Hosting an industry conference? Ask us about including it in this ticker?
What do you think of our site upgrade? Trending Topics for ERISA Plan Sponsors: Week Ending 7/8/16 Trending Topics for ERISA Plan Sponsors: Week Ending 7/8/16
July 11
00:03 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:
Should a Fiduciary Use Historic Returns or Economic Forecasts when Making Retirement Return Projections?” (, July 6, 2016) Between using past performance to suggest future results and using forecasts to try to time the market, which is the lesser evil?

Compliance – They’re Coming to Take Your Assets Away! Ha-ha, Ho-ho, Hee-hee!:
Not to the funny farm, but it may as well be. It seems states – those bastions of ideal and responsible money management – are moving forward with their taking over the retirement plan industry. Oh, they’re not saying that’s what they’re doing. It’s just that’s what they’re doing. Dismal track record or not.
Administrative 401k mistakes now cost more,” (InvestmentNews, July 5, 2016) The DOL is upping its monetary fines.
Should the Social Security eligibility age be increased to 64?” (MarketWatch, July 5, 2016) On the face of it, changes in Social Security doesn’t appear to have any connection with the fiduciary obligations of sponsoring a corporate retirement plan. But when you start tinkering with the various age triggers for Social Security, that mean employees will want to work longer. This can easily have major repercussions for their retirement plan (and their employer in general).
States aim to fill pension gaps with ‘auto IRAs’,” (CBS News, July 5, 2016) While others have suggested the usual litany of problems with this, for the most part they’re overlooking the most obvious. First, auto-enrollment always allows employees to opt-out. Will citizens in these states have the same option? If not, how does one justify the state’s unilateral confiscation of a citizen’s property? Second, if states have a problem managing their own public employees’ retirement funds, why would we think they could have success managing the retirement funds of private citizens?
Employee contributions to public pensions down in first quarter,” (BenefitsPro, July 5, 2016) Honestly, the above was written before reading this article. Perhaps the lack of attention to public retirement funds (this article mentions the governments also contributed less) could be due to the government trying to get its hand on private retirement funds.

Fiduciary – How to Succeed at Hiding Conflicts…:
…without even trying. Oh the humanity!
Do 401k Providers Favor Their Own Funds?” (Wall Street Journal, July 4, 2016) This is a classic conflict-of-interest situation where 401k “advisors” recommend their own funds. In a nutshell, it should be outlawed.
DOL clarifies that insurance firms qualify for best-interest contract exemption under fiduciary rule,” (InvestmentNews, July 7, 2016) Insurance firms will no longer need to undergo an independent audit to qualify for BICE. Every mutual fund is required to undergo an independent audit. But not insurance firms.

Fees – Taking the Gloves Off:
If it’s a barroom brawl you want, it’s a barroom brawl you’ll get. Pity the innocent bystanders.
SEC to Put Investors’ Understanding of 12b-1 Fees to the Test,” (ThinkAdvisor, July 5, 2016) The SEC is particularly concerned with the “mischaracterization” of 12b-1 fees.
401k fees are attracting more attention — from lawyers,” (Employee Benefit News, July 8, 2016) Anyone who is surprised by this hasn’t been paying attention.

Investments – Just Clap Your Hands if You Believe:
Sometimes it seems that’s what it comes down to. It’s as though we should just throw away all those MBA books and all the experience and just take up living in a commune.
A lesson in retirement investing from your morning commute,” (MarketWatch, June 30, 2016) The author is an adherent of the “indexing only” cult. He offers an analogy more suited to defeating the concept of market timing in an attempt to explain why passive investing is The Only True Path. In the process, he accidentally provides an evidentiary explanation as to why behavioral economics does a far better job at explaining markets than does the Efficient Market Hypothesis. What the author sees as “efficiency” the rest of the world sees as proof people do not act rationally.
What’s the difference between economic forecasts and market timing?” (BenefitsPro, July 6, 2016) Both involve guessing the future. Both portend to use some sort of empirical backdrop. Both suggest you should buy and sell the market at certain times. What’s the difference?
Why Boomers Should Show Stocks More Love,” (Forbes, July 6, 2016) You’ve still got to plan for another 30 years of life when you retire. If that doesn’t make you think “long-term,” you’re in trouble. The only way to make sure your retirement savings lasts that long is to keep it invested in long-term securities, and that means stocks.

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.
Dismissal of small 401k plan excessive-fee lawsuit ‘highly atypical’,” (InvestmentNews, July 1, 2016)
Why More 401k Plans Offer ‘Brokerage Windows’,” (Wall Street Journal, July 2, 2016)
Boomers not moving beyond 401k and IRA plans,” (Employee Benefit News, July 4, 2016)
Gender discrepancies persist when it comes to retirement,” (Employee Benefit News, July 4, 2016)
American Century employees sue for excessive 401k fees,” (InvestmentNews, July 5, 2016)
Fujitsu Faces 401k Lawsuit by Participants,” (PLANADVISER, July 5, 2016)
Don’t Bet Your Retirement On History Repeating Itself,” (Forbes, July 5, 2016)
Disney Sued over Undiversified Investment in Retirement Plan,” (PLANADVISER, July 6, 2016)
How plan sponsors can prepare for new money market fund rules,” (Employee Benefit News, July 7, 2016)
RIA Among Targets In 401k Case Alleging Fiduciary Breach,” (Financial Advisor, July 8, 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.
What Millennials Are Doing Right—and Wrong—About Retirement,” (Bloomberg, June 29, 2016)
Americans still not taking advantage of IRAs: survey,” (InvestmentNews, June 29, 2016)
The Declining Retirement Age Is Dead,” (ThinkAdvisor, July 29, 2016)
These big mistakes will result in smaller Social Security checks,” (CNBC, June 30, 2016)
Women get shortchanged when saving for retirement,” (USA Today, July 2, 2016)
Brexit, and how to score in your ‘retirement red zone’,” (CNBC, July 2, 2016)
Ask Larry: How Should We File Under The New Law?” (Forbes, July 2, 2016)
The Benefit of Donating Your Required IRA Distributions to Charity,” (Wall Street Journal, July 4, 2016)
How to Spend, and Pay Taxes on, Your 401k,” (ThinkAdvisor, July 5, 2016)
Millennials Are Pretty Cocky About Their Investing Skills,” (ThinkAdvisor, July 5, 2016)
Millennial financial action does not match retirement expectations,” (Employee Benefit Adviser, July 5, 2016)
When retirees are forced to make withdrawals,” (CBS News, July 6, 2016)
As 401k suits mount, check your own plan,” (CNBC, July 6, 2016)
Retirement planning: advice for women,” (MarketWatch, July 7, 2016)
Gen Xers, Boomers Struggle With ‘Evolving Realities’ of Retirement: AARP,” (ThinkAdvisor, July 7, 2016)

Wisdom from Some of Our Favorite Blogs:
Data “Points”: 4 Things Plan Fiduciaries Have in Common With the 2nd Continental Congress |
Data “Points”: Your Plan Might Be an Excessive Fee Litigation Target If… |
RetirementRevised: Retirement: The Other Economic Gender Gap |
fi360: Reverse Churning and How the DOL Addresses the Problem Under the New Fiduciary Rule |
Behavior Gap: Talking About Money |
ERISA Lawyer Blog: Seventh Circuit Holds That Facts Must Be Established To Determine If Withdrawal Liability May Be Imposed On A Successor Company |
fi360: Collective investment trusts rise in popularity as attractive alternatives to mutual funds |
ERISA Lawyer Blog: IRS Issues Rev. Procedure Describing Its Determination Letter Program, Including Curtailment Of The Program For Individually Designed Plans |
Business of Benefits: Auditing Distributed 403(b) (and 401(a)) Contracts |
Boston ERISA Law Blog: What Lies at the Intersection of §502(a)(3) and ACI’s 13th National Forum on ERISA Litigation? |

Hot Tips from Popular Web Resources:
NAPA Net: Participants Sue Another Financial Services Provider |
NAPA Net: 5 Things That Retirement Calculator Won’t Tell You |
NAPA Net: 3 Ways Plan Sponsor Creativity Is Making a Difference |
The Motley Fool: 5 Huge Roth IRA Advantages You Need to Know |
NAPA Net: Excessive Fee Suit Targets ‘One of the Most Expensive Plans in America’ |
NAPA Net: Solicitor’s Fees at Risk Under DOL Fiduciary Rule |
NAPA Net: DOL Bumps Up Civil Monetary Penalties |
NAPA Net: State-Run Retirement Program in Maryland Takes Effect |
The Motley Fool: Hate Your Job? Here’s How It Might Derail Your Retirement |
Morningstar: 401k Investors: Avoid These 20 Mistakes |
NAPA Net: Who’s More Worried About Benefit Costs — DB or DC Plan Sponsors? |
NAPA Net: DOL Officials Resolute, But Flexible, on Fiduciary Rule |
NAPA Net: Reinventing After-tax Contributions |
Morningstar: IRA, 401k, 529: What’s the Best Tax-Sheltered Account Type for You? |
NAPA Net: Plan Fiduciaries Sued for Failing to Remove Fund |
NAPA Net: House Moves to Defund Fiduciary Regulation; Litigation Proceeds |
The Motley Fool: Not Your Daddy’s Retirement, Part 1: Many Unhappy Returns |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


No Comments Yet!

There are no comments at the moment, do you want to add one?

Write a comment

Only registered users can comment. Login is sponsored by…

Order Your From Cradle to Retirement book today!

Vote in our Poll


The materials at this web site are maintained for the sole purpose of providing general information about fiduciary law, tax accounting and investments and do not under any circumstances constitute legal, accounting or investment advice. You should not act or refrain from acting based on these materials without first obtaining the advice of an appropriate professional. Please carefully read the terms and conditions for using this site. This website contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that may be provided by or through such websites.