The Rosenbaum Law Firm P.C. Blog

My wife doesn’t know much about crypto, but she is fascinated by what happened with FTX and SBF. She doesn’t understand how someone like that, could be involved in such a scam. Unlike me, my wife never knew two plan providers, currently sitting in Federal prison for embezzlement.

SBF like Matt Hutcheson (Google it), came out of nowhere. They both got access. SBF spent millions in hooking up with Tom Brady and Giselle and politicians. Matt Hutcheson got access by appearing on Capitol Hill and a fawning portrayal of him on PBS’ Frontline. People vouched for both, without having justification for it. I remember inquiring a very well-known 401(k) leader about Matt and getting a fawning endorsement, even though later, it was based on nothing.

SBF like with Matt, things just didn’t add up. I probably should have figured Matt out in 2012 when he claimed he was under serious consideration by both Obama and Romney for being the next Secretary of Labor. That was a warning sign, I  just didn’t follow it.  SBF came out of nowhere. Throwing some money around, and famous figures vouching for him, just made things easier.

When it comes to dealing with people of questionable character, trust your instincts and verify who they really are.

There is a gender gap with 401(k) deferrals and auto-enrollment might be the way to curb that.

In 401(k) plans without automatic enrollment, men lag behind women in participation rates at all income levels, most notably below $150,000.

The largest difference is in the $50,000-to-$74,999 income range, with 81% of women participating versus 67% of men.

However, the average 401(k) balance among men in 2021 was $93,512, compared with $70,037 among women, the Vanguard research shows. That’s because men make more money than women and they actually have a slightly higher deferral rate too (7.5 vs 7.0%).

I have seen some great articles about plan sponsors and issues surrounding retirement income options. They talk about obstacles to implementation and some talk about articles about plan sponsors interested in it.

Quite honestly, I have yet to see plan sponsors on my end, ask about it. Most don’t know about it and without a mandate demanding that plan sponsors offer one, I just don’t see it taking off for most small and medium-sized plans. There is no benefit for a plan sponsor to add one and I see no benefits for most plan providers to offer them as well.

The Department of Labor (DOL) announced changes to Form 5500.

For Multiple Employer Plans (MEPs), new codes have been added to Line 8a of Part II to identify different types of MEPs, such as pooled employer plans, association retirement plans, professional employer organization MEPs, and other MEPs.

For Schedule MB, used by multiemployer defined benefit plans and certain money-purchase plan actuarial information, instructions for Line 3 have been changed to require an attachment that shows total withdrawal liability payments by participating employers, made to the plan while separating periodic and lump sum withdrawals. Line 8b(1) was updated to increase the projection period in the attachment to 50 years for plans with 1,000 or more participants. Line 8b(3) has been changed to require plans with 1,000 or more participants to attach a 10-year projection of employer contributions and withdrawals. Schedule R, Line 13 of Part V was changed to require plans must report identifying information about any participating employer who either contributed more than 5% of the plan’s total contributions or was one of the 10 highest contributors.

The instructions for Form 5500, have been updated to reflect an increase in the maximum civil penalty amount assessable under ERISA.

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

You could be the greatest plan provider, but you can’t please everyone. Even when things aren’t your fault, there will be some plan sponsors who will still blame you.

You can try to bend over backward for some plan sponsors in even fixing their own mistakes, but they might have ideas on their own on how things should be fixed. As an ERISA attorney, I have seen plan sponsors and participants in shapes and all sizes. The moment you are threatened by a plan sponsor or blackmailed, the best thing to do is contact counsel. I always think that you should leave things to those who can best handle things. As an ERISA attorney, I’ve very good at confrontations and offering a hammer in correspondence when there needs to be.

Corresponding to plan sponsors that are making threatening demands can get you so confused, you might state something you might regret and be held against you. When getting a threat, just stop the correspondence and refer the matter to counsel.

While technology makes it easier for bad actors to steal the retirement assets of plan participants, it’s far easier to steal from 401(k) plans with crypto investments. 401(k) plans that have Bitcoin investments would have a crypto wallet, rather than an ordinary custodian for mutual funds and stocks.

Hackers have stolen more than $3 billion in cryptocurrency in 2022, and that’s not even counting the FTX disaster. It seems stealing from wallets and crypto exchanges is far easier than stealing from 401(k) trusts.

Just another way that Bitcoin 401(k) is a bad idea.

With high inflation and an economy that might be in a recession, it is no shock that hardship distributions are on the rise.

About 0.5% of employers participating in 401(k) plans made a “hardship” withdrawal in October, according to Vanguard. This is a major increase from the 0.3% rate recorded, during the time last year and is the highest level since Vanguard began tracking the data in 2004.

With inflation booming and a recession that we might be in or going into, means participants need more money. So no shock, that expenses require a hardship.

My wife forwarded me an op-ed piece, criticizing the Biden administration rule change on ESG investments in 401(k) plans. Obviously, the person writing it doesn’t understand how 401(k) plans work.

The ESG rule isn’t licensed theft to pursue a woke agenda, whatever that means. Most 401(k) plans are participant-directed, so the ESG rule will merely allow 401(k) plans to add ESG funds to their fund lineup. It will be up to plan participants to decide whether their account balance should be used for a woke agenda.

I’m not in favor of the ESG rule because I think the main aim is for total return and ESG funds don’t do that. However, I could see nonsense when I read it.

Robinhood is rolling out retirement accounts for users of its mobile app, by offering a 401(k) like match to IRAs.

Robinhood will offer customers a 1% match on its traditional or Roth IRAs. Users can start investing on deposits of up to $1,000 before contributions settle into their accounts.  Customers will get 1% on IRA contributions up to the $6,500 limit.

The launch allows Robinhood to against brokerage giants, like Fidelity, Charles Schwab, and Morgan Stanley’s E*TRADE.

Full availability on this IRA offering is set to begin in January.