The curse of social media

I always say that social media helped build my career as an ERISA attorney. Without Linked and the articles I write on JDSupra, I would have starved a long time ago when I went on my own. Social media should be a wonderful thing, but lately, I’ve seen nothing but negative.

The beauty of social media is that allowed people to express their opinions and be heard and the bad part of social media is that it allowed people to express their opinions and be heard. It allows people to opine on matters that shouldn’t concern them (other people’s lives). It allows people to post hurtful and racist comments with anonymity. It allows people to be cruel without the courage to say it to someone’s face. It has led to an increase in narcissism and other psychological disorders. It has been used to spread hate and it has been used to increase the number of school shootings (it’s not just about guns). The Internet has been around for more than 25 years, but it is the boom of social media (Twitter and Facebook) that has seen such an explosion in so many terrible acts and has led the political process to become more like professional wrestling.

I’m not saying we should get rid of social media, I’m saying we should take a harder look on the negativity that it creates instead of just focusing on the positive.

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Student loan match legislation proposed

Sen. Ron Wyden (D-OR) has reintroduced legislation that would permit 401(k), 403(b), SIMPLE and governmental 457(b) retirement plans to make matching contributions to workers as if their student loan payments were salary reduction contributions.

The legislation is based on an IRS private letter ruling issued last year permitting a 401(k) plan to be amended to include a student loan benefit program.

Student loans are a big deal these days because of the amount of student loan debt as well as the fact that student loan debt precludes many younger workers from saving under a 401(k) plan.

Studies have shown that households headed by a person age 35 or younger with a college degree and no student loan debt reportedly has a median deferral account balances of $20,000, as compared to $13,000 for similar families that have student loan debt.

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Don’t ask for trouble with plan provisions

One of my biggest tasks as an ERISA attorney is helping plan sponsors out with voluntary compliance and self-correction programs. Many of these problems that have to be fixed are as a result of the plan document saying one thing and the plan sponsor doing another. This might be because the third party administrator (made an error) or the plan document didn’t contain the provision that the plan sponsor thought it did.

Regardless of who caused the error, it’s my opinion that plan sponsors often ask for trouble by creating out of the box, unique plan provisions that lead to multiple errors. It usually deals with a provision regarding compensation and the plan sponsor’s desire to exclude or include certain parts of compensation. These mistakes may require corrective contributions or an IRS approval of a corrective plan amendment.

It’s not to say you shouldn’t have unique plan provisions especially when you need them, it’s just a word of advice that avoid them if you can. If you do need them, make sure the plan document is consistent with your intent and that the TPA understands the unique plan provision.

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What you can learn from the AAF

The Alliance of American Football (AAF) tries to be a spring football league that would act as a feeder system for the National Football League. It was a nice idea on paper and they had an app that had some interesting gambling capabilities to it that could have soured serious interest. In addition, they had broadcast deals with CBS.

On paper, it was all great, but they immediately started running out of money. So the founders of the league brought in someone who vowed to spend up to $250 million to get the league rolling and then eventually pulled the plug on the league after spending $70 million in about six weeks.

What could you learn from the AAF? No matter the greatest idea you may have, it doesn’t matter if you don’t have the funding to keep things going.  I’ve seen many great ideas in the 401(k) business that couldn’t achieve critical mass because of a lack of funding.

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Great service doesn’t justify over inflated fees

I’m a loyal customer and always have been. I’ve always been reluctant to change especially when I’m satisfied with a service. I’m too loyal and sometimes, it costs me money like 401(k) plan sponsors who have misplaced loyalty in their plan providers.

Ever since I got my first cell phone in 1998, I always used Verizon Wireless. The services was far superior in terms of coverage and I was always willing to pay more. I even waited the longest time when Verizon didn’t originally carry the IPhone when AT&T had the exclusivity of it. I even was loyal when Verizon phased me out of unlimited data in exchange for the subsidy of my first IPhone, the 4S.

When my kids needed cell phone, I actually signed them up with T-Mobile because they were less expensive and it was a trial to see if I should make the switch. I dawdled for over a year without making the switch. My wife and I made the switch to T-Mobile because of a promotion regarding new phones. We made the switch and ended up saving $125 a month. In addition, through their T-Mobile Tuesdays, I got a free year of MLB.TV, free Netflix, and a whole host of other goodies.

Verizon still has a better service, but not enough to justify the $125 extra a month. The point here is that while better service should fetch a premium, too much of a premium is going to scare your plan sponsors to seek a less quality with a steeper discount. Everything about fees is reasonablenessand if you charge too much of a premium for your higher quality service, you may end up not being reasonable in fees for the services you provide.

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Dear 401(k) Sponsors, It’s About A Process And Not A Result

My latest article on JDSupra.com can be found here.

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BB&T settles 401(k) lawsuit

With a planned merger with SunTrust, BB&T tied up a loose end by agreeing to a $24 million settlement on a class action lawsuit filed against them over their 401(k) plan.

The lawsuit alleged that BB&T breached its fiduciary duties by causing its 401(k) plan to pay unreasonable investment management and administrative fees, among other charges, constituting self-dealing and imprudent decision-making.

The problem in the case was that BB&T was the plan record keeper, custodian and investment manager in addition to being the plan sponsor. As I always say, it’s not wise to make yourself a target and clearly, the bank did by wearing one too many hats.

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The things about awards

You will hear about how certain retirement plan providers have won awards. Awards are impressive, but sometimes they’re not. You have to be wary as to who gave the award and what the award really means, You also shouldn’t just pick a provider because they won an award.

The best example is my local business newspaper that gave a lifetime achievement award to the former managing attorney for my law firm. The law firm is a big time advertiser of that newspaper and under this managing attorney’s watch, two offices closed and the firm is down 33% in size. Is the award justified or is it simply a thank you to a long term advertiser? Probably the latter.

I’ve seen plan providers tout awards that aren’t worth the paper the certificate is printed on. I’ve seen plan providers tout awards I never knew existed. Heck, I could mention that I won the Martin Buskin Award for Excellence in Student Journalism, but that was so 1994 and in college.

So many reasons are there to hire a plan provider, some type of award-winning isn’t one of them.

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Don’t shake it up so quickly

After Lorne Michaels left with the original cast of Saturday Night Live in 1980, they hired Jean Doumanian as Executive Producer who had limited work with the original cast a producer of the show. She along with most of that 1980-81 cast (which included Charles Rocket, Gilbert Gottfried, and Gail Matthius) were fired after 12 episodes.

When Sir Alex Ferguson retired after 25 seasons coaching Manchester United, his replacement David Moyes lasted 10 months as his replacement.

In my kid’s Hebrew school, the long term and well love Principal left after 15 years over a salary dispute. His replacement decided she wanted to shake things up and she was let go with months left in the school year.

When you’re taking over for a long term provider as their replacement or when you’re taking over for someone where you work, making quick changes when they were respected and beloved could be a recipe for disaster. People who take control sometimes make the mistake that the change in control also means change and it really doesn’t if the predecessor did a great job. Any change should come gradually especially after the honeymoon phase wears out; Making drastic changes curtails the honeymoon period and makes for an awkward time where people may long for the days of the predecessor.

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Why 401(k) Plan Sponsors Need To Communicate With Their Participants

My latest article for JDSupra.com can be found here.

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