ERISA Lawsuit Dismissed; John Hancock was not a Fiduciary

On July 24, the U.S. District Court for the District of New Jersey dismissed (for a second time) a breach of fiduciary duty case brought by participants in various 401(k) plans against John Hancock and its affiliates. Essentially, the plaintiffs alleged that John Hancock breached its fiduciary duty to them (and other participants in the 401(k) plans). The court held that John Hancock was not a fiduciary with respect to any of the alleged actions.   Read More

The High Cost of ‘Orphan’ Accounts

In the aggregate, how bad is the problem created by participants who leave their retirement accounts behind when they move to a new employer? Among other data points: 45% of employees leave their retirement accounts behind; there are an estimated 15 million “orphan” accounts; at an annual cost between $25 and $35 per orphan account, the total cost is between $375 million and $525 million a year.   Read More

Last Week’s Top 5 Posts on NAPA Net

Last week’s top five most-read stories on NAPA Net reflected keen interest in Yale’s response to Brian Graff’s original “Love Letters from Yale” post, a six-month delay on the second round of participant fee disclosure, the DOL’s proposed change to 408(b)(2) disclosure regs, a Yale professor’s letter to thousands of plan sponsors, and the five big lies of retirement planning.   Read More

Populism Sans Facts

I was excited to hear that President Obama would be addressing the issue of retirement security in a series of speeches last week focusing on his policy agenda. That is, until I actually heard him do it. Speaking at Knox College in Galesburg, IL, on July 24, the president took the stage and made an irresponsibly misleading assertion about our so-called “upside down” retirement system.   Read More

Stretch IRAs on the Chopping Block?

With the federal government looking for any and all ways to generate revenue, there’s speculation that stretch IRAs are likely to be cut, according to a recent article by two law professors. Stretch IRAs allow a beneficiary to take either a lump sum payment or withdraw over a number years based on RMD rules and their beneficiaries’ ages. Meanwhile, the IRA continues to grow tax free. Critics argue that stretch IRAs go beyond the intent to incent people to save for retirement, and have become a wealth transfer tool.   Read More

The Benefits of ‘Closet Indexing’

According to academic research from 1997-2011, investors will reward funds that outperform their benchmarks when the market is up but not when it’s down. When the market experienced negative returns, the research found, there was no significant effect on flows when comparing funds that outperformed their benchmark versus funds that underperformed. Why?   Read More

Yale Responds

As we reported last week, a Yale University Law School professor sent letters to over 6,000 plan sponsors suggesting their 401(k) plans were “high cost” and, among other things, implying that they may be violating their fiduciary obligations. We pointed out the serious flaws in the data being used by the professor as well as the general inappropriateness of the tone of the letters.   Read More