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Ret plan investments - self-directed


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403(b) University Lawsuits May Impact 401(k) Self-Directed Brokerage Accounts
"There are so many moving pieces in these lawsuits related to the particular structure and operational differences between 401(k) plans and 403(b) plans, that it does remind [the author] of the expensive trap many service providers fell into after the 2007 IRS 403(b) reg changes. Those reg changes made 403(b) plans look ... a lot more like 401(k) plans. What those service providers (and the IRS as well) soon found out is that there are still fundamental structural and detailed differences between the two types of plans-and not recognizing those differences has been very costly. It appears that the plaintiff law firms may have made a similar miscalculation, underestimating the differences between the two types of plans." (Business of Benefits)
Recent Lawsuit Demonstrates Continuing Need for Plan Fiduciaries to Document Decision-Making Process
"The plaintiffs claim that Anthem selected 'high-priced share classes of mutual funds, instead of identical lower-cost share classes of those same mutual funds,' purportedly resulting in a loss of over $18 million to the participants.... While the plaintiffs seem to overstate the requirement to always use the lowest-cost share class available, the fiduciaries of other plans may be able to protect themselves in similar litigation by having a documented process which demonstrates that they considered the lowest-cost share class available and, when such lowest-cost share class was not selected, the reasoning that led them to the selection of a more expensive share class." (Bradley Arant Boult Cummings LLP)
A Set-It-and-Forget-It Retirement? Not Exactly (PDF)
"[O]nly one quarter (26 percent) [of participants surveyed] are using the funds as intended. Two out of three (64 percent) target -date fund investors hold only a portion of their investments (less than 90 percent) in the funds, potentially harming their investment returns compared to those fully invested in target -date funds. Despite moving away from being fully invested in their target-date fund, 81 percent of participants said that they understood that target-date funds are diversified by design and that they knew how they worked. By investing outside of their target-date fund, participants were seeking something beyond what their target-date fund could offer." (Financial Engines)
Millennials Crave Face-to-Face Advice
"[A recent IRI] study found that the large majority (87 percent) of millennials definitely want an advisor who will meet with them personally. That percentage is very close to the percentage of those in Generation X (89 percent) who said the same, and of baby boomers, 92 percent of whom also have that requirement for advisors.... [W]hen doing retirement planning, more than half (62 percent) of surveyed millennials said they would like to be walked through each step of the process. Only 19 percent of millennials said they are likely to use a robo-advisor." (InsuranceNewsNet.com)
Are You Mentally Fit Enough to Plan for Retirement?
"In this era of 'self-directed' retirement (no pensions, you make all the investment choices) postponing making a real plan poses a particular risk to future security. Not only are the logistics of planning hard enough -- when to collect Social Security, how to budget for expenses, what to do with savings -- but the decline in cognition that accompanies normal aging has a measurable negative impact on the ability to make sound financial decisions." (Money)
Selling Savings the Amazon Way
"[I]t's no surprise how quickly employees give up when they're encouraged to save more in their retirement plans, yet then have to complete a long process to do so.... [Vanguard has] developed 'nudges' for savings, including Meet Your Match and Recommended Savings Rate.... Both nudges use a sophisticated combination of plan design information and participant data to make a specific recommendation to an employee logging into the retirement plans site. This information includes match structure, contribution source information, participant compensation data, participant savings rate, and more." (Vanguard)
Is Your Target Date Fund Ripping You Off?
"[A]nnual returns can vary dramatically -- even for investors of identical ages -- and some funds can carry sky-high fees, according to an analysis of more than 1,700 target-date funds conducted by online financial advisor FutureAdvisor.... Among all the funds it analyzed, FutureAdvisor found an average expense ratio of 1.02%, or around $102 a year, for a $10,000 investment." (CNNMoney.com)
ERISA Issues for Solicitor's Fees
"[T]he person making the referral is receiving 'indirect' compensation (that is, the solicitor's payment by the investment manager), which makes that person a 'covered service provider' or 'CSP.' ... The DOL takes the position that a referral to a discretionary manager is the same as the recommendation of an investment. If it is individualized, based on the particular needs of the plan (or a participant), the DOL says it's a fiduciary act.... 'The fiduciary nature of such advice does not change merely because the advice is being given to a plan participant or beneficiary.' That conclusion means that the CSP should engage in a prudent process and its compensation must be 'level'[.]" (FredReish.com)
[Opinion] Retirement Saving: How Responsible is the 401(k) Fiduciary?
"[T]here are active discussions as to exactly how aggressive the government should be in forcing citizens to save for their retirement. The same question is being asked of plan sponsors: How much should the responsibility for individual employee savings [lie] with the companies that offer retirement benefits? ... The government provides the blueprints; the 401k fiduciary provides the materials; but building a secure retirement is best left to the individual. And that's money in the bank." (Fiduciary News)
Text of Ninth Circuit Opinion Allowing Amgen Stock Drop Lawsuit to Go Forward (PDF)
42 pages. "It is true that removing the Amgen Common Stock Fund as an investment option would have sent a negative signal to investors if the fact of the removal had been made public, and that such a signal may have caused a drop in the share price. But several factors would have mitigated this effect .... If defendants had acted to remove the Fund as an investment option when Amgen's share price began to be artificially inflated -- that is, when some of the defendants began to violate their obligations under the securities laws -- that action may well have caused those defendants to comply with those obligations. But defendants did not do this.... [If] defendants had made no disclosures but had simply not allowed additional investments in the Fund while the price of Amgen stock was artificially inflated, they would not thereby have violated the prohibition against insider trading, for there is no violation absent purchase or sale of stock.... [D]efendants contend that their fiduciary duties of loyalty and care to plan participants under ERISA, with respect to company stock, are less than the duty they owe to the general public under the securities laws. Defendants are wrong[.]" [Harris v. Amgen, Inc., No. 10-56014 (9th Cir. Oct. 30, 2014)] (U.S. Court of Appeals for the Ninth Circuit)
What ERISA Service Providers Should Know About Money Market Reform (PDF)
"[D]efined benefit plans, endowments and small businesses are not considered 'natural persons' and would not be eligible to invest in a retail money market fund.... The SEC provided examples of how funds could satisfy the natural person definition with intermediaries ... ERISA service providers who hold fund shares in omnibus accounts may expect to be contacted by retail money market funds to provide these certifications or representations and/or to enter into new agreements with funds for this purpose.... The liquidity fee and gate requirements will usually only be triggered in times of extreme market stress. But they are features that many ERISA participants and ERISA service providers will not find appealing." (Drinker Biddle)
Lights Out for a 401(k) Fund? Check the Blackout Rules
"Replacement of an investment option or a permanent restriction on new contributions to an investment fund does not, in and of itself, trigger a blackout notice requirement. However, if pursuant to such actions the rights to diversify investments or take loans or distributions are suspended, a blackout notice may be in order." (Mintz Levin)
Information on Brokerage Windows Requested by DOL
"Thus, a brokerage window can [1] allow plan participants who are sophisticated investors (including, e.g., participants using an account manager/advisor) access to investments not otherwise available and [2] deal with pressure from senior executives to increase the number of fund options available in the 'regular' fund menu. The RFI presents an opportunity for sponsors (and other interested persons) to provide DOL with information about how brokerage window programs work in practice, how useful they are and what problems they present. Respondents do not have to answer every question, and thus can concentrate on issues of particular concern." (October Three Consulting)
Navigating the Minefield of Fiduciary Liability as a 401(k) Plan Sponsor
"[T]the vast majority of 401k plans are offered by small employers, who may have no meaningful understanding of the fiduciary responsibilities they and their plan administrator have taken on by offering the plan.... Selecting a suitable and appropriate 401k plan, and its administration thereafter, are not simply annoying administrative tasks to be delegated to any staff person or senior executive who might appear to have some financial acumen or business sense. This is no place for amateurs." (Robert C. Port, of Gaslowitz Frankel LLC, via 401kHelpCenter.com)
The Paternalization of Participant-Directed Plans (PDF)
"Most experts agree that the system is well-designed, with the proper incentives and structure in place to make it possible for American workers to achieve a secure retirement. However, workers are experiencing significant shortfalls in retirement savings.... [T]he flaw in the system may point back to the participants and their investment choices.... [R]etirement plan participants may be finding themselves overwhelmed by the investment decision-making required of them." (Arnerich Massena)
Employees Ease Off on Using Investment Advisors
"The use of advisors to dispense retirement-related advice dipped slightly in 2013 for the first time since 2007 as the stock market performed well and volatility eased ... 33 percent of employees with 401(k)s used an advisor, down from 36 percent who used an advisor in 2012. The percentage of employees using an advisor had been rising steadily since 2007, when 24 percent of 401(k) plan participants used an advisor." (InsuranceNewsNet.com)
Can We Really Measure Risk Tolerance, or Does It Swing Too Wildly?
"[A] client's true risk tolerance appears to be remarkably stable and doesn't change much at all in the midst of volatile markets. Instead, what appears to be unstable is not the client's tolerance for risk, but their perceptions of risk in the first place; in other words, clients may be loading up on stocks in bull markets not because they're more tolerant of risk, but because they don't think there is any risk in the first place." (Michael Kitces in Nerd's Eye View)
'Bad News Bonds' Could Increase 401(k) Fiduciary Liability
"Last week State Street Global Advisors released the results of their Biannual DC Investor Survey. In part, the results confirm the results of earlier surveys that showed 401k investors are over-weighted in bonds.... Worse, finds SSGA, investors seemed to have a fundamental misunderstanding regarding the nature, risk and safety of bonds." (Fiduciary News)
Put Your 401(k) to the Test: Does It Have the Latest and Best Features?
"[A] 'best-practice, risk-managed' 401(k)/defined contribution plan [includes]: Mandatory participation or automatic enrollment; Adequate contribution rates; A limited set of professionally managed, low-cost, pooled investments; Mandatory or default investment in automatic asset allocation vehicles, such as target-date funds; Limited or no borrowing from the plan; Annuitized benefit payments; and Provision of objective education and advice for participants.... [W]hat's [also] needed in a best-in-class 401(k) is an aggressive auto-escalation feature, advisers say." (MarketWatch)
Defined Contribution Plan Re-Enrollment: A Fiduciary Imperative? (PDF)
"Evidence is mounting that the self-directed, do-it-yourself approach to DC investing is resulting in poorly constructed participant portfolios. While auto-enrollment directs new participants to a QDIA option such as a Target Date fund, existing participants' portfolios, often chosen years ago, remain misallocated. This paper looks at: 1. The role a re-enrollment campaign can play in guiding all participants to an appropriate asset allocation. 2. Potential roadblocks to implementing re-enrollment and ways to overcome them. 3. Key elements of successful implementation." (Russell Investments)
Most Middle Class Retirement Savers Avoid the Stock Market
"About half (52%) say they don't invest in the stock market because 'I am afraid to lose my nest egg in the ups and downs of the market.' The apprehension about the market is stronger for those age 25 to 29, with 56% expressing fear of losing their nest egg. When asked if given $5,000 for retirement where they would invest, 58% of those age 25 to 29 say they would invest in a savings account/CD." (Wells Fargo)
Initial Fee Disclosure Deadlines Are Behind Us, but Fee Disclosure Is Not (PDF)
"In February 2013, Assistant Secretary Phyllis Borzi wrote about the success of the disclosures on the marketplace, praising those who have designed apps and websites to make accessing and comparing fees simpler for participants. She also stated that EBSA will continue to closely monitor the implementation of the fee disclosure rules and stressed the importance of these rules, stating that the most important thing participants can do is 'review [their] fee disclosure chart.'... The DOL's recent communications should send a clear message to plan sponsors and service providers that fee disclosure will continue to be an important focus." (United Retirement Plan Consultants)
Nearly Half of Americans Struggle to Find Trusted Financial Advice
"Forty-eight percent of Americans say it is hard to know which sources of financial advice can be trusted.... Gen X ... leads all age groups in seeking advice on retirement..... Gen Y is the most likely to say that it's a little or not at all informed about retirement planning ... In 2013, 63 percent of Americans who received financial advice sought information on saving for retirement, as opposed to 52 percent in 2012, an increase of 11 percentage points." (TIAA-CREF)
$3M Settlement in Class Action Lawsuit Over 401(k) Investments
"The suit on behalf of former and current employees of Flagstar Bank alleges that Flagstar breached its fiduciary duties under ERISA, by allowing investments in its own stock for the employees 401(k) for several years during and after the Great Recession, 'when they allegedly knew or should have known that such investment was imprudent[.]'" (Grand Rapids Business Journal)
The Income Annuity Puzzle: Why Don't More People Use Them?
"Economists have long argued that there's a perfect financial product for retirement: the humble immediate income annuity.... [A recent study] found that health shocks can produce a unique double-whammy for annuity buyers: a sharp decline in life expectancy, which cuts the remaining value of the annuity, and the unmet need for cash to pay for care. [The authors] conclude that for risk-averse retirees, or for those with limited retirement assets, the best move is to avoid annuities altogether." (Reuters)
[Official Guidance] EBSA Press Release: Labor Department Permits 401(k) Plans to Reschedule Annual Disclosures to Employees (PDF)
"Under the enforcement policy contained in Field Assistance Bulletin 2013-02, plan administrators may reset the deadline one time, for either the 2013 or the 2014 comparative chart, if the responsible plan fiduciary determines that doing so will benefit the plan's participants and beneficiaries and provided that no more than 18 months may pass before participants receive their next comparative chart.... Plans operating on a calendar year had to furnish their first chart no later than August 30, 2012, and their second chart is due no later than August 30, 2013 [subject to the one-time reset permitted under the terms of the Field Assistance Bulletin]. Many other plan disclosures, however, such as pension benefit statements, are disclosed later in the calendar year. Permitting a one-time 'reset' of the deadline will allow plan administrators to align the comparative chart with other participant disclosures." (Employee Benefits Security Administration, U.S. Department of Labor)
[Official Guidance] DOL Field Assistance Bulletin No. 2013-02: Extension of Aug. 30 Deadline for Comparative Chart of Investment Alternatives
"A plan administrator may furnish the '2013 comparative chart' no later than 18 months after the prior comparative chart was furnished as described below. The '2013 comparative chart' is the comparative chart that is due, according to the terms of the final regulation, 'at least annually' after the first comparative chart that was furnished in compliance with the regulation. For example, if a plan administrator furnished the first comparative chart on August 25, 2012, the '2013 comparative chart' would be due no later than August 25, 2013. In accordance with this Bulletin, however, the Department will take no enforcement action based on timeliness if the plan administrator furnishes the '2013 comparative chart' by February 25, 2014." (Employee Benefits Security Administration, U.S. Department of Labor)
[Opinion] Yale Professor Notifying Particular Plan Sponsors of Upcoming Publicity of Their Investment Costs
"We have recently learned that a Yale Law School professor has sent a letter to thousands of 401(k) plan sponsors. The professor is doing a 'study' on the financial impact of plan fees and has identified the employers receiving the letter as sponsoring a 'potential high-cost plan.' ... The letter says the findings of the study are expected to be published in Spring 2014, including distributing the findings to news media and through social media, with the corporate names of identified plan sponsors highlighted.... The tone of these letters, frankly, is shocking." (NAPA Net)
Text of All Comments Received to Date by SEC on Proposed Uniform Fiduciary Standard for Broker-Dealers
On the linked web page, the name of each of the 53 persons and organizations listed under the heading "Comments on Duties of Brokers, Dealers, and Investment Advisers" is a hypertext link to the full text of that particular comment. (U.S. Securities and Exchange Commission)
Seven Basic Investment Concepts Every 401(k) Participant Must Understand
"1. The Risk-Return Relationship ... 2. Diversification ... 3. Asset Allocation ... 4. Time is on Your Side ... 5. Don't Time the Market ... 6. Pay Attention to Fees that Matter ... 7. Monitor and Adjust as Needed." (Fiduciary News)
Text of Retail Investor Protection Act (H.R. 2374) as Approved by Committee (PDF)
Introduced June 12, 2013; as marked up and favorably reported out of committee by a vote of 44 to 13 on June 19. Excerpt: "[T]he Secretary of Labor shall not prescribe any regulation under [ERISA] defining the circumstances under which an individual is considered a fiduciary until the date that is 60 days after the [SEC] issues a final rule relating to standards of conduct for brokers and dealers ... The Commission shall not promulgate a rule pursuant to paragraph (1) before -- (A) identifying if retail customers (and such other customers as the Commission may by rule provide) are being systematically harmed or disadvantaged due to brokers or dealers operating under different standards of conduct than those standards that apply to investment advisors under section 211 of the Investment Advisers Act of 1940 [and] (B) identifying whether the adoption of a uniform fiduciary standard of care for brokers or dealers and investment advisors would adversely impact retail investor access to personalized investment advice[.]" (Committee on Financial Services, U.S. House of Representatives)
DC Participants Sold Stocks in 2012 Despite Strong Equity Returns
"Domestic equity overall remained the largest asset class at about 31.1%, nearly flat from the end of 2011 due to investment gains, but large-, mid- and small-cap strategies all saw outflows for the year. Small-cap strategies experienced nearly 5% in outflows while large- and midcaps had less than 1% in outflows." (Pensions & Investments)
U.S. Target-Date Fund Assets Hit $503B in 2012
"Target-date funds saw 20 percent growth in assets last year as more companies encouraged employees to funnel money into these all-in-one retirement vehicles ... Expense ratios average 0.70 percent, BrightScope said. But that number decreased by 0.02 percentage point in 2012." (Reuters)
The Gender Factor: How to Engage and Motivate Women in Retirement Plans (PDF)
"When saving for retirement, hope and fear influence women more than men.... Some women take charge of retirement planning, but many avoid it.... Very few women are fully engaged, possibly because they rely on their partners... [S]pecific actions you can take: Engage with a multifaceted approach for a dynamic segment.... Offer in-person guidance, particularly one-on-one if possible.... Deliver outcomes-focused communication and de-emphasize process-focused communication.... Provide straightforward choices." (Lincoln Financial Group)
News About 401(k) Fees Decreases Benefit All Investors But More Is Needed
"Based on new data ... small plan costs fell from 1.47% to 1.46% in 2012, while large plan costs fell from 1.08% to 1.03%. Expenses for small plans were between 0.38% and 1.97%, while large plan expenses ranged from 0.28% to 1.41%.... In most cases, the difference in changing from a more expensive to a lower-cost fund fee will more than compensate for a decrease in any fund investment returns over time ... because the difference between market return and a fund's individual return is directly attributable to a fund's costs." (MutualFundReform.com)
An Update on 401(k) Plan Investment Issues, and Revenue Sharing in Particular
"In the last year or so, there have been a lot of developments in the law relating to the investment of 401(k) plan assets. There have been several important cases, and the implementation of DOL regulations requiring the disclosure of detailed information on fees, both from third party providers to plan sponsors and from plan sponsors to participants. This seems like a good time to address the question of what issues should be of concern to a plan committee that is charged with reviewing the performance of investments and the compensation of third party providers." (Shipman & Goodwin LLP)
Redesigning Your Self-Directed Retirement Plan's Core Menu
Questions include: 'Why offer a tier of asset class options at all? Why not offer a plan design that consists solely of target date funds and a brokerage window? Why offer as many as six to 10 options on a core menu? Aren't two or three enough? I have more than 20 options available today. Collapsing that menu down to six options seems drastic. What should I do?' (Russell Investments)
Core Menu in Self-Directed Retirement Plans: What Is It Good For? (PDF)
"Many plan sponsors are looking at the role the asset-class fund menu plays. Typically representing anywhere from six to 20 individual options, individual asset-class funds -- traditionally referred to as the 'core' menu -- are where the bulk of the assets have historically resided ... This paper discusses the role asset-class options can still play in the DC plans of today and tomorrow. Then it lays out a three-step plan we advise sponsors to consider as they migrate their asset-class options." (Russell Investments)
The Economics of Providing 401(k) Plans: Services, Fees, and Expenses in 2012 (PDF)
"In 2012, the average expense ratio on equity funds offered for sale in the United States was 1.40 percent. 401(k) plan participants who invested in equity mutual funds paid less than half that amount, 0.63 percent.... In 1998, 401(k) plan participants incurred expenses of 0.74 percent of the 401(k) assets they held in equity funds. By 2012, that had fallen to 0.63 percent, a 15 percent decline. The expenses 401(k) plan participants incurred for investing in hybrid and bond funds have fallen even more, by 19 percent and 23 percent, respectively, from 1998 to 2012." (Investment Company Institute)
Is the Fiduciary Liability of Self-Directed Brokerage Options Too Great for 401(k) Plan Sponsors?
"Brooks Herman, Head of Data and Research at BrightScope, Inc.... looked at the number of 401k plans that filed their Form 5500 with a service code indicating that they offer a self-directed brokerage option and found the number has nearly doubled from 2006 to 2011 ... 'The verdict is still out on whether a plan sponsor is fulfilling their fiduciary duty with a brokerage window: it gives them cover because the plan is not limited to two dozen pre-selected assets, but opens them up to exposure if their participants are buying' highly leveraged ETFs, for example." (Fiduciary News)
[Opinion] The Disconnected Reality of Today's Target Date Funds
"Under [this] Risk Profile paradigm, the various components of a person's risk profile are split out and analyzed separately by a financial professional and this information is used to make a recommendation. TDFs do not have access to Risk Need, Risk Attitude (Tolerance) or Risk Perception -- only, to some extent Risk Capacity. Yet, TDFs are built as a one-stop portfolio for all." (Scott Dauenhauer CFP, MSFP, AIF)
[Opinion] Asset Classes in DC Plan: Should They be the Same as in a DB Plan?
"There are a myriad of reason why participants in DC plans, on average, do not get the returns on investments that DB plan sponsors do. Here are some: In theory, DB plans, have an infinitely long investment time horizon.... DC plan participants, even if they choose to invest in non-traditional strategies, do not usually have the knowledge or the tools to develop an investment portfolio that sits on an efficient frontier.... DB plans don't have leakage.... DB plans spread those asset pools over a group of participants." (Benefits and Compensation with John Lowell)
[Opinion] Observations on 'The Retirement Gamble'
"By far the most important factor in how comfortable retirement will be for participants is how much money they salt away in their plan accounts. Even a 70% annual return would be of little consequence if a participant is squirreling away only $3 a year. Many experts maintain that annual plan contributions should total -- between participant and employer -- around 15%-20% during the participant's working years to help ensure a comfortable retirement." (W. Scott Simon, for Morningstar Advisor)
Adding Categories: a Sample of a New and Improved 401(k) Investment Option Menu
"401k plan design remains, for the most part, unchanged since the mutual fund industry allied with plan recordkeepers to take over the retirement plan market in the 1980s. Ever since, fitting plans into the needs of the service providers has trumped creating a retirement plan that actually helps more people retire with more money.... Many companies are now adopting systemic changes to their 401k that create plans more in line with the language, needs and motivations of their employees." (Fiduciary News)
How Employers Can Restructure a 401(k) Investment Menu to Increase Participation
"Here's a look at how professional advisers have successfully implemented the four proven strategies to reduce choice overload in 401k plans. [1] Reduce the Number of Choices ... [2] Make the Consequences of their Actions More Vivid ... [3] Group Investment Options into Groups More Aligned with Employee Psychology ... [4] Develop a Decision Tree Beginning with Questions with the Fewest Options and Ending with Questions with the Most Options[.]" (Fiduciary News)
Four Proven Strategies to Reduce Choice Overload in 401(k) Plans
"[W]hen placed in a situation featuring a choice overload, 401k plan participants are more likely to: (1) Procrastinate, to put off making a decision, even when it goes against their own self-interest; (2) Make worse decisions, the kind that sacrifice quality and may even hurt them; and (3) Choose things that make them less satisfied, even when those choices do objectively better." (Fiduciary News)
Is Your 401(k)'s Brokerage Option Right for You?
"Access to a brokerage option opens a whole universe of investments to plan participants, compared to the handful that may be available in the core lineup. However, a brokerage account may not be suitable for every investor. Here are a few important considerations: [1] Fees ... [2] Mutual Fund Minimums ... [3] Patience and Discipline." (Smart401k)
Why Pension Funds Are Eating Your 401(k)'s Lunch
"Pension funds have the benefit of investing for a whole pool of people; they can look longer term and take different risks. Still, there are lessons to be learned by the two types of retirement plans' disparate returns.... The bigger the pool, the better the returns.... Fees matter... Don't play follow the leader.... Don't rule out the return of pensions." (Reuters)
The Perfect Fit for One-Size-Fits-All Target Date Funds (PDF)
"There are two indisputable truths in defined contribution retirement savings: [1] Saving enough is critical to retiring with dignity. [2] There is a risk zone spanning the 5 years before and after retirement during which losses can materially disrupt retirement lifestyles, even if savings are sufficient.... These facts are largely ignored when it comes to target date funds." (Target Date Solutions)
Wagner Law Group Legal Updates in ERISA, Employee Benefits & Human Resources, May 2013
Articles include: Tax Reform Proposals Regarding the Retirement System; DOL Offers Tips on TDFs; Definition of Fiduciary; Re-Enrollment Default Investments: Bidwell v. University Medical Center; 408b-2 and 404a-5 Disclosure Aftermath; Brokerage Accounts; New Areas of Potential Litigation. (The Wagner Law Group)
Younger Prospects Getting Cold Shoulder from Advisers
"[T]wo-thirds of executives at broker-dealer and registered investment adviser firms ... said they are still focused on serving and attracting baby boomer clients, while just 23% said they're targeting Gen X (ages 34-48) and Gen Y (18-33)." (Investment News; free registration required)
Improving Retirement Savings Options for Employees (PDF)
"The core principles of trust investment law ... establish a presumption in favor of passive (index) investing and against active investing ... The key question is what this presumption implies for a situation where plan participants are allowed to exercise control over their accounts -- control explicitly endorsed by ERISA.... [P]lan fiduciaries' duty to protect participants from poor investment choices does not simply evaporate in this context." (U. of Pennsylvania Journal of Business Law Review)
A Nervy Approach to Retirement Saving: Self-Directed IRAs Using Exotic Investments
"[W]hile many Americans rely on their savings or 401(k) plans to see them through their golden years, high-end folks are falling in love with another option -- something called the self-directed individual retirement account. The idea is simple enough: Invest in anything you want, but put the investment into a special IRA, so it isn't taxed until retirement ... [But] some experts are expressing serious reservations about the skyrocketing growth of self-directed IRAs ... because many parts of this business aren't regulated." (The Wall Street Journal)
Retirement Plan Participants: Comparing Concerns of Men to Those of Women
"There are few retirement readiness issues on which men and women feel equally secure.... When asked about future prospects, men are more likely than women to say they expect to be better off financially one year from now. They also express greater concern with their level of household debt. Women are more concerned about not saving enough for retirement, health issues and the financial situation of their children." (Spectrem Group)
Personality Type Theories and Investing
"Individuals are different in the way they process information, vary in the way they behave when faced with a financial decision, and have different risk preferences, so it is essential that advisors interact with each client effectively. This often means that you must change the way you speak to different types of clients even though your advice may be similar across your client base." (Morningstar Advisor)
Consumer Fact Sheet: The Basics of Investing
"The Insured Retirement Institute (IRI) and the National Retirement Planning Coalition (NRPC) released a new fact sheet focused on the basics of investing as part of their six-month national retirement planning campaign.... According to research by IRI, only about 17 percent of Boomers believe that they are extremely or very knowledgeable about making financial investments. Even more alarming, more than 40 percent of Boomers say that they are not very or not at all knowledgeable about investing." (Insured Retirement Institute)
[Opinion] Beware of Target-Date Funds
"[D]espite the growing popularity of TDFs, flaws with these types of investments abound.... TDFs encourage people to be lazy.... TDFs don't properly tackle the issue of longevity.... TDFs undermine the crucial role of professional investment advice.... TDFs are not adequately diversified." (Advisor One)
Rethinking Target Date Funds: Fulfilling Fiduciary Responsibilities (PDF)
"[S]ignificant differences among target date offerings exist -- asset allocation, underlying design and philosophy -- presenting a challenge for plan sponsors in the selection and monitoring of target date strategies." (Plan Sponsor Advisors)
[Opinion] The Social Costs of Choice, Free Market Ideology and the Empirical Consequences of the 401(k) Plan Large Menu Defense
"Under the 'large menu defense'" courts have held that, even assuming a failure to exercise due care in selecting plan options, the employer can nonetheless claim the protection of the employee-control safe harbor under ERISA because, when the plan's menu is sufficiently large, the plan participant is deemed to have exercised legal control over the relevant investment decision.... Research has shown that large 401(k) menus result in lower participation rates, overly conservative allocations, inferior investment options and other adverse effects that, collectively, cost workers billions of dollars every year." (Mercer Bullard via SSRN)

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