Keep it Simple, Stupid

When it comes to drafting plan documents, I always say K.I.S.S.: keep it simple, stupid.

Any intricate plan design features such as weird matching allocations and out of the box definitions of compensation is a great way of having this administered in a wrong fashion. Many years ago, when I was working for a third party administrator (TPA), I was given a proposed amendment drafted by an outside ERISA attorney. I told our conversion specialist that while I could understand what the attorney wanted to do with the matching contribution formula, I wished him good luck on having it administered that way. While there are many times, when you need out of the box provisions, I would avoid it if you can.

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Maybe a 401(k) Salary Deferral Procedure should be a thing?

I recently go through a harrowing Department of Labor (DOL) audit over the late deposit of salary deferrals. What was the problem for the client was multiple locations and multiple payroll providers and previous third-party administrators (TPAs) that didn’t alert the client that this was a problem.

As part of resolving this issue with the DOL auditor, I suggested a salary deferral procedure, a written policy that details the issues regarding late deposits and how the plan sponsor was supposed to make sure it didn’t happen again and what steps they would take if it did.

It’s not a masterpiece, but it gives a good explanation of why late deferrals is a big thing and the steps that the employer to make sure this isn’t a recurring issue.

If interested in this policy for your plan sponsor clients, you know where to reach me.

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HSAs should be part of an advisor’s business

Providing advisory help to a 401(k) plan is a great part of a financial advisor’s business because it can grow to ancillary lines of business such as working with the decision makers of the plan and their money.

One great ancillary business that too many advisors are avoiding is health savings accounts. Alliance Benefits Group of Illinois had a great presentation about that at That 401(k) Conference at Wrigley Field in September. Assets in these accounts can be invested and they can grow for the plan participants, so it’s a no-brainer for advisors to pursue that business and inquire whether these accounts are a great idea for their clients.

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The Rosenbaum Law Firm Review

My latest newsletter can be found here.

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The Eventual Comeback Of MEPs

To read the article, please click here.

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Connecting with plan participants

You can be a great financial advisor and have a terrific way of communicating with plan sponsor clients, but that doesn’t mean you can effectively communicate with plan participants.

Quite honestly, most advisors have a tough time dealing with it and I think the biggest problem is making a connection with them because most advisors don’t talk to plan participants on a level they can understand.  It’s a problem because increased participation by plan participants on the salary deferral component of the plan is a great metric to show plan sponsors that advisors are doing their job well.

One great way is to liven up the enrollment meetings because most are alike, they’re as exciting as my Secured Transactions class in law school.  Introduce trivia contests and award prizes to plan participants who engage in the enrollment meeting. Doing something that is unique will be memorable for plan participants and get them more engaged.

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Oregon opens up small business plan for individuals

Oregon announced that their OregonSaves retirement program will now allow individuals, such as self-employed or gig economy workers, to join and start participating in this program for small employers.

OregonSaves began with a pilot program in July 2017 and is expanding statewide.

Since the program launched in November 2017, workers have set aside $9 million towards retirement. Individuals can now join the 45,000 employees that have enrolled through an employer.

While I’m all for plans that increase participation to employees who couldn’t get retirement plan coverage from their employer on their own, I still think that these programs won’t become popular. When it comes to government and money, I still believe that people have a libertarian streak and don’t want government involved with their retirement savings especially with the jaded views we have about Social Security. Just look at the numbers, OregonSaves has 45,000 participants with $9 million in assets. That is $200 per participant, hardly a win to reduce the retirement plan gap.

As I have always stated, it will be multiple employer plans (MEPs) created by associations and plan providers that will be able to effectively increase participation to employees that wouldn’t have been covered under a single employer plan, just my two cents.

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Vanguard to offer HSAs, interest will be increased

As I’ve been saying for a while, advisors need to offer health savings accounts (HSAs) to the plan sponsors clients they have. They can make money on increased assets and their clients get to offer a tremendous employee benefit.

Many plan providers understand that and that’s why they are offering that benefit to the list of the services they provide. Vanguard just announced a partnership with HealthEquity, the nation’s largest independent HSA custodian, to provide plan sponsor clients with a new service integrating health and wealth planning for retirement.

If you’re an advisor, why should you offer HSAs to clients? It’s a tax dream for employees. Participants investing in an HSA enjoy several benefits, including a triple tax advantage: 1) contributions are made pre-tax or are tax-deductible; 2) earnings and interest accumulate tax-free; and 3) withdrawals for qualified medical expenses are also non-taxed. After age 65, account owners can make withdrawals for any expense without a penalty; however, withdrawals used for anything other than medical expenses are taxed as income.

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When a 401(k) Plan Sponsor May Have To Fire Their TPA

My latest article for can be found here.

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That Sal The Stockbroker Event

The idea of That 401(k) Conference is based on creating memorable events and it probably can trace itself to the time I brought Sal The Stockbroker for a comedy show as Vice President of my old synagogue.

My old synagogue was like many synagogues who would always run the same old fundraising events like a journal dinner and a Monte Carlo event. They must have been strong environmentalists because they kept on recycling tired old events that would only be attractive to its members. We also had a fundraising chairman who wouldn’t publicize the event until 2 weeks before the event would take place which would depress attendance.

I wanted a fundraising event that would attract non-members because their money is just as good as members’ money and since we only had a solid core of 50 people who regularly attended events, I wanted something unique that would have broad appeal to the outside.

Since a fellow member and a good friend worked on the Howard Stern Show, I inquired whether he could get Sal to appear at a comedy show. Sal agreed and I ran the event and allowed minimal involvement from the fundraising chairman to make sure he didn’t ruin the event. The only drawbacks that I had to deal with are that I had opposition to a $50 charge (I agreed to the suggested $40) and I had to cut in our caterer in for $12 ahead. The event was a raging success as we packed in around 200 people with most coming from the outside community. A few weeks back, a current synagogue trustee lamented that he wished we’d have fundraisers like the Sal show again. I told him that they still think it’s 1978 and run events that cater to a select few.

While That 401(k) Conference is a growing endeavor, what I like about is that it’s something unique for plan advisors. You can always offer a rubber chicken from the local Sheraton, but offering a memorable event for either plan sponsors or plan providers goes a long way. Hopefully, you can join me at the next That 401(k) Conference and That 401(k) Plan Sponsor Forum soon.

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