The Rosenbaum Law Firm Review

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Why a Plan Sponsor Shold Seek Out a Retirement Plan “Dentist”

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Advertising won’t fix this

Over the years, I worked with many organizations starting back with student political organizations and the school paper at Stony Brook. This includes actual businesses, civic and religious organizations. Many of these businesses and organizations thought that advertising was the be all and end all in getting new business for these companies and members for these organizations. I even designed and wrote copy for these ads.

The problem with advertising is that it’s not a be all and end all to help a business that’s struggling or an organization that wants members. Advertising can never fix what troubles many businesses and organizations and that’s culture.

If you’re a business with a culture of poor customer service, advertising won’t fix that. If you’re a civic organization and you run it like an excusive clique while not interacting with new members, advertising won’t fix it.

As a retirement plan provider, you need to identify the issues as to why business isn’t growing because advertising may help, but it wont fix the problems that might ail your organization.

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The DOL Script

I had a client who had been undergoing a Department of Labor (DOL) audit. Their mistake? Years ago, a former participant asked for a distribution from this trustee directed profit sharing plan (so no 401(k)) and my client failed to respond. There was no second request as the participant contacted the DOL.

The plan is small potatoes; maybe $700,000 in assets and the employer can’t make employer contributions since the economy downturn a few years back.

The DOL auditor conducted an interview with the client. I sat in on the call without alerting my presence because the last thing I wanted to do is let the DOL agent be alarmed that ERISA counsel was retained. The agent sounded so young and the last thing I wanted to do was scare her.

The interview basically was a script, she even asked questions that only pertained to a 401(k) and my client alerted that the plan had no salary deferrals. The script sounded like one of my articles (without the cultural allusions to Caddyshack, Airplane!, and The Godfather). The DOL agent wanted to know if the plan had an investment policy statement, whether there was a financial advisor on the plan, whether that advisor is in contact, and whether there is a process to review the advisor’s work. Additional questions were about the third party administrator, where there was a contract with them, and fee disclosure. Thankfully, the plan sponsor was able to give the right answers and the audit concluded quickly.

The lesson here is that whether the plan is audited by the DOL because of a complaint or something random, a plan sponsors needs to have a well run retirement plan so they could give the DOL agent the correct answers they are looking for. Better have a plan that is well run prior to a DOL audit, it’s less costly that way.


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It Happened, It Happened: Small 401(k) Plan Sued

I love boxing and one of my favorite fights is when George Foreman shocked the world and knocked out Michael Moorer to become heavyweight champion at age 45. Jim Lampley doing the HBO broadcast proclaimed: “it happened! It happened!”

When the first big lawsuits started going against some large 401(k) plans, naysayers like this fellow on LinkedIn named Elmer said that talking about fees and fiduciary issues to small to medium sized 401(k) plan is meaningless because small to medium sized 401(k) plans don’t get sued.

I always said that just because small to medium sized plans weren’t sued doesn’t mean that they won’t be sued in the future.

Well, it happened, it happened.

A new class-action lawsuit was filed in federal court in Minnesota that targets excessive 401(k) fees in a $9 million plan. The suit, Damberg v, LaMettry’s Collision Inc., claims that plan fiduciaries breached their duties under ERISA for allowing excessive fees to be charged for plan investments, record keeping, and administration.

What does it mean? It means that the threat that financial advisors and ERISA attorneys like me having been saying for years is finally a reality, small plans can be sued.

If you have a small to medium sized 401(k) plan or know someone that does, maybe it’s time to have a discussion about plan fees if a discussion hasn’t taken place before.

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Meaningless Plan Sponsor Surveys

There was a new 401(k) plan sponsor on which providers are associated with being a “good value for the money”.

Providers Most Associated with “Good Value for the Money”

Among all plan sponsors

1   Empower Retirement

2   Ascensus

3   Fidelity Investments

4   Betterment

5   OneAmerica

6   Vanguard

7   Paychex

8   American Funds

9   ADP Retirement Services

10 Wells Fargo

Source: Market Strategies International: Cogent Reports™, Retirement Planscape: May 2016

I think most of these providers are actually good, but did you see what I see? The two biggest payroll providers made the list. What does that tell you? Plan sponsors may know about paying low fees, but they might not really understand good value. These payroll providers charge a reasonable fee, but their lack of attention to compliance testing details doesn’t make them a good value when errors are discovered and have to be corrected.

Surveys are a nice thing, but when it comes to judging whether a 401(k) provider is any good, most of the time it’s the plan sponsor that has so little information in order to make an informed decision.  Would you want an opinion from the one entity that knows the least about 401(k) plans? It’s like asking a vegan for their opinion on the best steakhouse.

So I think surveys like this are kind of meaningless because you can write a book on what plan sponsors don’t know about their plan providers.

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Just Say Sorry

I worked for someone once who I thought was the biggest pain in the rear end and I think when I got older and started my own business, I finally understood where he was coming from.

When I work on my own and something doesn’t get done, it’s all on me. When I worked for law firms and especially third party administrators (TPA), there are times when you have to rely on others and when they don’t get what you need done, you can’t get your stuff done.  When my boss asked me why I didn’t accomplish something or if I did something wrong based on the information provided, he didn’t want to hear any type of excuse. He just wanted me to acknowledge that I did wrong without making any excuse even if they were valid. I once drafted a defined benefit plan document 5-7 times because the actuary and the client couldn’t handle as to what the plan was supposed to say rather than how they thought should be administered. The fact that the actuary had no clue how he administered the plan didn’t change the fact that the client was disappointed.

The same thing can be said about clients. They don’t want to hear excuses; they just want to hear that you’re sorry. When you’re on the phone with a government agency and they haven’t acted on something for you, you don’t want to hear from the person you’re complaining to that they’re understaffed. If you’re complaining about the work done for you, you don’t want to feel that the person who was supposed to get the work done thinks your concern is silly by responding LOL to your complaint.

Sorry is the hardest word sometimes because people think sorry equals guilt or admission of liability. It isn’t. I find it a great method to defuse a situation. There are times when I failed to get something done because I was ill or flooded with work and I said I was sorry because I didn’t meet the client’s expectation, It happens, thankfully not so much. The sorry went a long way into nipping any remaining anger with my failure to get something done.

I have seen families destroyed and business partnerships disintegrated just because someone put too much weight in what saying sorry meant. Saying sorry doesn’t mean someone has something over you or that you’re going to have say sorry many more times, it’s just a great way to communicate with someone who is disappointed in you. It helps healing the disappointment they had.

I’m sorry you had to read this, but it’s something I thought you should read.


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The Bottom Line On What Retirement Plan Sponsors Need To Do

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You can say no

I always believe that regardless of whether it’s business or in regular day-to-day life, that you can’t be everything for everybody. Being honest with that is only half the battle.

A lot of times, I met folks who are interested in starting a registered investment advisory (RIA) firm.  I get calls for my insight on the retirement plan business, as well as my work in drafting advisory agreements for RIA firms and their retirement plan clients to comply with the fee disclosure regulations (which I do for $1,250 on a flat fee basis, cheap plug) here.  I also get asked  on whether I could work on their RIA registration or whether they should use one of those businesses that only deal with RIA set ups and registration. Looking at my experience in doing that and comparing myself to these businesses, I politely tell them that these firms would be a better fit for their RIA registration. It’s not that I couldn’t do the work; it’s just that the fees and length of time in doing the work is probably better by using a business that does nothing but RIA registrations. Perhaps these new RIAs will be a client of mine, perhaps not, but at least I was honest with them.  Again, you can’t be everything for everybody.

I have a friend of mine who works for a great third party administration (TPA) firm in the Northeast. Only problem is that when it comes to smaller plans, the fees are high. Nothing wrong with that, except if you are a smaller plan and were dead set on getting this TPA to handle your plan. Anyway, this salesperson met one of the accountants he was familiar with. The accountant had a lot of opportunity in single employee, defined benefit plans. With a $4,000 minimum for the actuarial work, the salesperson told the accountant that they were better off finding another firm for these plans at less than half what his minimum fee was. Again, you can’t be everything for everybody.

Contrast this with a case at my old TPA. We had a 401(k) plan where the human resources director hated us from day one because we wouldn’t do the work she received from the previous TPA she liked. She was a problem from Day 1, but we took the case because we had a great relationship with a southern RIA firm. So this client was a problem from Day 1, but they seemed to be interested in changing the plan by making it a K-SOP, basically adding an employer stock ownership feature (ESOP) to it.  The client’s advisors asked me about our experience with it and I was honest, I said we had a couple of those cases. Our lack of experience showed up in some of the presentations to the client (of which I was not invited to attend). Story cut short, our lack of knowledge was exposed and not only did we lose the client, the RIA who referred us the client lost the client as well.

Regardless of whether it’s a TPA, RIA, and an ERISA attorney, you know you found an honest provider when they basically tell you that they can’t handle your plan because the plan is not a right fit for their book of business. As a plan provider, you also need to be honest and forthcoming when you can’t do the work. Know your limits and let the potential clients know what they are.


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Avoid the proverbial “Shrugging of the Shoulders”

One of my pet peeves out there is when you give a list of complaints to a business or an organization and they give the proverbial “shrug of the shoulders”. The “proverbial shrug” is basically the business or the organization telling you that they aren’t going to merit a discussion of your complaints because like what Jeff Probst tells losing reward challenge participants on Survivor, they have nothing for you.

I always say that everything in business is about communication because it’s a connection business.  Having empathy for clients who aren’t happy with your service goes a long way. Saying that you understand their complaints and that you will try better the next time goes a long way.

Taking the path that apologizing in any way possible is like admitting to a criminal act is only going to exacerbate the tension with the client. Whether the client’s gripes are justified or not (and many times they aren’t because it may contravene the law), they want to be heard.

For example, a few weeks back, I had one of my ERISA §3(16) client through my administration service, Austin 3(16) Fiduciary Limited (cheap plug) question what I did for my fee. I apologized and said that I should be more upfront and tell them everything I did for those 3 basis points. I took responsibility in failing to properly communicate with them and they came away happy knowing that I did everything that I promised per our contract. Taking the approach that I have more important things to do or that they could have communicated with me would only have exacerbated the issue.

People sometimes complain and all they want is to be heard and acknowledged, they don’t even want an apology. Shrugging your shoulders isn’t the way to go.

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