FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/6/13

September 09
00:07 2013

1020805_25983300_Trending_Topics_2013.09.09_stock_xchng_royalty_free_300Welcome 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.

FiduciaryNews Lead Story:
Retirement Readiness: The One True 401k Benchmark Every Fiduciary Should Measure,” (, September 4, 2013). “The ultimate goal of a 401k plan is to maximize the participants’ retirement readiness.”

Compliance – “If you repeat a lie often enough…”:
“…people will believe it, and you will even come to believe it yourself.” Such states the most cited quote attributed to Nazi Propaganda Minister Joseph Goebbels (he may have never actually said it, but he said a lot of similar things). Fact: 401k plans have made all people richer. Lie: Defined Contribution plans have made the poor poorer. Fact: 401k plans have allowed people to take personal responsibility for their retirement. Lie: Only pension plans can guarantee a secure retire. Fact: Pension plans have caused municipal bankruptcies. Lie: Defined Contribution plans will require retirement bailouts. Now, read the following:
Observers say city pension is ‘a Frankenstein’s monster’,” (Cincinnati Enquirer, September 1, 2013) Here’s a story about a city that looks at Detroit, California and Illinois and says, “Not me!” Of course, the opposition is saying, “You! Not us!” Let’s see who wins in this effort to transition the municipal Ponzi – er – Pension Plan over to a more 401k-like system. In the meantime, the opponents of common sense are pulling out all the stops to remove personal responsibility from our lexicon. See the next article from Jeff Bezos’ new toy.
401k plans are replacing pensions. That’s making inequality worse.” (Washington Post, September 1, 2013) This article, from the “Wonk” side of the paper, should be held up as a poster child as to why policy analysts and reporters shouldn’t be allowed to write stories about topics with which they have no recent business experience. Indeed, the inequality isn’t that the high end is putting away more money (they generally are), in terms of retirement readiness, the inequality exists because low income earners are more likely to be retirement ready than high income earners. That’s the consensus among those actually working in the field. And the reason is obvious – high income earners need to replace a high income and contribution caps prevent them from saving enough.
Pension reform lessons from Canada,” (BenefitsPro, September 2, 2013) This two-tiered approach splits the risk and rewards between the workers and the municipalities and seems like a good first step towards transitioning away from a defined benefit approach to a much fairer (for employee and tax payer) defined contribution approach.
State pensions underfunded by $4.1 trillion, study claims,” (BenefitsPro, September 3, 2013) OK, so here’s the bad boy list: Illinois, Connecticut, Kentucky, Kansas, Mississippi, New Hampshire, Alaska and Ohio. Why California isn’t on the list might suggest the problem is bigger than this analysis claims.
EPI says rise of 401k worsened ‘retirement inequality’,” (BenefitsPro, September 3, 2013) This from a self-proclaimed “liberal” think tank. See comments on the WaPo article above.
MAP-21: The wrong course for pension plans?” (BenefitsPro, September 5, 2013) Read it and weep. Yet another government sponsored legislative pension “fix” goes awry. Why don’t they just accept that you cannot fix Ponzi schemes? They are designed to fail.

Fiduciary – Welcome to Fiduciary September!:
It’s that time of year, folks, when all good little boys and girls start thinking about “Service above self.” No. Wait. That’s all good little Rotarians. Well, for the rest of us, it’s September so it’s time to celebrate all that is fiduciary. And let’s not to forget the fiduciary that is yet to come!
For Retirement, Protect Clients From Themselves,” (On Wall Street, September 3, 2013) At the risk of sounding paternalistic… Wait! Let’s not “risk” it. Let’s state it. If acting in the fiduciary duty appears paternalistic, it’s because acting under a fiduciary duty is paternalistic. Think Charles Foster Kane’s trust officer in Citizen Kane. Our modern version of fiduciary duty evolved from the bank trust department. There, trustees (a.k.a. fiduciaries) often represented minor who did not have the maturity to decide things for themselves. And, as we found with Charlie Kane, even when the law said they were “of age,” they often still lacked that maturity. That’s what a good fiduciary does. He protects clients from themselves.
Rostad Kicks Off Fiduciary September,” (ThinkAdvisor, September 3, 2013) If it’s September, then it must be time for fiduciary! But why read the article talking about Knut Rostad when you can hear it straight from the man himself…
In a Watershed Year for Fiduciary Standard, Reviewing the Arguments,” (ThinkAdvisor, September 3, 2013) For those of you who’ve been away this summer, Knut Rostad outlines the key points of the issue as it stands now. It’s a great overview. Even for the non-professional.
September Surprise: Fiduciary Supporters Lobby the SEC,” (ThinkAdvisor, September 5, 2013) Bob Clark weighs in on the doings this month by Knut Rostad et al.

Fees – To Ayres is Human:
This guy’s putting Andy Warhol to shame. His fifteen minutes should have ended long ago.
The Fight Over 401k Fees,” (Wall Street Journal, August 31, 2013) At what point does this just become piling on? We know the Yale Law School professor’s paper wasn’t peer reviewed. We know the research, well, just wasn’t as thorough as it could have been. We know the data was stale. We know the interpretation of the data was a bit simplistic. How much more do we need to know? This “paper” has gotten more ink than many real research papers whose conclusions can actually help retirement plan sponsors and their employees.

Investments – “If you can read this…”:
“…You’re driving too close.” Often, investments cause us to miss the forest for the trees. Investing is really simple. Discipline is hard. That’s why investment advisers, like all good coaches, get paid the big bucks.
The Rise of Asset Allocation Funds,” (On Wall Street, September 1, 2013) This is what government legislation will do (we’re talking about the 2006 PPA here). Asset allocation funds include balanced funds, lifestyle funds and, most infamously, target date funds. All can serve as qualified default investment options under the Pension Protection Act of 2006. And with more plans going with auto-enrollment, the need for these default options has risen. It’s not that they’re better than traditional long-term all equity options, it’s only that plan sponsors won’t get in trouble for directing employees to these particular investments – whether they’re appropriate or not. Hmm, sounds less like “fiduciary” and more like “CYA.”
Do Not Invest Social Security Benefits, Expert Says,” (Financial Advisor, September 3, 2013) No to worry. The article is not about investing any excess cash you get from Social Security. It’s a warning not to take a lesser Social Security payment earlier in hopes of making up for the difference via investing. The odds are massively against you.

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.
The Coming Retirement Storm,” (On Wall Street, September 1, 2013)
Unmatched 401k Contributions: Are There Better Alternatives?” (Financial Planning, September 1, 2013)
The New Math of Retirement,” (On Wall Street, September 1, 2013)
3 Highly Personal Threats to Your Retirement,” (, September 3, 2013)
Is a $1 million retirement portfolio realistic?” (MarketWatch, September 3, 2013)
Help Clients Set Goals by Practicing Retirement,” (On Wall Street, September 3, 2013)
Participants seek help with 401k plans, survey finds,” (Employee Benefit News, September 3, 2013)
4% Failure,” (Financial Advisor, September 4, 2013)
Participants seek help with 401k plans, survey finds,” (Employee Benefit News, September 4, 2013)
Time for Clients to Rethink Retirement Age?” (On Wall Street, September 4, 2013)
401k Plans Add More Personalized Advice,” (Wall Street Journal, September 4, 2013)
Retirement Responsibility Shift to Workers Creates Inequality,” (PLANSPONSOR, September 4, 2013)
Stop borrowing from your 401k to fund your business,” (Crain’s Wealth, September 5, 2013)
Participants Want Retirement Readiness Help from Sponsors,” (PLANSPONSOR, September 5, 2013)
401k plans can’t be retirement-ready, only people can,” (BenefitsPro, September 5, 2013)
Why 66 is the magic retirement age,” (Crain’s Wealth, September 5, 2013)
Advisor Checklist: 5 Ways to Increase Retirement Income,” (Financial Planning, September 6, 2013)
Spouses Who Plan Together Are Best Prepared to Retire: Behavioral Study,” (ThinkAdvisor, September 6, 2013)
Before Retiring, Clients Must Retire Debt First,” (Financial Planning, September 6, 2013)
Why women lag behind men in retirement saving,” (BenefitsPro, September 6, 2013)
US Can Learn from Retirement Programs Abroad,” (PLANSPONSOR, September 6, 2013)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: 4 Steps to Make Your 401k Work as Hard as You Do |
The Pension Protection Act Blog: Happy 39th Birthday ERISA |
fi360: Fiduciary Links: Best Execution Duties Best Not Be Overlooked |
Squared Away Blog: Money Concerns Sap Mental Capacity |
The Pension Protection Act Blog: Cincinnati Explores Solving $870 Million Pension Shortfall: Pension System Funding is 61% |
Boston ERISA Law Blog: Me, Massachusetts Lawyers Weekly and Gross v. Sun Life |
The Chicago Financial Planner: 4 Reasons to Accept Your Company’s Buyout Offer | “Some” Totals |
FiduciaryPath: The $14 Trillion Question: Why Aren’t There More Bidding Wars for Service Providers to 401k Plans? |

Hot Tips from Popular Web Resources:
NAPA Net: Automation + Education = Success |
NAPA Net: The Bigger Picture |
NAPA Net: Proprietary Assets Account for Almost Half the DCIO Market |
NAPA Net: Percentage of Workers at Employers with Retirement Plans Inches Up  | EPI States the Obvious in a New Report About Retirement Savings |
NAPA Net: DOL’s Proposed Lifetime Income Illustrations Causing Widespread Debate |
NAPA Net: Online Advice Getting More Attention  |
NAPA Net: Switch to 401k Plans Increased Inequality, Think Tank Argues |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

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