The Attitudes That Get 401(k) Plan Sponsors In Trouble

My latest article for can be found here.

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Take advantage of the new E-Disclosure rules

As a 401(k)-plan sponsor, the new Department of Labor (DOL) rules that allow for the electronic delivery of important ERISA notices is a no brainer.

You will no longer have to deal with the mailings and the bounced back mail, only to deal with the bounced back email messages, as well as collecting email addresses for your employees to allow for delivery in the first place  There will be some annoying housekeeping details that needed to be done to get this going, but in the overall scheme of things, so much time and money will be saved by going through the e-disclosure route. Saving paper and saving stamps may allow for fees to be lowered for plan participants, especially if you pay a mail charge.

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Theft through cyber crime will be a bigger thing

Theft by plan fiduciaries does happen and it’s not hard to find out who did it.

The problem with theft by cyber breaches is that the cybercriminals are quite good at keeping themselves invisible as soon as the theft has been completed, unlike fiduciaries where there is a noticeable fingerprint of theft. As a plan sponsor, identify with your plan providers as to the delegation of liability by you or assumption by you.

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Special COVID Valuation Date creates a 401(k) lawsuit

They said it best in This Is Spinal Tap, there is a fine line between being clever and stupid.

Behan Bros, Inc. Retirement Plan is an annual valued 401(k) plan with a valuation date of December 31st. As with many plans, there is an ability to create a special valuation date.

Well, participants who terminated in 2018 were told that in early 2019 that they were entitled to a distribution based on December 31, 2018. Even though the market was up in 2019, they were told that the plan sponsor would not create a special valuation date. These former participants decided to keep their money in the plan. They then requested a distribution of their account balance in January 2020, based on a higher December 31, 2019, balance. Through March, these former participants were told that the annual valuation was not done. Then COVID-19 struck and the markets went south. On March 25, the plan sponsor indicated that because of the volatility in the market and to protect plan assets, they would create a special valuation date. Based on the new valuation date, two former participants would have received $20,000+ less, each.

The troubling aspect is that these former participants asked for distribution in January and the plan sponsor delayed payment because the valuation wasn’t done. Add the fact that the owners have account balances in the plan and you have the recipe for a nice lawsuit. Special valuation dates become problematic if you have participants with outstanding requests, based on a valuation with a vastly higher account balance.

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It’s all about trust

Everyone knows that I’m a huge baseball fan (these 401(k) conferences have allowed me to travel to stadiums around the country), so I’m tremendously disappointed as to what has been going on or has not been going for the 2020 Major League Baseball season. Ultimately, the breakdown is about trust and the players haven’t been able to trust the owners since the recognition of the Major League Baseball Players Association as the player’s union.

So much of what we do in business is built on trust. Whether we serve as plan fiduciaries or how we refer business to others, so much is built on trust. Without trust, you have nothing, That’swhy I’m always perplexed when I will get the email or LinkedIn invite where the advisor is already trying to be my referral source for the clients I have.

Trust is such a huge component of success in this business, that you should never lose sight of it and never betray it.

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Clearly retirement plan providers aren’t doing enough

According to the J.D. Power 2020 U.S. Retirement Plan Participant Satisfaction Study, most plan providers aren’t helping participants in the participants’ eyes.

Just 27% of retirement plan participants say they have accessed professional financial advice related to their plan, and 29% are either unaware of whether such advice is available or perceive that it is not available to them. 22% of retirement plan participants say they’ve had no interaction with their provider during the past 12 months.

Before plan providers get twisted in a knot, remember this is a survey of plan participants and their perception may not be fully grounded in reality. Communicating with participants effectively is always a challenge and it’s one of the greatest challenges that a provider can go through.

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Advisors Advantage

My latest newsletter can be found here.

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Keeping Plan Sponsor Clients In These Challenging Times

My latest article for can be found here.

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There is nothing wrong with criticism

When I was at law school at American University Washington College of Law, I was the Executive Editor of The American Jurist, which was the student newsmagazine for my final year of law school. I wasn’t a particularly fond fan of my law school, I think they made promises to students that they couldn’t deliver on and some of the great opportunities like their law clinics were only available to a small group of students. For example, while I was led to believe my interest and coursework in tax law would merit me for consideration in the tax clinic, I did not get a slot for the tax clinic because my name was literally not pulled out of a hat. So my year as the top editor was dedicating my columns to lambast what was wrong with the school and suggestions on how to improve certain aspects of it like the career services office, the journal and law clinic selection process, and orientation.

Certain students and faculty were very critical of my views because they said my columns would have a negative impact on the school because potential students would read the columns and then not got to our school because of what I wrote. It was pure nonsense because my columns criticized the school and then offered suggestions on how to fix the problems I pointed out. After I graduated, many of my suggestions were acted upon by the administration and I am proud of my role in helping the school out.

People don’t like criticism, they can’t handle it. If you criticize, you get labeled as a hater. It’s a label to discredit you and your opinion. I see that all the time on the community Facebook groups where people who have criticized elements of my local village are told to move. If you only allow nice, happy thoughts about things, you never get better.

Many years back, an advisor I know sent an e-mail to one of the big movers and shakers in the 401(k) industry. The mover and shaker were one of these industry spokespeople who were against any type of fee disclosure regulation.  The e-mail had a simple quote from an outspoken columnist who has been critical of the abuses with the 401(k) industry. The 401(k) big shot was very offended by the quote and took many exceptions to it.

My point is that there are enough problems within the retirement plan industry to criticize and simply attacking those that do is certainly not going to help the industry out. Those that try to shout down those 401(k) critics do a disservice to the industry because it is those critics on fees and investments that have helped spur change within the 401(k) industry. That being said, there are those who consistently attack 401(k) plans without a suggestion to improve them or a realistic way to help the retirement savings crisis in the country. When managed correctly, a 401(k) plan is one of the best employee benefits out there that has helped plan participants save for retirement and lower their current taxable income. People within this industry don’t have to be like Anthony’s neighbors in the Twilight Zone episode “It’s A Good Life” and think “nice, happy thoughts.” If you see something wrong within the industry, say something and offer a way to make things better.

Those that believe that the retirement plan industry is perfect and call those that criticize it are haters are members of a flat earth society who don’t have tolerance for the free flow and exchange of ideas. There is a lot of right and wrong with the retirement plan business, don’t be afraid to speak up in trying to improve it.

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The choice is clear

I may not remember what I ate for lunch yesterday, but I remember everyone who was ever nice to me when I first started working and I remember better the ones who didn’t. I worked with a lot of people over the years and I just never wanted to be remembered as the backstabber, the yeller, or the insulter.

Even when dealing with impossible bosses, ineffective co-workers, or clueless fellow plan providers, I always made a choice that I wanted to be kind. I never wanted to come off as the workroom bully because life is short and life is tough and there is no sense in. hurting others. I have a friend of mine who I know back from the day when I was a law clerk for a law firm in Boston when I was getting my LLM while he was a first-year associate. When we talk, we will mention certain partners at the firm who may or may not still be there and I will mention the partners who were absolutely cruel. Everybody can have a bad day here or there, but I’m talking about people who were just cruel, all the time. It’s 22 years later and I’ve gotten over all of the nonsense, but I don’t forget.

You have a choice, be nice, or be cruel. It’s easier to be nice and it’s better for everyone to be nice.


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