An Employer’s “Recipe” for having a Great Retirement Plan

My latest article on can be found here.

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Bells and whistles not being used is worse than having no bells and whistles

My wife will admit I am a dutiful husband. For years, I have been forced from sleep to stand online for Black Friday sales. One year, I stood on line at Sports Authority for the 5 am open to buy a treadmill. A treadmill is great exercise equipment as long as it’s being used. Thanks to where it was sitting in our den, it was used primarily to hold clothing and everything else, but used for its intended purpose. The treadmill died during Hurricane Sandy. So I ended up buying an elliptical machine, which is rarely used as well. The point is that when you go through the trouble of having something that’s good for you, it doesn’t mean anything if you don’t use it.

Many plan providers are a little flashy when it comes to the services they offer. They may give you a large binder that details everything the plan sponsor should do as fiduciary. Some may develop investment policy statements (IPS) for their client that reads like a treatise or develop an education policy statement that will lay the plans on how plan participants will be educated for participant direction of plan investments.  The problem is that these things are useless if it’s not being used. Quite honestly, having these apparatuses and not using them is worse than not having them all.

For an example, an IPS is not legally required even though Department of Labor agents do ask plan sponsors if they have them. What is worse: not having one or having one that’s not being used? I would suggest that any bells and whistles that a plan provider offers are far worse than not having those bells and whistles.

So a plan provider that offers something that the competition isn’t offering should make sure the plan sponsors are actually using those bells and whistles.

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Avoid the next big thing in 401(k) Litigation

ERISA litigators need to eat and once they exhausted much of the fee litigation prior to the implementation of fee disclosure, they needed something else to sink their teeth in. Then we got cases regarding using the wrong share classes of mutual funds as a violation of duty of prudence in the Tibble v. Edison case.

There have been cases regarding participants who invest revenue sharing paying funds to subsidize those participants who do not.

Revenue sharing in Tussey v. ABB also took center stage as more and more cases have held plan sponsors to be liable if one of the biggest reasons for selection of plan investments was that those investments produced revenue sharing.

What can a plan provider do? Take care of the threats that you know that may involve litigation or Department of Labor oversight. What is the next big thing? My two cents is plan sponsors who use too many proprietary funds that are managed by their bundled provider. I also think that revenue sharing is still going to be a big issue. A plan sponsor needs to show that picking plan investments weren’t solely based on revenue sharing and because the bundled provider was the fund manager.

I am not trying to create any alarms that are unwarranted; it’s just my advice to you.

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Why An Employer Can And Should Set Up A Retirement Plan Committee

My latest article can be found here.

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The Fallout from Fee Disclosure continues

When I was fresh out of school and started my first job working for a third party administration (TPA), the paralegal that I was working with told me her experience with the retirement plan business that was pre-ERISA. Marge told me that every time there is change in the business (she was talking about the Tax Reform of 1986 in particular), there would be a number of plan providers that will just go out of business after struggling with the change.

That is how I felt about fee disclosure. You could look up some of my views on this blog in 2012 and how I predicted how some businesses would thrive and some would die because of fee disclosure. It was just common sense and my knowledge of business history that any seismic change in an industry will be a boon for some and a disaster for others.

For example according to a firm named NEPC, the median recordkeeping fee for a 401(k) participant was $116 in 2006. In 2013, it was $80 per participant. Technology probably has reduced some costs, but not by $36 a head.

Many big providers sold their business like Hartford, others like Schwab and Great West consolidated their operations. Many small providers merged or sold to competitors

The changes will continue as the fallout from 401(k) fee disclosure will continue.

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As a 401(k) financial advisor, Networking takes time

Being a retirement plan financial advisor is a never-ending battle to maintain your book of business while trying to grow it.

When it comes to networking and social media, I think the way you meet potential clients and potential sources of referrals is to try it as if you were dating, It takes time to develop relationships because relationships require trust and that requires time.

Did you ever succeed in dating by trying to take things quickly, trying to roll up a month’s worth of dates into one?  I don’t know about you, it never worked for me.  When you watch it on film and television, you’re kind of amused about the fellow at the bar with the really cheesy pick up lines and wonder how he ever achieved anything with someone of the opposite sex? But is it that different than the insurance agent I never heard from before who states on a business-networking site: “Lets meet to discuss what we can do together with your clients.”?  Do I know you? Do you think the advisors who referred me my clients will mind?

The greatest relationships that I ever made in this business whether it’s been clients or financial advisors or third party administrators that became great sources of referrals is that it has taken time. It has taken time because both sides need to develop trust and that takes time. In addition, I have never taken a meeting or had a phone call with any advisor or TPA with the idea that I had to sell them on being a client. The reason I have done that is because I’m more interested in developing a long-term relationship instead of a quick score for a legal bill.  If you have a good enough message about your practice, you don’t need a hard sell, the way you handle your practice will sell itself.

I have talked with hundreds of advisors over the years. A few have become clients; more have been sources of referrals. Most have not, but that’s fine because the funny thing about developing relationships is that you may not reap any benefit until several years later when that person you met may recommend you to someone who then recommended you to someone else, who then asked you to help them on a matter that makes them a client. Quite honestly, I have never received a client from someone who stated before I met that they can get me clients. Possibly because they don’t have any clients or more likely that they think that can easily get business from me and my spheres of influence by promising me that.

The point is that you shouldn’t try too hard. That means when it comes to networking with people either in meeting in-person or online, you should take things slow and not try to make a hard sell because are likely going to scare away someone that can be a valued partner to help build your practice or someone that can act as a referral of business.

You don’t need to cut fast to the hoop to score; you just need to get it in the basket.

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Good “Housekeeping” Tips To Minimize A Retirement Plan Sponsor’s Liability

My latest article on can be found here.

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Mid-Term Elections and Being A Plan Sponsor

Whether you vote right or left, the beauty of the mid-term elections was that it is ultimately about accountability. Accountability is the essence of democracy. Many of the Senators defeated in the mid-term elections were from the Class of 2008, the year of hope, change, and President Obama. They were rock stars. Now they are has beens. The beauty of politics is that you can be the rising star one-year and after being considered by a poor office holder by the electorate, you’re toast.

Politicians can’t rest on their laurels and the same can be said about plan sponsors. Being a plan sponsor needs constant vigilance as well. Having a great 401(k) plan one year means nothing when the plan goes bad because of plan fiduciary neglect. A plan sponsor can never rest because Form 5500s still need to be filed, plan participants need to be educated, and plan providers still need to be reviewed. There is no time for a plan sponsor to have a victory lap when their Brightscope score hits high. It’s a constant battle because the duty of a plan fiduciary is so high. There is no room for complacency as a plan sponsor and there is no room to coast on past successes. At least when a Senator is defeated, they will likely have a future in lobbying. A plan sponsor that is knocked off through a plan audit or litigation isn’t so lucky.

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Plan participation is up, but the problems remain

The percentage of workers who participate in a retirement plan increased in 2013 for the first time since 2010, according to a report by the nonpartisan Employee Benefit Research Institute.

Participation rose to 40.8 percent, up from 39.7 percent in 2010. The number of workers participating rose to 64.2 million last year, which is the highest number since 2007.

Let’s not uncork the champagne bottles, this is still a dreadfully low number. If 40.8% participate, that means 59.2% do not. The reason for this pathetic number is because 30 percent of eligible workers don’t participate in their employers’ 401(k) plans.

What can we do about it? A plan sponsor should add an automatic enrollment feature, offer more of an employer contribution, offer investment advice, or perhaps improving the plan providers where improvement is needed.

We have a retirement plan crisis in this country and this survey just proves the point.

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Advisors Advantage

My latest newsletter geared towards retirement plan providers can be found here.

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