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Viewpoints: Opinion and Commentary

People within and out of the industry speak out on a variety of issues related to 401k's. One of our most interesting areas, but remember, opinions expressed here are those of the author and do not necessarily reflect the positions of 401khelpcenter.com.


There's $27 Trillion in the Retirement Savings System: Don't Expect Legislators to Leave It Alone

Summary: Federal budgetary considerations, a growing focus on coverage, questions of efficiency, and several other pressure points are leading to a growing likelihood of change in the retirement system. A number of proposals are circulating at the Federal and the States level. A lot is in play: a system that has grown to $27 trillion cannot expect to avoid legislative attention.

Source: Russell.com, March 2015

Obama Starts Addressing the Retirement Crisis by Getting Wall Street Out of Our Wallets

Summary: Author writes, "President Obama should be commended for taking on the brokerage industry for ripping off multitudes of 401k participants. Last month he announced support for a Labor Department proposed regulation that would subject those advising 401k participants to a fiduciary standard."

Source: Huffingtonpost.com, March 2015

Should Low-Cost Funds Be Mandated in 401k's?

Summary: Author doesn't believe in forcing DC plans to use low-cost mutual funds, but does think it would be great to mandate their availability in employer-sponsored plans.

Source: Wsj.com, March 2015

Why I Disagree With Don Trone

Summary: Ron Rhoades writes, "While I appreciate Don Trone's work in the fiduciary movement, his recent opinion in RIABiz, headlined Why Obama and the DOL are all wet when it comes to the proposed fiduciary rule, is ill-informed in part and premature in part."

Source: Riabiz.com, February 2015

The Two Faces of a Fiduciary Standard: Positive and Punitive

Summary: Don Trone writes, "As I considered the President's remarks, it occurred to me that there are two faces to a fiduciary standard -- Positive and Punitive -- and it's critical that the industry be able to distinguish between the two." Read his take here.

Source: 401khelpcenter.com, February 2015

RadioShack Workers Will Lose Their Jobs and Their Retirement

Summary: RadioShack workers won't be just losing their jobs as a result of the company's bankruptcy filing, but a big chunk of their retirement savings as well. Author points out the danger around owning to much company stock in your 401k retirement account.

Source: 401khelpcenter.com, February 2015

DOL Primed to Expand 401k Oversight Through Tibble v. Edison

Summary: In this commentary, author write, "The Obama administration is geared up to leave a lasting impression upon employee benefit packages. Just weeks after the Affordable Care Act's employer mandate to provide specific health care coverage or face penalties took effect, the administration is now in position to make its mark on employee retirement accounts."

Source: Benefitnews.com, February 2015

The Impact of Assumptions on the Impact of Leakage

Summary: Nevin Adams questions the assumptions in a recent Center for Retirement Research at Boston College paper entitled "The Impact of Leakages on 401k/IRA Assets." He notes, "As for the so-called impact of leakages? It might more accurately be described as the impact of assumptions."

Source: Napa-net.org, February 2015

401k Loans: A Temporary Band-Aid?

Summary: Study data implies that the high rate of 401k plan loan defaults could be for reasons of low financial literacy, impatience, or inattention. Many employees were surprised by the effect of an unanticipated job change on an outstanding 401k plan loan. Author suggests we need more and better financial education in the workplace.

Source: Retirementplanblog.com, February 2015

Why Brokers Should Be Bound to a Fiduciary Duty

Summary: It would be highly controversial for Obama to impose the higher legal standard, called a fiduciary duty, on brokers. Wall Street will hate the requirement that brokers act solely in a client's interest or risk getting sued, and will probably ask Congress to overturn it.

Source: Benefitspro.com, January 2015

White-Labeling Investment Funds Is a Bad Idea

Summary: Recently, many plan sponsors were forced to make a decision about keeping the PIMCO Total Return Fund in their line-up that many participants feel is the anchor to their 401k plan investment strategy. Observers have used this situation to outline the benefits of white-labeling 401k plan investment funds. But does white-labeling makes sense?

Source: Lawtonrpc.com, January 2015

Can a Fiduciary Duty for Investment Advisers Co-Exist With Commissions?

Summary: Legislative and regulatory consultant Duane Thompson writes, "Given the premise that a fee arrangement is inextricably bound with the fiduciary standard, it would seem logical to assume that a salesperson working on commission cannot be a fiduciary. However -- spoiler alert -- you would be wrong. That is not to say that working on a commission basis and serving the client's best interest is an easy thing to do -- it's just far more difficult, at least in legal terms."

Source: Kitces.com, January 2015

Plain Advice to Retirement Plan Sponsors

Summary: The problem with advice given to plan sponsors is that it's often self-serving by the plan providers who want to maintain or get the business from plan sponsors. ERISA attorney Ary Rosenbaum has six pieces of "plain" advice to retirement plan sponsors.

Source: Jdsupra.com, January 2015

MEP Reform: Is it Necessary? A Rebuke

Summary: Author takes issue with a recent article that claims the promotion of MEP's is "a conspiracy of Wall Street to hoist unnecessary and expensive financial products on small plans, as a way to further promote mutual fund interests."

Source: Businessofbenefits.com, December 2014

Multiple Employer Plans Are a Marketing Play, Not a Way to Cut Costs

Summary: Author writes, "The idea that small employers cannot provide low-cost plans to their employees is a myth perpetuated by vested interests in the financial services industry. MEPs are a solution to a problem that does not exist, and they bring other potential risks to small employers."

Source: Employeefiduciary.com, December 2014

Are Annuities a Good Fit for Target-Date Funds?

Summary: New regulatory guidance allowing plan sponsors to include annuities in QDIA-ready target-date funds is a watershed moment for the retirement industry. But cost and complexity may warrant a look at other reliable income options, writes Glenn Dial.

Source: Allianzgi.com, December 2014

401k Brokerage Windows Are All About the "Nudge"

Summary: As the 401k plan has moved from being seen as a supplementary savings vehicle to taking on the role of primary retirement plan for most private sector workers, the way that plans are structured has evolved. It's probably the most widespread application of the principles of "choice architecture," which were described in Cass Sunstein's and Richard Thaler's influential book "Nudge."

Source: Russell.com, November 2014

Two Different Business Models, Two Different Outcomes for Investors

Summary: The motivations under the non-fiduciary and fiduciary business models are vastly different, which results in the recommendation of quite different financial products for clients, writes Scott Simon, Prudent Investor Advisors, in this piece.

Source: Morningstar.com, November 2014

Edison International Case Highlights a Needed Reform: Share Class Restrictions in 401k Plans

Summary: The author suggests that, although the case is interesting, a more fundamental issue that needs to be addressed. "The use of multiple share classes for mutual funds in 401k plans is confusing the heck out of just about every small business retirement plan sponsor in America."

Source: Employeefiduciary.com, October 2014

Interview: Jerry Schlichter Reveals Three Ways 401k Plan Sponsors Can Avoid a Fiduciary Breach

Summary: Jerry Schlichter has made a name for himself and his firm as lead attorney on numerous cases on behalf of employees and retirees involving claims of excessive fees and fiduciary breaches in large 401k plans. Here, he talks about how plan sponsors might reduce their fiduciary liability while helping retirement savers have the best chance to enjoy a comfortable retirement.

Source: Fiduciarynews.com, October 2014

How Bundled Services in Retirement Plans Are Like Fast Food Value Meals

Summary: Author writes, "Very few plans take advantage of everything they pay for when it comes to bundled services. As a plan fiduciary, you should be asking your plan's vendors to break out its fees for each desired and necessary service, so you can then make a determination of reasonableness."

Source: Pension-consultants.com, September 2014

Sorry, ERISA Is Hardly a Failure

Summary: Not everyone has a 401k at work, but that is irrelevant. ERISA safeguards the retirement plans that are in place for workers. Author therefore writes, "I'm seeing all of these 40th anniversary stories about ERISA and how the system has failed Americans, and it's burning me up."

Source: Workforce.com, September 2014

Redefining 'Choice' in Retirement Plans

Summary: Choice in the context of a retirement plan means something quite different to providers that aren't fiduciaries to a plan than to fiduciary plan providers. Non-fiduciary plan providers care little about what any given participant invests in, because they just want to sell product. Which is why they give plan participants lots of 'choices.' Defining choice in this way, however, means that plan participants have a much greater risk of investing in portfolios that are sub-optimal in diversification.

Source: Morningstar.com, September 2014

Unhappy 40th Birthday, ERISA: So Much for Retirement Security

Summary: The enactment of ERISA in 1974 was inspired by the 1963 collapse of the Studebaker Corporation, whose pension was so poorly funded that even workers with 10 years of service got a tiny pension and about a third of the workers got nothing. The bill was sponsored by the late Senator Jake Javits, who saw it as just one step towards a more satisfactory private retirement system. Author writes, "Let's make sure Senator Javits' efforts weren't in vain. We need to put pressure on Congress to move on [pension reform]."

Source: Huffingtonpost.com, August 2014

The Power of The "All-In" 401k Fee

Summary: Under an all-in fee approach, all administrative, recordkeeping and investment expenses are summed into a single, total amount. This approach "normalizes" the numerous fee arrangements used by 401k service providers, including compensation paid to providers from plan investments, making it easier for the sponsor to compare fees provider by provider. It does matter if fees are paid directly by an employer or deducted from participant accounts or paid indirectly from revenue sharing or wrap fees. Regardless of the compensation's origin, it should be included in the all-in fee total.

Source: Employeefiduciary.com, August 2014

401k Plans Work in a Balanced Approach to Retirement Security

Summary: Author writes, "[T]aken as part of a broader retirement system, 401ks work for working Americans. Retirees do face legitimate risks -- but the decline of private-sector defined benefit plans and the rise of defined contribution plans, such as 401k plans, isn't one of them. This shift isn't unlikely to reduce retirement preparedness."

Source: Ici.org, August 2014

Interview With CFDD's Phil Chiricotti (Part 2)

Summary: According to Phil Chiricotti, "industry forces fighting coverage solutions like MEPs and outsourced 3(16) services along with the fiduciary standard are providing the government and DC plan critics with the ammo to launch their own solutions, undermine the industry, and eventually take over the private system."

Source: Fiduciarynews.com, August 2014

Interview With CFDD's Phil Chiricotti (Part 1)

Summary: Chris Carosa writes of this interview," Phil Chiricotti's blunt no-holds-barred style makes him a perfectly delicious interview. His incendiary commentary is so provocative we considered whether it would be too hot for our readers. But, then again, our readers are old enough to play with fire, so we decided to give Phil the keys to the typewriter and have him do what his may."

Source: Fiduciarynews.com, August 2014

Prune Those 401k Plan Investment Lineups

Summary: Studies have shown that too many funds on a plan's investment lineup actually lowers the rate at which participants defer their salary in a 401k plan. Why? Too many funds, especially in one asset class have the ability to confuse and overwhelm plan participants and overwhelmed plan participants are less likely to defer than those that aren't.

Source: Jdsupra.com, August 2014

Can Dabblers Exist in the DC Market?

Summary: Can dabblers survive in today's complicated DC world? While many experts think that advisors must specialize to do well in the 401k and related retirement plan markets, there's a lot of evidence that many advisors with plans under management do not specialize, nor do they intend to.

Source: Napa-net.org, August 2014

The 401k Retirement Complex: Retooling Americans' Nest Egg

Summary: American workers need their employers to provide 401k plans that can help meet their retirement goals. They need their employers to help educate them to make good investment choices. Service providers also are vital to a well-functioning system. But Jerry Schlichter suggests that the 401k retirement complex also needs to retool itself so that it works primarily in the best interests of American savers. According to Schlichter, that is the real retirement crisis we face.

Source: Investmentnews.com (free registration may be required), August 2014

To DB or Not to DB . . . That Is the Target-Date Question

Summary: Should target-date funds be more like DB pension plans? The argument for the DB-ization of TDFs is a poor one according to the author, when DC sponsors should consider risks, transparency, and other factors.

Source: Vanguardinstitutionalblog.com, August 2014

Unconventional Wisdom on Retirement Preparedness

Summary: How well are Americans planning and saving for retirement? This is an important question to answer, but also vexingly difficult. Researchers have come to different conclusions. Much of the academic research and ICI's own analysis of the data indicate that, contrary to conventional wisdom, most Americans are properly preparing for retirement.

Source: Ici.org, August 2014

Letter to RMS About Dispelling the 3(16) Myth

Summary: The majority of plans will be using outsourced 3(16) services within a decade. Service providers that don't offer or provide due diligence on these services will lose business. MEPs and aggregated solutions are the easiest way to access 3(16) services today.

Source: Linkedin.com, July 2014

Revenue Sharing is Becoming the 401k Leisure Suit

Summary: Ary Rosenbaum writes, "Leisure suits were once in style and while people claim style is cyclical, leisure suits never made a comeback. Revenue sharing is becomes a lot like a leisure suit, it's not going to come back in style and most plan sponsors and their plan providers are going to touch it with a 10 foot pole."

Source: Jdsupra.com, July 2014

Retirement Education is Not the Answer to the Retirement Crisis

Summary: The evidence is clear: employers need to provide their employees with a way to save for retirement that requires little effort on their part. They need an automated retirement program that ensures they are saving the right amount for retirement, with automatic contribution adjustments made as market fluctuations dictate.

Source: Xerox.com, July 2014

All Passive DC Plans: Whose Interest Do They Serve?

Summary: Author writes, "I take no issue with those who opt for passive management, if they have done thorough research and analysis on what's the best investment solution for their participants. I do have concerns with sponsors who base their decision to go passive because of a fear that higher fees for actively managed funds could expose them to potential lawsuits or put them in a fiduciary bind."

Source: Russell.com, July 2014

Plan Sponsors Should Avoid Using Their Payroll Provider as Their 401k TPA

Summary: While it may look good on paper to hire a payroll provider as a 401k TPA, the author of this paper thinks it's actually a terrible idea and explains why in this article.

Source: Jdsupra.com, July 2014

Multiple Employer DC Plans: Safety in Numbers?

Summary: Smaller US defined contribution plans face a host of fee difficulties simply because of the size of their plans. This has led to a growing interest in multiple employer plans as a potential cost-effective solution. But, MEPs do have an important regulatory issue.

Source: Alliancebernstein.com, July 2014

Safeguarding Workforce Assets: State and Federal Retirement Proposals

Summary: Author write, "Recent CFDD newsletters discussed some of the looming state and federal savings plan initiatives that could be made available to the private sector, both voluntary and involuntary. We also highlighted the biased and inaccurate coverage of 401k plans by the media and other agenda-driven critics."

Source: Thecfdd.com, June 2014

Recordkeeper Consolidation Would Not Mean Falling Skies

Summary: Author write, "[C]onsolidation within the recordkeeping industry should not be seen as a sky-is-falling development. Conscientious recordkeepers will continue their commitment to offering the best product they can, at a price that generates a reasonable profit, but is also fair to plans and their participants."

Source: Ascensus, June 2014

Ron Surz Says Regulators Can't Solve Target-Date Fund Problems

Summary: Ron Surz is president & owner of Target Date Solutions. He says TDFs have become riskier at the target-date. "Fidelity recently increased their equity exposure, positioning for the performance horse race. Also, non-equities at the target-date are mostly long-term bonds, which are hardly safe in a zero interest rate environment. It's a disaster waiting to happen."

Source: Fiduciarynews.com, June 2014

About That DOL Fiduciary Survey...

Summary: Author writes, "We need to ask the questions: why the spin, why the fear? [T]he DOL has been seeking to create clarity on the fiduciary issue so there is no further dodging of the fiduciary role by those who have creatively skirted ERISA while continuing to deliver advice. The industry apparently does not want to declare themselves fiduciaries to do what they have been doing for years under the guise of 'education.'"

Source: Thinkadvisor.com, June 2014

Manufacturing a Retirement Funding Crisis

Summary: Author writes, "Progressive activists are in the early stages of attempting to create a retirement security crisis. Using the health care playbook, they claim that people lack access to 'adequate retirement security.' The lack of access is said to impose large costs on everyone else because people without 'retirement security' consume more public assistance payments. Government must 'solve' the problem because only government can provide secure retirement investment options for all by mandating that people purchase them."

Source: Greeleytribune.com, June 2014

Disclosures and Knowing Consent

Summary: If the SEC goes ahead and issues some sort of 'harmonized,' disclosure-heavy fiduciary status rule, it will perpetuate unnecessary costs for many individual retail investors, writes Scott Simon of Prudent Investor Advisors.

Source: Morningstar.com, June 2014

Indirect Compensation in Small Business Retirement Plans Made a Lot of Sense in 1980

Summary: Author writes, "While the industry squabbles over fee disclosure regulations, the root problem has been, and remains indirect compensation arrangements. Reforming fee disclosure regulations would be great, abolishing indirect compensation would be better."

Source: Employeefiduciary.com, June 2014

Does 'The Hassle Factor' Better Explain Participant Behavior

Summary: Author writes, "Much is made these days of the application of behavioral finance and the implications for plan design, as well as the role of choice architecture in helping workers make "better" (if not more informed) benefit decisions. Valuable as these insights have been, I think much of human behavior (or lack thereof) in these matters can be more simply explained."

Source: Ebriorg.wordpress.com, June 2014

What Does the Moench Presumption Look Like in the Light of the Real World?

Summary: Author writes, "...it would certainly be a lot better to decide what the legal rule governing stock drop cases should be by first learning all the relevant facts, and then creating the rule, rather than by doing it in reverse (which is essentially where we are right now, with the Moench presumption applied by courts at the pleading stage).

Source: Bostonerisalaw.com, May 2014

Most Fiduciaries Using Target-Date Funds Are Inviting Lawsuits

Summary: At $1 trillion and growing, target-date funds are the most popular qualified default investment alternative in 401k plans, yet most fiduciaries are not vetting their target-date funds selection, opting instead to use their bundled service providers out of convenience and familiarity rather than excellence. This breach of fiduciary responsibility invites lawsuits.

Source: Paladinregistry.com, May 2014

The Retirement Apocalypse That Isn't Coming

Summary: No one argues that building a solid financial future is easy -- wages are stagnant, markets have been disappointing and Americans are getting older and living longer. Still, retirement isn't going the way of the carrier pigeon. Innovative retirement plans and new policies and products point to a future richer than many workers imagine.

Source: Investmentnews.com (free registration may be required), May 2014

With Retirement Policy, You Can't Tell the Players Even with a Scorecard

Summary: Senator Marco Rubio (R-FL), a Tea Party favorite and staunch conservative legislator, has proposed opening the Federal government's Thrift Plan to all Americans who do not have the opportunity to participate in an employer-sponsored retirement plan. The fact that a conservative Senator is expressing an interest in expanding government is surely paradoxical and confusing. But what really comes from this ill-conceived notion is the obvious lack of sound retirement policy in Washington.

Source: Benefitsbryancave.com, May 2014

Incredible Marketing Opportunity for RIAs

Summary: The DOL's pending fiduciary revisions and the SEC's stall tactics provide an incredible opportunity for investment advisers, who are already subject to a fiduciary standard. Prudent investment advisers will focus their marketing on the inequitable dual standard that currently exists and the dangers that result from same.

Source: Prudent Investment Adviser, May 2014

The Retirement Crisis That Isn't?

Summary: Few would dispute the value of helping workers understand how much they need to save for retirement. But some recent assessments of what workers should save and when they should save it dramatically understate the adequacy of retirement savings for many households.

Source: Morningstar.com, May 2014

'Myth' Understandings Defined Benefit Plans

Summary: A frequent criticism of the 401k design is that it was never designed to provide a full retirement benefit, unlike, as it's often stated or implied, the defined benefit plan. However, the data show that some of the common assumptions about defined benefit pensions are out of line with the realities.

Source: Ebriorg.wordpress.com, May 2014

These Seven Megatrends Will Redefine the Future of 401k Plans

Summary: This article focuses on several megatrends that appear likely to forever influence 401k plans as we know them. Some of these megatrends are in the process now of changing the 401k world, while others seems more science fiction at this point.

Source: Fiduciarynews.com, May 2014

Is a Gutted Fiduciary in Our Future?

Summary: An SEC staff recommendation would gut the many protections provided by the fiduciary standard that have been developed over the centuries.

Source: Morningstar.com, May 2014

IRAs Provide Universal Retirement Plan Access

Summary: Critics of the U.S. retirement system often point to the fact that many people do not have access to a workplace retirement plan. What they ignore, however, is that all workers in the United States have access to a retirement plan that offers the same preferential tax treatment as an employer-provided plan -- Individual Retirement Account (IRA).

Source: Forbes.com, April 2014

Why Are Many Members of Congress Among the Few Americans That Can Retire?

Summary: Author writes, "The lack of mandates for an adequate retirement plan is ironic given that most long-serving members of Congress look forward to more generous pensions than the vast majority of their constituents. A member of Congress retiring with 20 years of service under Federal Employees' Retirement System and a high three-year average salary of $174,000 will get an initial annual FERS pension of more than $59,000 -- on top of Social Security."

Source: Huffingtonpost.com, April 2014

408(b)(2) Guide and More

Summary: The DOL recently issued a proposal to require a 408(b)(2) guide. The guide has also been referred to as a roadmap, but think of it as an index to the disclosures. This is the DOL's response to their review of provider disclosures and problems the DOL has seen. The DOL has at least two more significant concerns.

Source: Fredreish.com, April 2014

ASPPA Head Brian Graff Blasts Stupid Retirement Suggestions from Capitol Hill

Summary: Brian H. Graff began serving as Executive Director/Chief Executive Officer of the American Society of Pension Professionals and Actuaries (ASPPA) in November 1996. He has made a name for himself as protector of the retirement plan, especially from sometimes misguided government reforms. What does he see as the biggest threats to retirement savers being talked about in state and federal legislative branches?

Source: Fiduciarynews.com, April 2014

Ayres is Wrong, and Hecker is Wrong: Establishing a Fiduciary Breach Through Excessive Fees

Summary: While the Seventh Circuit was wrong to believe that the inclusion of many funds is enough to preclude a breach of fiduciary duty by the inclusion of investment options with excessive fees, so too is the premise that simply having an excessive amount of assets invested in a higher price product that is included among many funds with varying fee structures is enough to constitute a breach.

Source: Bostonerisalaw.com, April 2014

Tussey v. ABB - Opening Up New Avenues for Excessive Fee Litigation

Summary: A broader argument for rethinking how we analyze fiduciary prudence in the context of fees opens up new avenues for prosecuting fee claims, but also raises a red flag that prudent and conscientious plan sponsors need to pay attention to; namely, is the overall structure of plan choices optimal for the participants, rather than just whether there are some low cost choices open to the participants who are sophisticated enough to want to avoid the higher cost options.

Source: Bostonerisalaw.com, April 2014

Proposal Games: Why You May Not Know What Your 401k Plan Will Cost

Summary: When a plan sponsor goes to evaluate potential 401k service providers, will they be able to determine and understand how much their plan will cost? Author says, "Unfortunately, this can be quite difficult, as many providers have tried to gain a competitive edge by playing 'proposal games.'"

Source: 401khelpcenter.com, October 2012

"Retiring Boomers Find 401k Plans Fall Short" - A False Premise

Summary: The Wall Street Journal article, "Retiring Baby Boomers Find 401k Plans Fall Short," published over the weekend, seems to blame the tool used to save for retirement rather than the user or provider of the tool itself.

Source: 401khelpcenter.com, February 2011.

The Fiduciary Process is Only As Good As the Questions You Ask

Summary: A recent court case decision in California threatens to "upset the applecart" with regard to accepted fiduciary practices. Although all but one charge was dismissed, the plaintiffs did score a win that might surprise you. What went wrong for the defendants?

Source: 401khelpcenter.com, October 2010.

What Is the End Game With Target-Date Funds; Retirement or Death?

Summary: An article recently published in a retirement plan industry journal addressed criticisms of the construction of Target-Date Retirement portfolios that are based on a "through" retirement approach. The term "through" retirement implies that the glide-path, the formula by which the portfolio's asset allocation rebalances over time, carries through retirement to death. This strategy is contrasted by the "to" retirement approach, in which the glide-path is designed to end, or become static, at retirement, as opposed to death. Which is right, retirement or death?

Source: 401khelpcenter.com, April 2010.

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