Advisors Advantage

My latest newsletter for plan providers can be found here.

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Watch over the use of photos with your website

This is a heads up for retirement plan providers and it has nothing to do with retirement plans.

It has to do with your website and the pictures you may use. As you know, I have this website called that401ksite.com and you should know that since you’re reading it here. For the articles, I use photos to illustrate the articles. Since I know a thing or two about copyright, so when searching for photos on Google and I search it using photos that are tagged that they are allowed to be reused.

So a few years back, I got a letter addressed to my law firm (even though a separate company owns the website) with demand from another law firm that I pay some photographer $5,000 for the use of some photo on employee benefits. The demand was attached with an image of my website and nothing to indicate that the photographer owned the image.

So I searched from the image and while it was labeled as allowed to be reused on a site, there was a caveat that suggested that you need to pay $10 for the image. So while it was labeled as permitting to be reused, the photographer had this $10 request that no one would know about unless you clicked on his site and looked around. So if the photographer is willing to sell it for $10, why is his lawyer demanding $5,000? It’s what we call a honeypot or honeytrap scam. This photographer in cahoots with a lawyer entices people to use a stock image that appears to be free and they try to extort money from small websites for money. I went on Google and did further research and discovered that the law firm and the photographer are well known for this scam. Many small websites settle for hundreds of dollars because they don’t want to hire an attorney and I have the luxury of being one.

They send me another letter and I ignore it. Then I get a call from someone who claims to be a lawyer and I know from 5 seconds in that the person on the phone with me is not a lawyer because she asks me where to send the paperwork for a lawsuit. Like I’m going to her job for her. So I tell her that what she is doing is extortion and I will refer the matter to the proper authorities. I also tell her that next time she wants to extort money from me, she should bring a gun because she’ll have a better chance. Unprofessional on my part, but I didn’t give her my name and I’m going to respond in kind for someone who is trying to rip me off. A few days later, I get another message from someone who is claiming to be an attorney who wants to settle the case. I don’t return the call because I don’t think they’ll settle for anything and I never heard from them again.

The point here is that you should always be careful about the images used on your website and if you ever get a threatening letter as I did, give me a call.

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Employees don’t need to see that

I always jokingly say that the reason I try to avoid hiring employees is that I once was an employee too. However, part of the problem is that I worked for many employers who didn’t understand their role and the role of their employees.

Too many employers don’t have the ability to censor themselves especially when it comes to the sometimes disgust of running a business and employees really don’t want to hear that.

If you’re complaining about billing and the employees know you’re going on a luxurious trip in the not too distant future, employees don’t want to hear your complaints.

If it’s snowing badly and employees can’t get in because of traffic or public transportation issues, employees don’t want to hear how if you came in the morning, you should too because an owner has more dedication to showing up.

Employees don’t want to hear about how you had to use your credit card to pay something for the client when you’re throwing a lavish wedding for your son.

Too many employers think their employees want to know everything and they really don’t want to hear your complaints. Trust me, I was an employee once too.

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Fight like hell for plan participants

A lot of talk in political circles surround politicians using fighting words. I’m not a politician and I don’t like to use my space for that.

What I will say that as a plan fiduciary, you can use some fighting words when trying to protect your plan participants. Your job is to fight like hell for plan participants. That means making sure that costs are reasonable for plan participants and that the plan is working to help participants save for retirement.

As a plan fiduciary, I’m in a huge fight with the terminated Third-Party Administrator (TPA) over excessive fees that they want to charge plan participants for something that plan participants had already paid for. I could have avoided a conflict by agreeing to the fees, but I would be violating my fiduciary duties by allowing excessive fees to be charged.

Fighting like hell for plan participants will help you reduce your fiduciary liability and it’s your job.

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It’s not about a Name

11 years ago, I knew I was going to start my national law practice dedicated to ERISA/retirement plan law because I wasn’t going to accomplish that at the law firm I was working at. Before leaving, the local salesperson for one of the bundled providers introduced me to one of the big out of state brokers who did quite some business in New York.

The broker was very nice and he liked the idea of my Retirement Plan Tune-Up plan review for $750 (cheap plug) and he discussed pushing this out to all his clients and he wanted favored nation status on pricing and perhaps some regional exclusivity. With one foot out the door of my firm, I thought this was a home run.

After starting my firm, the broker invited me to his offices where I met the rest of his team. The meeting went well and I thought I had my first big break. Well, the broker contacted me and told me that the rest of his team had trepidation because I didn’t have a name for myself that had panache or recognition in the retirement plan business. He thought that my old law firm had the name, but the fact is that the law firm’s name isn’t well known outside of Long Island and New York City government circles.

Since you’re reading this article, you know the story about my name in the retirement plan business. I once joked to that broker a few years back that maybe now, I have a name. Regardless, I never got any business referrals from him.

The point here is that when it comes to the retirement plan business, there is no brand name like Rolex or Brooks Brothers, it’s all about the quality of service. Don’t get hung up on the names of the providers you work with, concentrate more on their quality of work.

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Make sure it’s not a gimmick

A few years back, a good friend of mine who is an ERISA §3(38) fiduciary won a case from a disgruntled broker who claimed that all 3(38) services were just marketing. A 3(38) fiduciary that does a competent job and assumes discretionary control over the plan’s fiduciary process is more than marketing. But it’s a gimmick.

Hear me out, every service and every feature that a plan provider advertises is a gimmick. Now, there is nothing wrong with being a gimmick as long as there is some substance behind that service or feature. A gimmick is a special feature that makes something “stand out” from its contemporaries. However, the special feature is typically thought to be of little relevance or use. If you offer a service or feature that other plan providers don’t offer, just make sure the gimmick is something that plan sponsors could use. A fiduciary warranty that offers a plan sponsor absolutely zero protection is a gimmick with a feature that has no use. A good ERISA fiduciary offering substantive §3(16) or 3(38) services are offering a gimmick with a feature that plan sponsors could actually use.

My flat fee approach to billing my clients is a gimmick, but it’s substantive because my clients have cost certainty rather than the billable hour approach that never seems to have any cap or limit.

The point is that any feature or service that you will use will allow you to stand out among the crowd, just make sure that the gimmick has some substance, so your client doesn’t ask like Clara Peller in those Wendy commercials as to “where’s the beef?”

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Coca-Cola MEP sued

Multiple employer plans (MEPs) have become larger targets for litigation when they achieve a plan of substantial size.

An employee of Heartland Coca-Cola Bottling Company, LLC, an employer that participated in the Coca-Cola Bottlers’ Association 401(k) Retirement Savings Plan, a multiple employer plan has sued the Coca-Cola Bottlers’ Association (CCBA), a Georgia corporation headquartered in Atlanta, whose members consist of all 65 U.S. independent bottlers of Coca-Cola. The MEP covers about 19,000 participants, and had nearly $800 million in assets spread across 24 investment options, including a Coca-Cola Common Stock Fund.

The complaint for the lawsuit alleges that the Plan:

  • served up target date funds that directed a substantial portion of their assets to an S&P 500 fund that charged more than seven times the market rate;
  • knew or should have known of the existence of collective trusts and should therefore have promptly identified the prudence of transferring the Plan’s funds into these lower cost alternative investments
  • failed to take advantage of lower-cost shares and utilize lower-cost collective trust versions of the investment options they did offer;
  • failed to consider and select lower cost investment options that were similar to or in the same investment style as those being offered in the Plan; and
  • failed to timely switch to an investment option that was the same investment in a different wrapper at a much lower price.

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Biden administration to implement Trump Fiduciary Rule

In what I consider a surprise move, the Department of Labor (DOL) announced that it will allow a Trump-era exemption for investment advice fiduciaries to move forward.

The rule entitled “Improving Investment Advice for Worker & Retirees,” an exemption for investment advice fiduciaries, will go into effect as scheduled. In the coming days, the agency will publish related guidance for retirement investors, employee benefit plans and investment advice providers.

The Trump administration replacement rule has two main parts: a new prohibited transaction exemption allowing advisors to provide conflicted advice for commissions; and a reinstatement of the “five-part test” from 1975 to determine what constitutes investment advice.

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Bad Behavior You Shouldn’t Replicate As A Plan Provider

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

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The Rosenbaum Law Firm Review

My latest newsletter can be found here.

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