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  • Fixing the 401(k): What Fiduciaries Must Know (And Do) to Help Employees Retire Successfully
    Fixing the 401(k): What Fiduciaries Must Know (And Do) to Help Employees Retire Successfully
    by Joshua P. Itzoe
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Mourning the Passing of My Dad, Phil Itzoe

I wanted to acknowledge the passing of my dad, Phil Itzoe, last Wednesday, February 10.  My dad was a truly amazing guy and one of the finest men I ever knew.  He spent a total of 45 seasons with the Baltimore Orioles, coordinating the team's travel plans for the last 41.  His last season was 2008 and at the time he had (and I believe still has) the longest tenure of any traveling secretary in the four major sports leagues.  

Dad was an avid sports fan, voracious reader and history buff, and he was deeply loved, admired and respected by everyone who knew him both inside and outside the game of baseball. 

A native of York, PA, Dad grew up in nearby New Freedom, PA. He played baseball and football at Susquehannock High School before transferring to York Catholic HS, where he played football. He attended York Junior College for two years before transferring to Millersville (PA) State College, earning three baseball letters. After graduating from Millersville in 1960, he spent three years as a reporter for the York Dispatch before joining the Orioles.

In 1963, while covering an assignment for the Dispatch that required him to travel to Baltimore, he stopped by the Baltimore Colts’ offices to inquire about employment opportunities.  Told that the team had no openings, it was recommended that he go next door to the Orioles’ offices.  Although the ballclub had no current positions available, his resume was kept on file and a year later, in 1964, he joined the organization as an assistant to the public relations director. He took over traveling secretary duties in 1968 and held them through the 2008 season.

In 2008, I had the privilege of inducting Dad into the Orioles Hall of Fame as the recipient of the Herb Armstrong Award for non-uniformed personnel who made significant contributions to the organization.  He was also inducted into the York Area Sports Hall of Fame in 2006 and the York Catholic High School Athletic Hall of Fame in 2007.

Viewed as legendary among his peers, Dad was honored in 1990 with the first Donald Davidson Memorial Award, given to the top traveling secretary in the major leagues.  In 1985, Sports Illustrated published an article entitled, “The Team Of Your Dreams” proposing its version of a true All-Star organization, from top to bottom.  Dad was selected as the team’s Traveling Secretary along with fellow Orioles greats such as Eddie Murray (First Base), Hank Peters (General Manager) and Pat Santarone (Groundskeeper). 

Here are some great quotes honoring my dad:

Jim Palmer - HOF Orioles Pitcher

"I used to always call him 'Fabulous Phil,' " Orioles Hall of Fame pitcher Jim Palmer said. "Phil did everything, and he was there for all the good times, all our championships. You know how difficult a job that is? You don't get paid the amount of money the managers do, but he had to deal with all the players, and he did it with class, with a sense of humor and with kindness. You don't find too many guys like Phil. When you lose somebody like that, it's just another horrible day."

Tippy Martinez - Former Orioles Reliever

"There are no words that could explain the type of character Phil had.  Anything you wanted, he got it done. If you forgot to get tickets to the game (for friends and family), all you had to do was talk to Phil. All we had to worry about was our suitcase, because everything else was taken care of. He did such a great job.  But more than just doing a good job, he was an honest man. You could give him your wallet and come back knowing everything would be how you left it. He got along with everybody. If you had a bad day with Phil, there's something wrong with you. It was a long way coming to get him mad, because honestly, I never saw him upset."

Andy Etchebarren - Former Orioles Catcher

"He did everything he could for you. He was a very, very good friend,."

Brian Roberts - Orioles 2nd Baseman

"For a long, long, long time, Phil was a huge part of the organization.  He helped things run the way they should in every aspect. He was an icon when it came to that position in major league baseball and within our organization."

Peter Angelos - Orioles Owner

"It is with great sadness that we learned today of the passing of Phil Itzoe. Phil served the Orioles with excellence and loyalty for over four decades and was respected not just by his co-workers, but also by those throughout the sports industry for his integrity and dedication. We extend our deepest condolences to his wife, TyLisa, and the rest of his family."

Dad was an incredibly humble, modest, kind, loyal and caring human being and a class act.  I've rarely met anyone who was so well-liked by everyone who met him and who always sought to put the needs of other people before his own without ever asking anything in return.  Rest in peace, Dad.  I love you and I'll miss you.

It's been amazing to see the number of tributes that have been written to my Dad over the past few days - here are some of my favorites:

Jeff Zrebiec - Baltimore Sun

Peter Schmuck - Baltimore Sun

Dan Connolly - Baltimore Sun

Roch Kubatko - MASN Sports

Jim Henneman - PressBox Online

Jeffrey Johnson - The York Dispatch

Jim Seip - York Daily Record


Josh Itzoe Featured on the Cover of Maryland Investor Magazine

I was pleased to be featured on the cover of the November/December issue of Maryland Investor Magazine. The magazine is a relatively new publication created by Bill Slaughter and Stephanie Pietry and is dedicated to informing HNW Marylanders about investment, legal and tax issues while providing a lifestyle element as well.

The article is written in Q&A fashion and takes an in-depth look at understanding the Fixing the 401(k) approach.  Here's the article and be sure to check out the Maryland Investor Magazine website.


Josh Itzoe Quoted in Employee Benefit Adviser

I was pleased to recently be quoted in Employee Benefit Adviser for an article about employer matching and what I am seeing in the marketplace.  You can read the full article here.


Josh Itzoe and BrightScope Quoted in November issue of SmartMoney Magazine

I was pleased to be quoted along with Mike Alfred from Brightscope in November's issue of SmartMoney Magazine.   Janet Paskin interviewed Mike and I for her article entitled "Meet the People Who Run Your 401(k)". Interestingly, there were some plan fiduciaries who were actually quoted in the article as well (although I'm not so sure their employees will take comfort in their comments.) 

For better or worse, I thought the article did a very good job of taking a ground-level look at how plans are generally operated and perceived by the fiduciaries and participants.  To me, the article highlighted several common (though usually faulty) perspectives from the plan fiduciaries who were quoted:

1. Some viewed the plan and their fiduciary duties as an afterthought.

2. Some seemed to think they were really "smart" and, therefore, doing a much better job at making decisions than they actually were.

3. None seemed to understand or grasp which decisions really matter (and which ones don't) in terms of designing their plan to be most effective and helping their employees use the plan wisely in order to accumulate more money.

Unfortunately, my experience has been that these misconceptions or errors in thinking are usually the rule out in the marketplace, rather than being the exception.  It's no wonder that most employees don't value their 401(k) plan or view it as a "benefit", especially when the prevailing attitude of some plan fiduciaries (as highlighted in the article) is "The 401(k)? That’s the least of my problems.”

Even so, with only a little bit of understanding and effort, the companies named in the article could go from having a poor/mediocre 401(k) plan to a great one like this.


A (Nearly) Perfectly Implemented Investment Strategy for a 401(k) Plan

We recently transitioned a client to a new, fully "open-architecture" plan provider - smoothest conversion we have ever been through. One of the benefits this particular provider allows us is the ability to build pre-allocated, model portfolios that we as the investment advisor and ERISA 3(38) "Investment Manager" have the responsibility to manage and rebalance on an ongoing basis.  

As readers of my book know, I am a big advocate of this approach rather than allowing participants to completely self-direct. To help employees use the plan more effectively, we conducted a series of in-person presentations for local employees and webinars for remote participants, with a focus on educating them about sound investing principles, how a model portfolio works and the benefits of such an approach, and how to use these options correctly (i.e. by putting 100% of their balance and contributions in a model rather than incorrectly diversifying amongst multiple models and/or individual asset class investments).

For some background, we've created 5 primarily passive portfolios with blended expense ratios between .25% and .40% and with the following allocations:

Conservative - 20% equities / 75% fixed income / 5% real assets

Moderate - 30% equities / 60% fixed income / 10% real assets

Balanced - 40% equities / 45% fixed income / 15% real assets

Growth - 55% equities / 30% fixed income / 15% real assets

Aggressive - 70% equities / 15% fixed income / 15% real assets

We also included the Vanguard Balanced Index Fund (with an approximate allocation of 60% equities  / 40% fixed income and an ER of .25%) as the default fund for terminated participants who still have a balance in the plan. These participants were mapped into this fund at conversion.  Currently, the plan has 89 total participants, with 69 active and 20 terminated participants with a balance in the plan above $5,000 (and thus, couldn't be automatically forced out of the plan).

I was analyzing some data this week and was really excited by what I found. Of the 69 active participants, 65 chose a model and used it correctly (for a success rate of 94%).  If you factor in the 20 terminated participants who were defaulted into the Vanguard Balanced Index fund, the total number of participants who are successfully positioned with a low-cost, well-diversified portfolio climbs to 85 of 89 (for a success rate of 96%), with only 4 participants choosing to self-direct.  

Overall, I am ecstatic with the results so far.  Such a high quality, low cost, professionally managed (and cohesive) investment strategy plan should go a long way to helping these participants retire more successfully and with meaningful benefits. Oh, and we cut the total fees for participants nearly in half while allowing the trustees to delegate the discretionary authority for the plan investments to our firm, thereby transferring a significant portion of their liability and reducing their personal (and corporate) risk.

I couldn't have asked for a better outcome thus far.  I just wish more plan sponsors would understand and "buy in" to this approach because there truly is no better way to design and implement an investment strategy for a participant-directed plan within our country's current retirement system.