A Good Retirement Plan Doesn’t Grow On Trees

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

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Divorcing that TPA can be a problem

The MTV reality series The Real World ends their opening intro by stating the show tries “to find out what happens… when people stop being polite… and start getting real.” As an ERISA attorney working with retirement plan clients I often find that what determines a good third party administrator (TPA) from a bad one is when we find out what happens, when the TPA gets fired, and we start getting real.

TPAs get fired for a multiple of reasons and for a good chunk of the time; it’s not for a lack of competence. TPAs can get fired for higher fees, change of advisors/brokers (who want to make the change), or because the brother of the law firm’s partner works for the mutual fund company that will now be the new TPA. So it’s business, not personal.

Again, it’s easy to determine who the good TPAs are from the bad ones. The good TPAs will not take it personally and will try to make the transition to a new provider as seamless as it can be. I think reputation means everything and since it’s such a close-knit industry, making it easier for a former client to transition business away from you will only help your reputation. Also, there is always the chance that the former client maybe your client once again, especially if the new TPA fouls things up. I always believe in the concept of paying it forward; that making it easier for former clients to leave will only make it easier for new clients to come in. The good TPAs will also spell out in their original service agreement with the client, the exact cost (if, any) of the de-conversion when the TPA is replaced.

The bad ones are easy to spot out. They take things so personally and they feel the need to take out the frustration of being fired on the former client. Again, it’s business, not personal. I had a client who changed TPAs a few years back. During the change to a new TPA, an IRS audit discovered that the Top Heavy test was done incorrectly because a couple of law firm partners were misidentified as non-key employees. Rather than admitting the error, the TPA placed blame on the client for the error and then whined that the client still did not pay all their invoices, forgetting that the client had spent thousands in legal representation to correct that Top Heavy error.

Divorce can be difficult, changing TPAs should not. I think it’s important for TPAs should maintain a high level of professionalism, especially when it comes to the time when the TPA is being replaced because it’s at those times that delineates the good TPAs from the bad ones.

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Sometimes Networking Can Be Bad

When it comes to building a retirement plan practice, networking is an important component. Whether you are a financial advisor or a third party administrator or an auditor, placing an advertisement in the local newspaper or the yellow pages (if they still have them) will be costly and less likely to bring in clients. Fact is cultivating a close network of referral sources and spheres of influence will be more productive in netting clients than any advertisement or Google search analytic.

While networking is important, the right kind of networking is more important. What is the right kind of networking? Pretty simple, it’s about reaching the audience of potential clients and referral sources. Believe me, 3 years in to building my practice, I know the good and bad of networking.  The good networking is developing relationships with other professionals who can refer you business. Those can be accountants, attorneys (forget my old law firm, I had better luck networking with dead people), or other retirement plan professionals. Bad networking is networking with groups of people that can rarely bring you business. That can be networking with sole proprietors, networking with people who can not serve as a referral source for potential clients, or people who right off the bat, claim they can get you clients. I have been in business in one form of another for 14 years and I have never received a client from someone who claimed they can get me clients.

Networking is all about building relationships and building trust and it takes time. But there is a time, when you have to realize whether networking with particular groups or people are worth your while. I used to network with a small business group on Long Island for years. Nice people, attended a lot of events. Just never got a client, it wasn’t the right fit. People who are struggling in business have no money for 401(k) plans and if they do, a simplified employee pension plan is great because you don’t need an ERISA attorney or TPA for that. Funny thing is that I network a lot less than I did when I started my practice 3 years ago and I have more clients, only because I no longer concentrated time on the networking that wasn’t working.

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5 Years in the Making

This April, will mark 5 years since I started my own law practice dedicated to retirement plans/ERISA.


5 years ago, I swore the days that I would be working for someone else were gone. I had enough; I wasn’t going to let my career to be dependent on a decision maker who didn’t understand the retirement plan business and/or didn’t understand how I would get clients. It’s not a knock of the law firm managing editor that I have made fun of the past 5 years, but Lois wouldn’t have gotten what I was trying to do no matter what type of law it was. Lois knew best and probably still does, but I knew that no matter the support, I would never make it at that law firm or any law firm for that matter. I had no choice but to go on my own.


There was a family member or two who thought I would fail on my own. Their reasoning was that since I couldn’t draw business at that law firm, how could I draw business on my own? Despite my failing in getting any substantive business for that firm, I don’t think I was given the necessary tools and support to draw a lot of business.


There was the law firm partner I worked for that claimed I would be a superstar on my own, but I don’t know if he was just patronizing or not (still to this day).  The point is that the only reason I was able to make a go of it was because I believed in myself and my ability to connect with an audience of clients and other retirement plan providers. I took a gamble and it’s paid off somewhat, it’s still a struggle after 5 years.

The point here isn’t to say how great I am or how I was right, etc. The point here is that after 5 years of being on my own, I could not have done it without the support of my clients, referral partners, other retirement plan providers, and the folks who read my articles. You can have a great message and write great articles, but it means nothing if no one reads it.

So I thank you all for the first 5 years, and thank you in advance for the next 5.

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A Great Idea isn’t everything

I always say that when I have a good idea, it’s despite the fact that most of my other ideas suck.

Having been in this business for almost 17 years and in my practice for almost five, I hear lots of ideas from other retirement plan provider that is going to be great for them and the retirement plan business. While many of these ideas are good, many of them go wrong.

The reason that these great ideas go wrong is because usually they were planned wrong. A good idea isn’t everything, but the execution of that idea is. I remember working with a plan provider who was going to make a huge splash in the multiple employer plan (MEP) business that was going to make them a ton of money. The problem is that they acted so slowly that eventually the Department of Labor killed off 95%of the open MEP market with an advisory opinion. So a year of planning, working, and getting billed by ERISA attorneys went to waste.

You may remember I was touting a company that was going to be the UPromise of 401(k) plans by giving money back in the form of a salary deferral to plan participants for online shipping. I thought it was a can’t miss, but it did. They spent too much money in developing the idea that the slow rollout to plan participants couldn’t support it.

So if you come up with a great idea to expand your business, just realize that the idea isn’t everything, how you execute it is.

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Have Plans get rid of those forfeitures

Forfeitures that occur when people terminate service from retirement plans is usually a problem when the plan sponsor and their providers forget about them. Whether forfeitures are used to pay expenses, reduce employer contributions or is reallocated is specified in the plan document. The problem is when they just left there to collect dust.

Forfeitures should be allocated in the year that they occur. If they don’t, it might be an issue for the Internal Revenue Service (IRS) or the Department of Labor (if participants are deprived of an employer contribution from these forfeitures).

Another problem with forfeitures is that IRS guidance is that forfeitures can’t be used to offset a safe harbor contribution because the reasoning is that a safe harbor contribution must be fully vested when made and that can’t happen with a forfeiture. I don’t necessarily agree with that, but I’m not going to pick a fight with the IRS. I just hope they would change their thinking.

There is no reason that an employer should have hundreds of thousands of dollars growing each year in forfeitures, they should be allocated annually. Otherwise, the plan may run into an issue and it’s silly to have compliance issues with something as silly as holding onto forfeitures.

So if you have a client with loads of forfeitures, tell them to get rid of them.

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Trust is an important thing in working with other providers

When working with other retirement plan providers, the most important word is trust. You must have trust in the providers you work with and trust in the providers that you refer business.

Trust doesn’t happen overnight and it certainly takes time. That’s why I would always laugh when I was at a networking meeting and I would bump into a stockbroker or insurance salesman who thought I would start referring them business then and there. It doesn’t work that way,

Trust takes time to develop and it can be broken in an instant. I know of so many circumstances where a provider that was referred business did such a poor job that it caused the referrer business or a producing third party administrator that would take business from the financial advisors that referred them work.

When you refer work to a plan provider and they violate your trust in them, it’s sort of like having a spouse who cheats on you. How can you ever trust them again and how can you repair the damage?  Unlike a cheating spouse, it’s easy to get rid of the provider that stabbed you in the back. However, is it really wise to chuck a provider you devoted so much time to? There is no easy answer. All I can say is that trust is the most important thing you have in other providers and hopefully, you don’t have to make the call if it’s betrayed.

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The Top 10 Wrong Ideas That Plan Sponsors Have About Their Retirement Plans

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

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When you get a call about your Plan, call an ERISA Attorney

It’s unfortunate, but the facts are that most people don’t respond to a complaint until there is a letter from an attorney. Service providers and companies hate correspondence from attorneys because that suggests litigation.

That is why it’s paramount that when a plan sponsor gets correspondence from the Internal Revenue Service or the Department of Labor, that they contact an ERISA attorney. It may be the difference between getting something closed out quickly and something that may result in plan disqualification. Too often, damage happens because a plan sponsor and their plan providers are too slow to seek out the experience and the advice of an ERISA attorney who are trained in working with government auditors as well as proficient in answering auditor requests.

So if you are a plan sponsor or know of one being contacted by the government over their retirement plan, seeking ERISA counsel is one of the first calls you should make.


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Make Sure You Check a Plan Provider’s Credentials

We’ve all made that mistake. We should know better, but when it comes to hiring people, we take their word for it instead of doing 5minutes of detective work.

I have had a lot of work done to my house and my biggest mistake is not evaluating the service provider before they start their job. I hired a waterproofer that did a lousy job and was impossible to get a hold of. 5 minutes of detective work would have shown that they had multiple complaints against them with the County Consumer Affairs Department and that the person who ran the place (his wife was the licensee) was a former podiatrist who lost his medical license for Medicare fraud (which explains why he couldn’t be the licensee).

There was the contractor who claimed to be a member of a highly respected home contracting association and it turns out they weren’t.

Any time I neglected to check up on a contractor I hired to review if there were any complaints or whether they were who they claimed they were, it was on me and I got screwed.

When it comes to being a plan sponsor, you have to answer because you have a higher responsibility than a homeowner because you are responsible for the retirement plan assets of your employees.  The ERISA attorney you met? Make sure they’re a member of the state bar. The third party administrator you know? Make sure they don’t have many complaints and that their principals have clean reputations.

When you meet people in a social setting, there is nothing wrong with taking their word. As a plan sponsor, you can’t afford to because of the liability that goes along.

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