The Rosenbaum Law Firm P.C. Blog

When you’re young, you’re urged not to quit. Whether it’s little league or scouts, your parents would always tell you that it’s just not OK to quit on a whim.

As a retirement plan provider, there are certain times where you have to quit and fire your client. Usually, it’s when dealing with a plan sponsor client that isn’t listening to your advice and keeping the plan out of compliance. Sometimes, it can just be a situation where you can’t properly function or you’re out of your comfort zone or continuing is a liability threat.

Getting clients is hard to come by, but associating with a plan sponsor that won’t comply with the law is a bigger threat than the loss of any fee.

Whenever I hear about someone getting caught lying about their resume or credentials, I am always astounded. I don’t know why people lie about college degrees they didn’t receive or credentials they didn’t achieve, but I guess the fact is that most people get away with it because people are trusting people and rarely check these credentials.

It happened to me, I used a contractor for a few jobs and assumed that they were members of a highly regarded remodeling association because they claimed that they were. Of course, after a dispute, I find out that they weren’t members of this organization.

I’m a member of the New York, Massachusetts, and California bars. You can look it up. You can look up the credentials of any financial advisor you’re hiring and see whether they have any issues with their license. A third-party administrator (TPA) is much harder to check because anyone can open a TPA shop, so find out information about the folks who run it.

Perhaps the principals are attorneys, enrolled actuaries, or have credentials through ASPPA (American Society of Pension Professionals & Actuaries).

With the initial 5500 deadline coming and going and October 15th around the corner, it makes sense for you to realize what happens if you fail to file our Form 5500 on time, with or without an extension. You might be late because the audit isn’t done or you didn’t provide the information to the third-party administrator.

If you are late, that Form 5500 needs to be filed coincident with an application to the Department of Labor’s Delinquent Filer Voluntary Compliance Program that allows you to file the form late and pay a nominal fee. Otherwise, you may get a bill from the Department of Labor and/or the Internal Revenue Service that you owe thousands in penalties.

With the Department of Labor (DOL) focusing on cybersecurity, I think it’s prudent for plan sponsors to put policies in place to cover it. On a DOL audit, I’m sure the auditor investigating your plan, will ask for it.

What your policy should cover:

1. Access controls and identity management for online systems
2. The processes for responding to a cybersecurity breach
3. A due diligence process for reviewing the cybersecurity protocols of plan providers
4. Cybersecurity awareness training for staff
5. The encryption of sensitive information transmitted, stored, or in transit

My latest newsletter for retirement plan providers can be found here.

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

My latest article can be found here.

My latest newsletter can be found here.

When I left a job, the first thing I did was execute my rollover form to move my 401(k) balance to an IRA rollover.

While research from Pew will show that fees for an IRA account are higher because of fund costs (buying retail instead of a 401(k) plan having the ability to buy institutional), the fact is that you want to be in control of your own money.

Recently I’ve had to work through a Department of Labor situation with an orphan plan for a company that terminated 6 years ago where participants have their money in funds that may not be the right investment now. Even if your plan sponsor is still in business, communication with former participants is still poor and access to your money in my mind, is better than dealing with a former employer, that you left, for one reason or another.

Surveys are great, but you can’t put a price on having a peaceful mind, or knowing where your retirement money is.

Back in the day, the question of theft of plan assets, usually indicated theft by the plan sponsor or plan provider (hello, Matt Hutcheson). These days, with access to 401(k) retirement distributions so easy, cyber theft is the biggest concern when it comes to the theft of plan assets.

A new ERISA lawsuit has been filed in federal court in New York, against the Colgate-Palmolive employee relations committee, plan recordkeeper Alight Solutions, and custodian BNY Mellon for their parts in operating the company’s defined contribution retirement plan and the theft of a participant’s $750,000 account balance.

The plaintiff is a former global director for customer marketing at Colgate-Palmolive, who has alleged that thieves have ripped off her entire account balance. The lawsuit claims that the plan providers missed several red flags.

The red flag was that within the span of fewer than two months, a person claiming to be the participant changed the participant’s phone number, email address, mailing address, and bank account information, and then requested an immediate cash distribution of the participant’s entire $750,000 plan account

In August 2020, the plaintiff claims she attempted to access her 401(k) account online to review the balance but she was blocked and the website informed her that she was entering an incorrect username ID and password. She then contacted the Colgate-Palmolive Benefits Information Center to request access and information about her plan account, according to the lawsuit.

The participant claimed that she was informed that the entire balance of her plan account, totaling $751,430.53, had been distributed from the plan in a single taxable lump sum, even though at no point had she authorized or received any such distribution to an individual with an address and bank account in Las Vegas, Nevada in March 2020, while the participant lived overseas.