The Word On The Street On What 401(k) Plan Sponsors May Need

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

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Never leave a bad taste in the mouth of the one who brings you business

I was working with an advisor recently, who had issues with one of those third party administrators (TPAs) I warn people about. Yeah, you know the folks who do payroll as are TPAs on the side.

The problem here was that the TPA promised the advisor they could do certain administrative things for the client and they didn’t. So the advisor was forced to take the business to another TPA to fix all the errors made including making improper allocations based on previous years’ compensation.  The former TPA agreed to pay for the administrative corrections and then it took forever for the new TPA to ever get that payment.

I learned from my good friend and master salesman, Richard Laurita that you never betray or take advantage of those who bring you business. If you do something that makes the advisor uncomfortable to do business with you, they’ll never refer business to you again.

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Get that late 5500 Filed

I used to have this recurring dream that I was back in college and it was my last semester. The dream was that there was this one class that I didn’t attend all semester and the finals were around the corner. Someone pointe doubt that the dream/nightmare was a fear of failing, perhaps they were right.

If I was a plan sponsor and I didn’t have the required Form 5500 filed, I don’t know if I’d sleep at night because that’s a nightmare that can’t go away. The reason why it’s a nightmare is that if it’s not corrected through the Department of Labor (DOL) Voluntary Compliance program and the DOL hits you with a penalty, the penalty for a late filing is $2,063 per day. If I knew my plan didn’t file the Form 5500 because one wasn’t completed, I would rush to call a third party administrator to have it done because you never know when the DOL will send out that letter asking for the filing.

It’s the most avoidable plan error and it’s amazing how many plans don’t file one on time for one reason or another. Then again, how many college students don’t attend a class all semester and show up for the finals?

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Hardship Provisions Will Change

As part of the budget agreement signed By President trump on February 9, some additional provisions have been added including changes to the hardship provisions for retirement plans.

The legislation requires the Internal Revenue Service to change its guidance and allow employees taking hardship distributions from a retirement plan to continue contributing to the plan without a six-month suspension. The revised regulations will apply to plan years beginning after Dec. 31, 2018.

The legislation also changes the rules relating to hardship withdrawals from 401(k) plans to permit employers to extend hardship distributions to amounts not previously permitted (QNEC and QMAC contributions). It also would remove the requirement that forced a participant take a loan before taking a hardship withdrawal. The provision applies to plan years beginning after Dec. 31, 2018.

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New Book Released

My latest book, The Great 401(k) Book Sequel Ever is available on Amazon.com.

The Kindle version can be found here :
https://www.amazon.com/Greatest-401-Book-Sequel-Ever-ebook/dp/B079P51641/ref=sr_1_2?ie=UTF8&qid=1518222173&sr=8-2&keywords=ary+rosenbaum

The paperback copy can be found here:
https://www.amazon.com/Greatest-401-Book-Sequel-Ever/dp/1980234868/ref=sr_1_3?ie=UTF8&qid=1518222173&sr=8-3&keywords=ary+rosenbaum

Not many books can combine discussions about 401(k) plans, movie sequels, the truly vicious people at work, and synagogue politics. It also includes a discussion about rational or irrational decision-making by plan sponsors.

Any plan providers looking for bulk purchasing, speaking engagements, or media appearances, please contact me.

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You only get one chance on the trust issue

Trust is a very important thing to me. If I can’t trust people, I really don’t need them. The reason I can’t trust people is that they have given me reason enough not to trust them.

As a retirement plan provider, you really have one bit ate the trust apple. That means that if you do something that betrays the trust of your client, you’ll never get that trust back. Whether it’s billing issues or not doing something you were entrusted to do or something else, creating a problem that questions your client’s trust in you is eventually going be a major reason why you get fired.

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The one list of TPAs that plan sponsors should ignore

What’s the best hamburger out there? There is a burger fad out there with so many expanding chain and franchised restaurants, so there are many choices out there. I’m sure there are thousands of places better than McDonald’s, but there are more McDonalds restaurants than any burger fast food restaurant. The folks at McDonald’s don’t say they’re the best burger out there, but they may say they’re the most popular. Bigger doesn’t mean better, popular doesn’t mean better.

So when it comes to choosing a third party administrator (TPA), the one list that plan sponsors should ignore is the list that shows the TPAs that are the biggest with most plans and/or most assets under administration. These lists are great for bragging rights, but they’re an awful idea for selecting a TPA. Finding the right TPA is like tailoring a suit, it’s all about fit. Picking a TPA just because they have so many plans and/or assets under administration is just silly.

There are many reasons why you should choose a TPA, just because they’re big isn’t a good enough reason.

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Never Hire Your Friends Or Family As Your Retirement Plan’s Financial Advisor

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

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Plan sponsors need to Google Their TPA’s Principals

I believe in the idea of redemption, that people who make mistakes can atone for them. Maybe that explains why Return of the Jedi is my favorite Star Wars films because Darth Vader was redeemed and brought balance to the Force as that original prophecy proposed. Unfortunately, the Jedi Order was almost destroyed and the Chancellor who was a Sith became the Emperor.

While I believe in redemption, I also believe if someone has done time for drunk driving, you’ll think twice about handing over the keys to your car.  Would you hire a plan provider with possible access to retirement plan assets that was convicted or sanctioned for financial improprieties? I wouldn’t

The whole Vantage Benefits story is alarming and maybe if plan sponsors and advisors would have Googled Jeff Richie, the head of Vantage Benefits, they would have been alarmed. Jeff Richie was sanctioned by the Securities Exchange Commission in 2008 for fraud in connection with the stock another company of his that was providing 401(k) services to the plan sponsors. I think if any plan sponsor and plan provider that would have bothered to do some research, would have thought twice.

In light of the Vantage Benefits situation, I’m alarmed that several of my colleagues in the New York area have advised me of a certain third party administrator (TPA) being used by some of the large insurance company plan providers here the principal of the organization was convicted of check fraud. I’d think twice of any TPA that charge $200 for ERISA 3(16) services on a $400,000 plan, even if the owner wasn’t convicted for a crime (for my 3(16) service, my minimum is $1,000).

I’d advise any plan sponsor to think twice before hiring a plan provider where the leadership has been convicted of a crime and/or civilly sanctioned by a government entity for fraud. What that means is that you should avoid plan providers that have had its day in court before a trier of fact and have been convicted/sanctioned of financial impropriety So that means you shouldn’t attract a scarlet letter to any plan provider that was under investigation without any charges filed or sued civilly.

Sometimes you ask for trouble if you just don’t do something as simple as doing a quick online search of the plan provider you’ve hired or are about to hire.

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More news bout Vantage Benefits

Since the FBI closed down Vantage Benefits on November 1, we haven’t heard much.

Here is an update:

  1. MBA Engineering, Inc filed sued against Vantage Benefits, Jeff Richie and his wife, Wendy Richie, for the $2,269,653.43 that is missing from the MBA Engineering, Inc. Employees 401(k) Plan. The suit alleges that the Defendants falsified pan participant account statements and participant account website information to make it appear that participant account balances were whole and accurate. Unnamed people named DOES 1-10 were sued as well as MBA is trying to identify who is involved in the fraud. From my experience in the Matt Hutcheson disaster (as detailed in my forthcoming book), I expect that further suits will be filed and other plan providers in connection with this matter may be sued as well. Any provider entity that might have accepted an order from Vantage to liquidate and transfer plan assets for corporate and personal use maybe sued as well.
  2. Jeff Richie is still not under arrest. I’ve talked to some of his former employees and even a plan participant in one of the plans where Vantage stole money and everyone is surprised no arrest has been made. A civil lawsuit is easy to file and there might be multiple shots at litigation by multiple plaintiffs. A criminal action allows the prosecutor only one shot at the apple, so expect the Department of Justice and the Department of Labor to act a lot slower than plan sponsors who want to track down plan assets. Again from the Hutcheson case, it took several months for a criminal complaint to be filed and an arrest made. I remember talking to Matt after the media disclosed the allegations against him and civil litigation filed against him. Matt was a little arrogant that he wasn’t under arrest and it wasn’t soon after, that he was arrested for his theft.
  3. A concern for me is that there hasn’t been word as to the full amount of the possible fraud committed against Vantage’s plan sponsor clients. I’m concerned about the liability exposure for plan sponsors who hired Vantage and plan providers that referred Vantage or worked with Vantage in any connection with a transfer of plan assets to Vantage or the Richies.
  4. If this situation is related to the theft of plan assets, I’m interested in whether other Vantage employees were involved in this disaster. If statements and website information were manipulated, assume that other employees might be involved as well. I just remember Bernie Madoff and how it was impossible to keep a Ponzi Scheme running without more help.

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