The Rosenbaum Law Firm P.C. Blog

As the time owning my house is coming to an end, my wife and I are embarking on one last project: renovating a patio that should have been replaced when we bought the house 18 years ago.

Trying to not replicate the mistakes of the past, we got a couple of bids and the difference between the pricing was wide. For the price of concrete offered by one bidder, we are getting the pavers my wife wanted. Happy wife, happy life.

When it comes to retirement plan service,  you have a fiduciary duty to pay only reasonable plan expenses. You can’t afford to just pick one provider for a bid. Unlike my patio project, you need to back up the fact that you checked other providers because that’s the only way you can determine whether services are reasonable or not.

In Huang v. TriNet HR III, Inc., the District Court for the Middle District of Florida threw out a case against a multiple-employer plan and rejected the plaintiff’s testimony that the fees were too high in its entirety.

While the defendants used expert testimony of someone who knows something about retirement plan pricing (Steve Swisher), the plaintiffs relied on someone who. Owned a third-party administration firm in the 1990s and had no idea how MEPs are priced.

Whether it’s expert testimony in a case or just someone to help with issues on a plan, pick someone who knows what they’re talking about.

A new study suggests that plan sponsors can increase the rate of automatic enrollment in 401(k) plans without decreasing participation.

The results are based on a new study conducted by Voya Behavioral Finance Institute for Innovation.

It did show that nearly all individuals who enroll in auto-escalation choose to keep the default a 1% escalation.

The results of the study showed that an opportunity exists for employers to increase the default to 2% without significantly decreasing employee participation in the escalation feature of the plan. The higher default escalator of 2% did not meaningfully increase the number of employees who initially declined auto-escalation altogether.

One caveat is that the more aggressive default delays, which led to escalation beginning sooner, did modestly reduce escalation enrollment from 23% to 18%, the research shows.

Paying bills to other plan providers is hard when money is hard to come by. Sometimes it was difficult over the past 13 years when the mortgage was due and some of my clients were too slow to pay.

Relationships with other plan providers mean everything and that includes how you deal with them in paying what you owe. The worst thing to do with plan providers that you owe money to is lie. If times are tough and you can’t make ends meet, be honest. I will say that over the past 13 years, I only was stiffed by one client, a third-party administrator that stiffed other plan providers and their former owner while changing their initial name every 6 months to avoid paying their creditors. Don’t be like that. Make payment plans, beg, and do whatever you can, but just don’t lie and say the check is in the mail when it isn’t.

If you partner with other providers, I think it’s best when decisions are made through a consensus. Just because you make a decision unilaterally, doesn’t mean you should. Everything should be done thoughtfully, with input from the other providers you work with.

Unilateral decisions can work, but usually, they flop. People you work with and partner with, I think would want a say, or at least have some input. I have worked with many partners over the years and the best relationships and decisions were when we were in sync.

A lot of people with a Libertarian streak hate state-mandated IRA programs. Even with my distaste for the government and their idea of funding Social Security with just a lick and a promise (obligatory Aerosmith reference), I like mandated state IRA programs. In the end, I’m a capitalist and it’s opportunity. 117,000 employers have registered with CalSavers. If you are a plan provider that is 117,000 employers that didn’t have a retirement plan, but do now.

These are 117,000 employers that may be interested in what you have to sell, a 401(k) opportunity that could be a stand-alone plan or joining a pooled employer plan. The only way this industry can grow is if more employers offer retirement plans. So even if these employers are drafted into offering a plan, it’s an opportunity for us all.

In Star Wars lore, Order 66 was a secret order by Chancellor/Emperor Palpatine for the clone troopers to kill the Jedi as traitors to the Republic. In the retirement plan space, I jokingly claim that this will be the Order when larger plan providers who have ownership stakes in registered investment advisors, will try to take plans from the advisors who referred them business.

While third-party administrators (TPAs) get larger and own interests in advisory firms, it’s nothing new. We have had producing TPAs in the past who did that, we have had mega-sized mutual fund companies do that as well, stealing business from their very own platform to move it to another of their platforms. It’s nothing new, it just seems newer because of the constant mentions of retirement plan consolidation. As Bill Belichick would say, “Do your job.” If you are an advisor, showcasing that you are an invaluable member of the fiduciary process for the plan sponsor, will make it more difficult for you to be replaced.

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

My latest article for JDSupra.com canoe found here.

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