The Rosenbaum Law Firm P.C. Blog

When working with other plan providers, trust is the biggest underpinning. Without it, you have nothing else. If you can’t trust the plan provider you’re working with, then why are you in business with them?

Rich Laurita is someone I have talked about for the past 13 years and he was the greatest third-party administration (TPA) salesman I have ever known. I joked he couldn’t spell 401(k), but he knew how to work with people and he knew how to cultivate trust with advisors when the TPA we worked at, had its own affiliated registered investment advisory firm. It was to the point that if one of our 401(k) plan sponsor clients would fire the advisor that referred Rich to the business, Rich would feel the need to be loyal and fire the client.

Trust is such a big deal for me in business and life. I have a wife who I adore and trust implicitly because, in 22 years, she’s never lied to me. I have had great relationships with plan providers because they’ve never lied to me and treated me with enough respect. As someone scarred by trust issues as a child and younger adult, I always say that if I can’t trust you, I don’t need you.

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

While most 401(k) plans don’t have account balances, the shuttering of Silicon Valley Bank and Signature Bank is a pause for concern. While there might be some pension plans that could have been affected by the failures of these banks, it just hits the point home that plan sponsors always need to be aware and vigilant.

Plan sponsors need to know where they have accounts and the protections these accounts have.

As more and more employees are deferring on a Roth after-tax basis, there will be more errors on whether the contributions are made after-tax or pro-tax and vice versa. Changing Roth to pre-tax and ore-tax to Roth is a giant accounting headache. It’s correcting an incorrect payroll issue, that will also require a corrected W2 if the change is made after the issue of one.

Plan providers and plan sponsors need to focus on whether deferrals are made pre-tax or post-tax and administer it that way. Otherwise, more mistakes will be made and the fix isn’t fun and is labor intensive.

T. Rowe Price published the latest findings of its annual Retirement Savings and Spending study, which found women lag far behind men in terms of retirement contributions, savings, and confidence.

The median 401(k) account balance for women was 65% lower compared to men. While women are saving less, there were no significant gaps in access to retirement plans between men and women.

Some contributing factors to the savings gap likely includes:

• National income averages reflect that women typically earn less than men
• Women are more likely to have shorter job tenures compared to men (median of six versus eight years)
• More women than men held debt across most of the categories offered in the survey, including credit card and personal loan debt, with a staggering disparity in student load debt in particular. According to the study, 23% of women and 14% of men reported student loan debt – a difference of 60%

Transamerica announced that it’s partnering with Cetera Financial Group to launch a new pooled employer plan (PEP), the Cetera Advantage(k) GPS. The PEP is designed for small and midsize businesses and will be available only through Cetera-affiliated advisors.

Transamerica will serve as the record keeper for the plan, while Cetera Retirement Plan Specialists, a third-party administrator owned by Cetera, will serve as the pooled employer plan.

CAPTRUST announced its purchase of Monroe Vos Consulting, a Houston-based registered investment advisor (RIA) with $5.8 billion in assets.

Monroe Vos provides advisory services for retirement plan sponsors, endowments, and foundations and provides wealth management services to high-net-worth individuals and family offices. The firm was founded in 1994 with a second office in Birmingham, Alabama. The firm will bring its entire team of 17 members to CAPTRUST, according to a release on the deal.

401(k) participants may be able to invest part of their 401(k) account balance directly into the CoinDesk Market Select Index (CMIS) under an arrangement by ForUsAll and CoinDesk Inc.

By expanding the investment options to include the CMIS, 401(k) participants will now be able to invest in its 28 underlying index coins. The CMIS includes better-known cryptocurrencies such as bitcoin, Ethereum, and litecoin as well as many lesser-known coins. While Crypto, including Bitcoin, have rebounded, they are well off their highs and the Department of Labor still is against their use in 401(k) plans.

The first time I heard the word Schnorrer, I was 7 years old and my parents took me on a trip to Mystic, Connecticut. During those days, the Connecticut Turnpike had eight toll booths from Greenwich to Mystic. It felt that every 10 miles, some toll collector was looking for a quarter. So my mother said, Connecticut is a bunch of schnorrers.

Schnorrer is a Yiddish term meaning “beggar” or “sponger”. The English usage of the word denotes a sly chiseler who will get money out of another any way he can, often through an air of entitlement. For me, a Schnorrer is essentially a cheapskate.

When it comes to retirement plans, a retirement plan sponsor or a retirement plan provider shouldn’t be a schnorrer.

A retirement plan sponsor who is a schnorrer is one who selects the lowest cost third party administration (TPA) like a payroll provider and doesn’t care that the administration of their plan is done properly or not. Plan costs should always be a consideration, but so should proper administration is a greater consideration.

For retirement plan providers who are schnorrers, I can remember my old TPA. As a producing TPA with its own RIA practice, we had clients around the country. We did charge a hefty RIA fee and then the managing director of the Firm who ran the day-to-day operation (the biggest schnorrer I ever met) started charging for travel expenses for our client relationship managers to visit clients in assisting them with the fiduciary process. That went over like a led zeppelin. I worked for a law firm partner who had clients around the country and he was insistent that he would never charge his clients for his travel time because he felt that the client would simply want to hire counsel than was more local than to pay him for traveling.

When I left the TPA in 2007, I was replaced by 2 attorneys and a paralegal. Like Lou in Caddyshack who had to raise the price of Coke, because he was losing at the track, my old TPA had to raise plan document fees because they were losing money by hiring this larger staff to replace me. Plan document fees went up by 25% and they started charging $150 for annual safe harbor notices. $150 to simply search and replace the year in a Word document for $150, this chiseling offended many clients.

Clients don’t want to be chiseled. They would rather play a higher flat fee than get inundated by petty charges.

One of the things I hated most about law firms was their chiseling of clients. It was enough that clients were charged by the hour, which only led to possible abuses of overbilling because law firms stress billable hours more than quality of service. So it’s not enough to overcharge clients for legal services, but the law firms that I was associated with also charged clients for typical office charges like FedEx or copies. When I buy a bagel with olive cream cheese at my favorite bagel store, do they charge me for napkins or a plastic knife? There is a cost for any business to do business, but does a law firm have to pass every nickel in costs to their client?

That is why my practice uses a flat fee; clients should have a fee that they have cost certainty over and with the knowledge that I am not chiseling them. When I drafted a plan document for a client for $2,000, I didn’t charge them the $8 to mail the plans or the $18 to bind the plans at Staples (before I went PDF only). Every retirement plan provider needs to be fully compensated for the work they do. There are costs involved in doing business, but clients don’t need to see every charge added and itemized because you don’t want to be labeled a schnorrer.