Comments for The Rosenbaum Law Firm P.C. Blog http://therosenbaumlawfirm.com/blog Wed, 09 May 2012 20:40:11 +0000 hourly 1 http://wordpress.org/?v=3.3.1 Comment on The battle to cure 401(k) participant apathy by Gwenn Paness http://therosenbaumlawfirm.com/blog/?p=977#comment-24628 Gwenn Paness Wed, 09 May 2012 20:40:11 +0000 http://therosenbaumlawfirm.com/blog/?p=977#comment-24628 Ary, great article on participant apathy! Another old joke -- "I used to be apathetic, but now I don't care." On a more serious note, Vanguard did a study back in 2007 that showed plans offering 401(k) loans had a participation rate of up to 10% higher than those that did not. The idea is that participants can still be encouraged to save money for retirement, with the knowledge that if they need to access their funds in the event of an emergency, they can do so. The interest rate is almost always lower than an outside source, such as a bank or credit card company, and the loan interest is paid back directly into the participant's core investment account(s). So in effect, they are borrowing from themselves. One may argue that plan sponsors do not want to be in the loan business. That is exactly why my company, MyPlanLoan, exists. We handle full administration and repayment of participant loans, freeing the plan sponsor's HR staff to do more profit- generating functions for the company. We also proactively monitor and educate participants who fall behind in payments to help decrease the risk of default. Finally, recordkeepers now have an effective solution to market to potential new plans that both simplifies administration of multiple loans and serves as an effective client retention tool. With nearly 90% of all plans now offering a loan provision, perhaps educating participants on the accessibility of these funds in a time of need is the better way to go. Just food for thought. Ary, great article on participant apathy! Another old joke — “I used to be apathetic, but now I don’t care.”
On a more serious note, Vanguard did a study back in 2007 that showed plans offering 401(k) loans had a participation rate of up to 10% higher than those that did not. The idea is that participants can still be encouraged to save money for retirement, with the knowledge that if they need to access their funds in the event of an emergency, they can do so. The interest rate is almost always lower than an outside source, such as a bank or credit card company, and the loan interest is paid back directly into the participant’s core investment account(s). So in effect, they are borrowing from themselves.
One may argue that plan sponsors do not want to be in the loan business. That is exactly why my company, MyPlanLoan, exists. We handle full administration and repayment of participant loans, freeing the plan sponsor’s HR staff to do more profit- generating functions for the company. We also proactively monitor and educate participants who fall behind in payments to help decrease the risk of default. Finally, recordkeepers now have an effective solution to market to potential new plans that both simplifies administration of multiple loans and serves as an effective client retention tool.
With nearly 90% of all plans now offering a loan provision, perhaps educating participants on the accessibility of these funds in a time of need is the better way to go.
Just food for thought.

]]> Comment on The battle to cure 401(k) participant apathy by Jack http://therosenbaumlawfirm.com/blog/?p=977#comment-24620 Jack Wed, 09 May 2012 15:03:39 +0000 http://therosenbaumlawfirm.com/blog/?p=977#comment-24620 In my opinion some simple steps would be: no early admission for age 60, an automatically admission to the pension scheme (default option) and opting out. Eliminate the individual character of this by accommodating a professional asset manager. The apathy of companies (sponsor) on pension has the opposite effect. When they take this seriously, it would give them a chance to compete with each other. This allows companies to persuade employees to come work for them, not only by good direct remuneration, but also with a good pension plan. In my opinion some simple steps would be: no early admission for age 60, an automatically admission to the pension scheme (default option) and opting out. Eliminate the individual character of this by accommodating a professional asset manager. The apathy of companies (sponsor) on pension has the opposite effect. When they take this seriously, it would give them a chance to compete with each other. This allows companies to persuade employees to come work for them, not only by good direct remuneration, but also with a good pension plan.

]]> Comment on The Value of a Good Retirement Plan Financial Advisor by retirement plan consultants http://therosenbaumlawfirm.com/blog/?p=965#comment-24504 retirement plan consultants Sat, 05 May 2012 09:05:48 +0000 http://therosenbaumlawfirm.com/blog/?p=965#comment-24504 When a husband retired from job pension was covered by the Ohio State teachers retirement system. elected to take less than 100 percent of his pension and leave half to his wife as survivors benefits. Since that time the wife has worked the required years and retired under the same pension plan. My question is can he can he stop the plan for survivors benefits and start to get 100 percent of his pension? If they divorce would survivors benefits continue? When a husband retired from job pension was covered by the Ohio State teachers retirement system. elected to take less than 100 percent of his pension and leave half to his wife as survivors benefits. Since that time the wife has worked the required years and retired under the same pension plan.
My question is can he can he stop the plan for survivors benefits and start to get 100 percent of his pension? If they divorce would survivors benefits continue?

]]> Comment on Congress takes a look at the 401(k) for money by David Rigby http://therosenbaumlawfirm.com/blog/?p=960#comment-24185 David Rigby Tue, 24 Apr 2012 19:01:39 +0000 http://therosenbaumlawfirm.com/blog/?p=960#comment-24185 A short-sighted gimmick, from Congress? I'm shocked, shocked! A short-sighted gimmick, from Congress? I’m shocked, shocked!

]]> Comment on The Effect of ERISA Litigation by Jan Schwartz http://therosenbaumlawfirm.com/blog/?p=956#comment-24145 Jan Schwartz Mon, 23 Apr 2012 13:08:50 +0000 http://therosenbaumlawfirm.com/blog/?p=956#comment-24145 What about excessive life insurance premium rates. Can a life insurance company be sued or forced to divulge the determination of those premium rates. I do not think life insurance rates are covered under ERISA but there must be some means of enforcing this by some governmental agency. Thanks. What about excessive life insurance premium rates.
Can a life insurance company be sued or forced to divulge the determination of those
premium rates.
I do not think life insurance rates are covered under ERISA but there must be
some means of enforcing this by some governmental agency.
Thanks.

]]> Comment on Plan Provisions that I’m Not a Big Fan of by Larry Starr http://therosenbaumlawfirm.com/blog/?p=953#comment-24082 Larry Starr Sat, 21 Apr 2012 17:47:20 +0000 http://therosenbaumlawfirm.com/blog/?p=953#comment-24082 Lastly, Roths. I am NOT a fan of Roths and we have exactly one plan that has Roths as an option. I have a series of articles and pieces (some of which I wrote and were published in national journals) which explains why in great detail (more than I would go into there). If anyone wants that stuff, send me an email at larrystarr@qpc-inc.com. Lastly, Roths. I am NOT a fan of Roths and we have exactly one plan that has Roths as an option. I have a series of articles and pieces (some of which I wrote and were published in national journals) which explains why in great detail (more than I would go into there). If anyone wants that stuff, send me an email at larrystarr@qpc-inc.com.

]]> Comment on The Effect of ERISA Litigation by Joe Gordon http://therosenbaumlawfirm.com/blog/?p=956#comment-24080 Joe Gordon Sat, 21 Apr 2012 16:30:23 +0000 http://therosenbaumlawfirm.com/blog/?p=956#comment-24080 In the early 90's current and former employees of First Union National Bank, Charlotte, NC, later changing its name to Wachovia, to protect the guilty, and then continuing with stupidity to buy Golden West at the top for $26 billion in cash, blowing up the company for good, sued their employer for screwing them over with home made funds on their 401(k) menu, which under performed by a long shot, making excessive bank profits at employees' expense! They sued under 404(c) et al... and won but lost...hundreds of millions of lost returns were sabotaged by big gun lawyers for the defendent, leaving a $26 million dollar settlement of which legal swalloed $8 million....Where was the DOL and its unlimited resources? In the early 90′s current and former employees of First Union National Bank, Charlotte, NC, later changing its name to Wachovia, to protect the guilty, and then continuing with stupidity to buy Golden West at the top for $26 billion in cash, blowing up the company for good, sued their employer for screwing them over with home made funds on their 401(k) menu, which under performed by a long shot, making excessive bank profits at employees’ expense! They sued under 404(c) et al… and won but lost…hundreds of millions of lost returns were sabotaged by big gun lawyers for the defendent, leaving a $26 million dollar settlement of which legal swalloed $8 million….Where was the DOL and its unlimited resources?

]]> Comment on MEPs: The Rumors, The Facts, and Buying in Bulk by Alan Croft http://therosenbaumlawfirm.com/blog/?p=597#comment-24063 Alan Croft Sat, 21 Apr 2012 01:28:45 +0000 http://therosenbaumlawfirm.com/blog/?p=597#comment-24063 The decision to join a MEP is a settlor's decision, not a fiduciary decision. It is possible for a MEP to completely divest a participating employer of fiduciary responsibility. The decision to join a MEP is a settlor’s decision, not a fiduciary decision. It is possible for a MEP to completely divest a participating employer of fiduciary responsibility.

]]> Comment on Plan Provisions that I’m Not a Big Fan of by Nora http://therosenbaumlawfirm.com/blog/?p=953#comment-24021 Nora Thu, 19 Apr 2012 19:00:47 +0000 http://therosenbaumlawfirm.com/blog/?p=953#comment-24021 Ary and Larry, The reason that plans are set up on a fiscal year is to coincide with the employer's (plan sponsor's) corporate fiscal year. It is easier for the employer to calculate and take a tax deduction for retirement plan contributions if the plan and corporate fiscal years are the same. The IRS explains it in Revenue Ruling 90-105. So while it may not be easy to calculate the individual participant's 402(g) limit in an off-calendar year plan, there is a basis for setting up a plan this way. The deduction has to relate to when the compensation that it is based upon is earned, and the IRS can impose penalties for improper deductions. Ary and Larry, The reason that plans are set up on a fiscal year is to coincide with the employer’s (plan sponsor’s) corporate fiscal year. It is easier for the employer to calculate and take a tax deduction for retirement plan contributions if the plan and corporate fiscal years are the same. The IRS explains it in Revenue Ruling 90-105. So while it may not be easy to calculate the individual participant’s 402(g) limit in an off-calendar year plan, there is a basis for setting up a plan this way. The deduction has to relate to when the compensation that it is based upon is earned, and the IRS can impose penalties for improper deductions.

]]> Comment on Plan Provisions that I’m Not a Big Fan of by Larry Starr http://therosenbaumlawfirm.com/blog/?p=953#comment-24009 Larry Starr Thu, 19 Apr 2012 14:59:28 +0000 http://therosenbaumlawfirm.com/blog/?p=953#comment-24009 Item 2. We agree (mostly) here. We always have an in-service withdrawal allowed at NRA. We normally do not want an in-service withdrawal earlier than that date because we don't want employees taking the money before they retire, unless they get to NRA. In some cases, usually for unusual circumstances for a given long service employee where the objective is to SPECIFICALLY benefit this individual, we will amend to have an earlier in-service date, but it is rare. We certainly don't do it on a wholesale basis. Our plans are NOT mostly salary deferrals; most rank in file employees defer little and their employer contributions (safe harbor or, more likely, gateway contributions) will make up the biggest part of their account. Item 3: We agree completely. In fact, I was the IRS consultant who developed the presentation for them on the problems with "springing cash values" which led to the crackdown and the lawsuits and the penalties and all that horrible stuff for so many clients who were taken advantage of. I actually go a little further; there is almost NO reason to ever have life insurance inside a DB plan (and I made my living from the sales of life insurance for the initial years of my career). Item 2. We agree (mostly) here. We always have an in-service withdrawal allowed at NRA. We normally do not want an in-service withdrawal earlier than that date because we don’t want employees taking the money before they retire, unless they get to NRA. In some cases, usually for unusual circumstances for a given long service employee where the objective is to SPECIFICALLY benefit this individual, we will amend to have an earlier in-service date, but it is rare. We certainly don’t do it on a wholesale basis. Our plans are NOT mostly salary deferrals; most rank in file employees defer little and their employer contributions (safe harbor or, more likely, gateway contributions) will make up the biggest part of their account.

Item 3: We agree completely. In fact, I was the IRS consultant who developed the presentation for them on the problems with “springing cash values” which led to the crackdown and the lawsuits and the penalties and all that horrible stuff for so many clients who were taken advantage of. I actually go a little further; there is almost NO reason to ever have life insurance inside a DB plan (and I made my living from the sales of life insurance for the initial years of my career).

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