Confirm what the auditor says

If you have a retirement plan with more than 100 participants, you probably have a plan audit (if you have more than 120 participants, you do). Like with any plan providers, there a lot of great auditors out there and some not so good.

So if you’re auditor brings up issues dealing with plan compliance, confirm those findings with plan providers and/or ERISA attorneys because auditors maybe great at accounting, they aren’t legal experts. I have an advisor-client (cheap plug here) who asks me to confirm what the auditors are saying on the compliance end and occasionally, they’re wrong and their answers could lead to compliance headaches especially where the Department of Labor and Internal Revenue Service are concerned.

Posted in Retirement Plans | Leave a comment

It Won’t Matter Until It Becomes Law

I spoke to a fellow ERISA attorney who was talking about the proposed changes going back and forth regarding tax reform. I told him I just didn’t have time to follow and I’m not a big fan of proposals, I just cared about what becomes law.

The proposals that have been flying back and forth that might have involved tax deferral and catch-up caps were just some things that were thrown out there. In the end, it only matters what is passed and signed into law.

When I started out, I learned much of what I know from a paralegal named Marge. For some small chatter, I was mentioning the idea of Roth 401(k) and this was sometime in 1999. Marge told me that there are always proposals out there, but it means nothing until it becomes law. So you won’t see me write a blog article about every proposal out there, there isn’t enough time in the day for me to do it.

Posted in Retirement Plans | Leave a comment

How 401(k) Plan Sponsors Can Avoid Turning Their Plan Into A Disaster

For my latest article on, please click here.

Posted in Retirement Plans | Leave a comment

Get fiduciary liability insurance

The warranty in the electronics business is gravy for the retailers who sell it. You’ll be surprised how many people pay $20 to get a warranty on a $100 Blu-Ray player. When Best Buy was going national, they advertised how they wouldn’t sell warranties and then realized that they couldn’t turn down all that free money, so they started offering it.

A warranty is like insurance, so you should only insure those things that have a high-cost replacement. You insure your health, your life, your house, your car, and some appliances worth insuring.

This isn’t another diatribe about the fiduciary warranty that insurance companies give away for free even though their main business is insuring risk for a fee.

This about plan sponsors who don’t insure their risk by buying fiduciary liability insurance or buying a plan service that could review their plan expenses and/or their plan document/administration.

Fiduciary liability insurance helps protect plan sponsors who find themselves also appearing as defendants in a lawsuit filed by an aggrieved plan participant in a town near you. I had clients sued in a class action lawsuit where the insurance company paid $900,000 for a $1 million legal fee (there was a $100,000 deductible) and this plan sponsor won their case.

So many plan sponsors don’t want to pay for a plan review that can help them identify plan issues they wouldn’t ordinarily find unless they were converting to a new provider. I have a plan review called the Retirement Plan Tune-Up for $750 and I can probably count on one hand how many I do a year. When I talk to plan sponsors and advisors, they seem interested but they treat a plan review like a trip to the dentist; something that they will avoid until it’s too late.

Spending some shekels on a fiduciary liability policy and a plan review is certainly well worth it to avoid a greater harm later.

Posted in Retirement Plans | Leave a comment

Nordstrom is the latest large employer sued over their 401(k) plan

The department store business model is selling items at high prices with the heavy end of season discounting. Now if only Nordstrom did the same with their nearly $3 billion 401(k) plan.

The lawsuit alleges that if the plan had opted to include Vanguard target date funds instead of the target date funds in the plan, the plan sponsor could have cut plan expenses by $3.6 million per year, or nearly $22 million over the past six years. The lawsuit also alleges that if the plan had changed other parts of its investment lineup for similarly available Vanguard funds, it would have saved $24 million over the past six years.

Whether a plan sponsor chose Vanguard funds or from another company, that’s clearly a fiduciary decision and the plaintiffs are going to have a hard time providing a breach of the duty of prudence just because Nordstrom didn’t use Vanguard funds. The plaintiffs are going to have to show that using other funds is an actual breach.

It should be noted that this lawsuit has just come months after Nordstrom replaced Transamerica as their record-keeper. Coincidental or related, it’s worth noting.

Posted in Retirement Plans | Leave a comment

Harvey Weinstein and You

The news of late has had daily accusations against Hollywood executives and personalities concerning sexual abuse and harassment. What has happened with the beginning of allegations against Harvey Weinstein have mushroomed into a force that can’t be stopped. It reminds me of the fall of the Berlin Wall and the rest of Eastern Europe where there was a tidal wave of political unrest. The allegations first asserted against Weinstein have empowered women and men to finally come forward and have the courage to challenge those that have abused them. The abuse and harassment were not beautiful, but the fact that terrible people who have committed terrible acts are finally getting what’s coming to them.

As retirement plan providers, you are either employers or employees. The current Hollywood scandal shows us that as people in the retirement plan industry, we need to make sure that there is no room for harassment in the workplace. People in positions of power don’t have the right to harass employees in any fashion. As retirement plan providers, we need to make sure that there are processes in place to fully investigate any allegations and punish those that have committed wrongdoing in the workplace. As a former employee of a number of TPAs and law firms, I can honestly I never worked at a place where sexual harassment took place, but I also never worked at a place that had a solid human resources department that could properly deal with any potential allegations.

As protectors of this great industry, we need to do better and make sure that the workplace is free from all allegations of sexual impropriety.

Posted in Retirement Plans | Leave a comment

Stealing plan assets is easier than you think

A third party administrator (TPA) and/or plan fiduciary stealing plans assets is easier than you think. The rumor that TPA Vantage Benefits stole $14 million from 6-7 of their clients shouldn’t be surprising to me because I saw it before with Matt Hutcheson and I saw it before at the TPA I worked at.

A plan administrator working at my TPA was close to getting a distribution from the 401(k) account of a client’s participant. The only reason he got caught is that the plan custodian found out that the administrator got the wrong account number for his rollover IRA. So if the administrator wasn’t so dumb in getting his IRA account number, he would have been able to get that distribution. The administrator was caught and fired. Charges were never pressed because what TPA is going to acknowledge that they have no processes in place to prevent it.

Why is it so easy for TPAs and financial advisors to steal plan assets? The problem is you have plan custodians and in the Matt Hutcheson case, a TPA assumes that orders to liquidate and transfer are on the up and up. You can’t blame these providers who unwittingly got involved in a criminal case, but it’s understandable. Plan providers assume liquidation and transfer requests are lawful because a fiduciary or TPA who steal plan assets will eventually be caught because their fingerprints will be all over the embezzlement.

While we can’t fathom why anyone in a fiduciary or fiduciary-like setting will steal plan assets, this is why we should understand that things like plan embezzlement can happen.

Posted in Retirement Plans | Leave a comment

It Looks Good On Paper For The 401(k) Plan Sponsor, But…

My latest article for can be found here.

Posted in Retirement Plans | Leave a comment

Location of your plan provider isn’t an issue these days

I’m the guy who will travel to a Target further from my home because the Target in Farmingdale is far better than Westbury and Valley Stream and people think I’m crazy to travel 15 minutes more for a better run store with better clearance sales. When my family has had medical issues, we travel to the best doctor out there whether it’s in the same town or New York City, which has some of the best medical care in the world.

So I’m still shocked when plan sponsors want plan providers who are local. Shopping locally for pizza or food makes sense, but technology makes requiring your plan providers to be local is silly.

Thanks to technology, the plan provider across the country can virtually be in any meeting you need them to attend. As an ERISA 3(16) plan administrator with clients around the country, I’m always there when my clients need me even if they are in San Francisco. The Internet has made the world smaller, so there is no need to hire plan provider that is local. Since you can have online meetings and constant email messages, there are no requirements that your providers be local. Find the best plan provider out there, whether they’re in town or thousands of miles away.

In real estate, it’s all about location, location, location. When it comes to plan providers, it’s about competence and reasonable fees.

Posted in Retirement Plans | Leave a comment

It might be you

Prior to starting my own law firm, I had made many different employer changes over the years to the point that my position as the head of my law firm is the longest time I’ve been employed at one place and that’s only 7years.

Am I going to blame the employers I worked for? Sure, they were short in the Christmas bonus department and I thought they didn’t have any long-term vision, but the only common thread between these four employers was me. So rather than blaming them for that checkered employment history, the fault lies with me. Some birds aren’t meant to be caged and some people need to work for themselves. So rather than blame them someone else, it’s important to look within.

If you’re a narcissist, there is no point in reading your article because you’re always right (at least in your mind). If you’re like most of us, you may realize that if you have a pattern of client problems or employee problems or problems with working with other providers, it may make sense to look at yourself. When you look at what you do, you may realize some of the mistakes you made in developing and maintaining relationships. I’ve learned in life and in business, growing as a person is just as important, if not more than growing your business.

So if you’re consistently having a problem with people, maybe it’s not them and it’s actually you.

Posted in Retirement Plans | Leave a comment