15, 2016)
Ignore Risk Questionnaires and Have a Better Retirement,” (Yahoo, June 15, 2016)
MassMutual settles 401k suit with its employees for $31 million,” (InvestmentNews, June 17, 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.
Americans Don’t Even Know What Their Most Important Retirement Asset Is, Study Shows,” (Forbes, June 8, 2016)
How to Retire Like the Rich (Even if You’re Not),” (US News, June 9, 2016)
She revamped her retirement plan after a divorce. Is she on track?” (The Washington Post, June 9, 2016)
New Retirement Travel Option: House Sitting,” (Fox Business, June 9, 2016)
Veteran asks: Should I claim Social Security early?” (Yahoo, June 9, 2016)
Why retirees can’t put required minimum distributions into Roth accounts,” (MarketWatch, June 10, 2016)
Spend Down or Gift Retirement Accounts? Here’s Some Math,” (Wall Street Journal, June 10, 2016)
Social Security and savings bonds: 2 Q&A’s,” (USA Today, June 11, 2016)
Are you on track for retirement? Do the math,” (Los Angeles Times, June 12, 2016)
How clients can add $8,000 a year to their retirement income,” (InvestmentNews, June 12, 2016)
How Your 401k Balance Stacks Up ,” (Yahoo, June 12, 2016)
Here’s the Very Best Age to Start Collecting Social Security,” (MainStreet, June 13, 2016)
More Americans are making smarter Social Security choices,” (CBS News, June 14, 2016)
Here’s How to Know If Your Retirement Calculator Is Accurate,” (MONEY, June 14, 2016)
What do Americans do after they retire?” (MarketWatch, June 14, 2016)
Don’t raid retirement accounts to pay for Johnny’s college,” (CNBC, June 14, 2016)
Five Common Errors That Are Hurting Your Retirement Savings,” (TheStreet, June 15, 2016)
5 Ways to Avoid Outliving Your Retirement Savings,” (MONEY, June 15, 2016)
Feeling guilty about spending savings in retirement,” (CNN, June 15, 2016)
How to Raise the Retirement Age For People Who Want to Work,” (Wealth Management, June 16, 2016)

Wisdom from Some of Our Favorite Blogs:
Nerd’s Eye View: Why Revenue-Sharing Referral Agreements Aren’t Worth It |
Proskauer’s ERISA Practice Center Blog: Lawsuits Filed Challenging The USDOL’s Final Fiduciary Rules |
Squared Away Blog: More Retirees Get Less Satisfaction |
Behavior Gap: Do Nothing |
Fred Reish: Interesting Angles on the DOL’s Fiduciary Rule #9 |
A NEW WAY TO FOUR01K: 3(16) Imposters. Buyer Beware! |
Behavior Gap: Stories & Spreadsheets: The Two Roles of Money |
The Retirement Plan Blog: 401k Self-Directed Brokerage Accounts: A Cautionary Tale |
RetirementRevised: Is the fiduciary rule fight really about the little guy? |
Squared Away Blog: Retirement Researchers Meet in August |
Behavior Gap: Buy Boring Things |
The Trust Advisor: These Unexpected Costs Could Spoil Your Retirement |

Hot Tips from Popular Web Resources:
Kiplinger: Build the Right Mix of Investments in Retirement |
NAPA Net: Plan Sponsors Cutting Fund Menus, Managers |
NAPA Net: HBO’s John Oliver Digs Into Retirement Saving |
NAPA Net: House GOP Outlines Pieces of Retirement Security Agenda |
NAPA Net: Oliver’s ‘Twist’: 5 Takeaways |
NAPA Net: Auto Designs Continue to Gain Ground – With Some Plans |
NAPA Net: High Stakes Negative Zero Sum Game Being Played in DC Plans |
NAPA Net: Could Changes Lie Ahead for Determination Letter Program? |
Morningstar: How Portfolio Managers Tackle Asset Allocation |
NAPA Net: Bad Timing Costs Fund Investors |
NAPA Net: Is DOL Rule Slowing Service Provider Changes? |
NAPA Net: Millennials Outpacing Their Elders in Retirement Readiness, But… |
NAPA Net: Why Employers Who Don’t Offer a Retirement Plan Don’t |
NAPA Net: Dear John Oliver… |
NAPA Net: Reader Poll: Plan Sponsors Know, But Largely Unmoved by Litigation Concerns |
NAPA Net: Ways and Means Okays Bill to Boost HSA Limits |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


  1. Dave Arey
    Dave Arey June 20, 21:31

    I’ve watched this segment three times now over the past couple of says and I just don’t see where John Oliver is advocating for “education”.

    He referred to the “enrollment meeting” as “it’s the kind of thing no one in their right ming wants to sit through.”

    Oliver said the retirement plan industry is a potential mine field because essentially anyone can call him or herself a “financial adviser”, there potentially high fee, and actively managed funds often under perform. So…you need to pay attention because given the current system, the deck is stacked against you.

    It was interesting to me that he was so embarrassed by the initial plan with high costs from Hancock that he decided to scrap it and he will “…pay almost all the fees for our employees” (of which there are 35). Apparently no one told Mr. Oliver that as the plan sponsor, he himself has a fiduciary duty to act in the SOLE interest of plan participants/beneficiaries. Did the Hancock rep inform Oliver that as plan sponsor under ERISA he is a fiduciary?

    He was embarrassed and so did the right thing…pay for most of the costs of offering a 401(k) plan. My takeaway is that many if not most small employers (under 100 ees for sure, maybe 250) shouldn’t sponsor a 401(k) plan as they are complicated and very costly to maintain.

    Oliver made no mention of the need for participants to know that bond prices are inversely rated to changes in interest rates (or anything that would qualify as becoming investment literate). He said that you need to pay attention because the potential exists that the retirement plan industry is a minefield.

    He ended by basically saying — start saving now (or better yet invest a time machine and start investing 10 years ago; (2) use low cost index funds; (3) if your financial adviser isn’t a fiduciary, RUN; (4) as you age, gradually shift from stocks to bonds (although to do that requires knowledge about stocks and bonds that many participants are clueless about); and (5) keep total fees less than 1%.

    According to Oliver, “no one in their right mind” wants to sit through an enrollment meeting. And your takeaway from this is that he is somehow advocating for participant education?

    I don’t think so…

  2. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author June 20, 22:08

    Dave, thanks for your comment and you’re absolutely correct! The HBO show said nothing about employee education. On the other hand, what it did do was suggest a better way to conduct employee education. Given the number of You Tube viewers, it’s clear this segment has gone well beyond the insiders and is being viewed by rank and file investors. Consider this – in order for those rank and file investors to watch this video, they have to actively search it out, find it, and press a button to view it. All those activities involve the use of behavioral techniques that have been shown to increase audience (and student) retention rates. They have made the commitment to watch the segment, and now possess a self-fulfilling vested interest in understanding what that show said. This is the demonstration of the successful education model the show presents – if only by accident.

  3. Dave Arey
    Dave Arey June 20, 23:02

    Chris, My experience is that many/most eligible employees attending enrollment meetings are like Oliver, e.g. no one in their right mind wants to sit through one, (let alone actually learn anything about investing).

    Over the past three decades or so, our national “retirement income program” has defaulted quite accidentally into participant directed 401(k) plans that require extremely knowledgeable individuals if it’s going to work. Looking objectively at the results (take median account balances for virtually any cohort) and it’s clear that our national system is utterly broken.

    Investment expertise cant be achieved via a series of 20-minute YouTube posts.

    The “default” investment arrangement for 401(k) plans should be that they are employer directed. But, that’s not going to happen.

    However, getting even 25% of the 401(k) participant population to a satisfactory level of investment expertise via “education” is not going to happen either, in my opinion.

    “No one in their right mind wants to sit through an enrollment meeting” let alone taking the time and making the academic effort it would take to actually learn how to be a successful investor.

  4. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author June 21, 23:31

    Is investment expertise the goals? Or is it savings expertise?

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