The Rosenbaum Law Firm P.C. Blog

My latest newsletter can be found here.

Ever since I started my law practice, LinkedIn has been a very effective tool for me in growing my business. I have been rewarded with meeting so many great retirement plan professionals that have helped me over the past 10 years.

Whether I’ve connected with these professionals or they’ve connected with me, it’s always done professionally. There was never any sales pitch that comes along with an invitation. I know what a financial advisor does and they know what an ERISA attorney does. We all realized that any relationship requires trust. So I’m always shocked when I get an invitation from an advisor or an insurance salesperson that just wants to talk and sell me something or for some reason, thinks that I’ve never worked or referred work to another financial advisor.

Acting like a shifty salesperson by trying to connect with other people on LinkedIn isn’t going to work. Networking is like dating, it will take time to develop a relationship and if you go for the quick move to the basket, you’re going to end stuffed more often than not.

It’s been happening a lot lately: a plan sponsor with several participating employers, not realizing that participation agreements for some of these employers weren’t done. This is just a silly mistake to make.

While some plan documents may recite all the participating employers in the plan document, most don’t. They require participation agreements (they also may be called adoption agreements) for each participating employer. I’ve had several voluntary compliance program submissions with the Internal Revenue Service just because of a failure to properly secure a participation agreement for one or more employers. It’s a costly mistake that shouldn’t happen.

10 years in, I’m glad I went on my own as an ERISA attorney, so I could provide value to clients, instead of being wedded to a billable hour because of a huge overhead working for a law firm.

I have championed the use of an independent ERISA attorney for plan documents instead of relying on the attorney for the third party administration firm (TPA) or whoever is drafting plan documents for a bundled provider. I stressed the value of an attorney-client relationship and the fact that plan documents are legal documents with legal consequences.

Like with TPAs and financial advisors, there are some good ERISA attorneys and not-so-good ERISA attorneys. I know this from my experiences working for TPAs and working at a law firm. I will never forget reviewing the work of a California ERISA attorney and an amendment he was trying to make to his client’s matching contribution formula. The amendment was a monstrosity and I quipped to my plan conversion expert that this attorney can write the amendment, but good luck to us in administering it. So when picking an ERISA attorney for a single employer plan, pick an ERISA attorney who works with single-employer plans. So when hiring an attorney for a 401(k) plan, don’t hire an ERISA attorney who only works on union (multiemployer) plans and doesn’t know what revenue sharing is.

Also, value is an important consideration. If a TPA is offering a pre-approved plan document for $2,000 and an attorney is creating a plan from scratch for $7,000 to $25,000 and the plan belongs to a small or medium-size employer, then I would recommend using the TPA’s services. I also recall an advisor friend of mine who advised me of an ERISA attorney who went through a plan sponsor’s entire $100,000 budget for a full fiduciary review before all the work was completed.

To me, value is such an important concept in terms of all retirement plan services, then that is why my practice is focused on flat fee billing and being competitive with the legal services of TPAs. I stress a flat fee because retirement plan sponsors need cost certainty and because of my disillusionment with working for law firms, which stressed billable hours more than anything else. I have never been a big fan of the billable hour because since billable hours are the most important criteria in judging and rewarding partners and associates; it opens itself to abuse and overbilling. I understand why medium-sized law firms need to bill by the hour, based on the overhead they carry.

As far as my TPA experience goes, I know it has been fodder for a lot of my material, but my career would have been nothing without it. It brought me so much experience that I have never would have gotten from a law school textbook or the halls of a law firm. Working for a TPA made me think quickly on my feet, churning out plan documents quickly, come up with solutions for problems you don’t read in textbooks, and made me love the idea of flat fee billing for plan documentation. I wouldn’t have traded that experience for anything.

When I was 13 and I had my Bar Mitzvah, I plunked down about $2,000 in 1985 money for a state-of-the-art Apple IIe with a monochrome monitor. One of the first pieces of software I bought was the top desktop publishing software known as Print Shop. I bought it through mail order (yes, there was life before Amazon.com) for about $30 and I remember that my wealthy uncle bought the very same program for my cousin for about $60. My uncle really thought nothing of the fact that he bought the very same program at double the price I paid. Sometimes people like to overpay.

I have a mantra that I hate to pay retail. I love a good sale. Yet there are some people who thumb their nose at paying at a discount or going to an outlet store. Somehow, it isn’t right for these people to pay less.

The problem is that plan fiduciaries such as plan sponsors and trustees don’t have that luxury. With their fiduciary duty on the line, plan sponsors need to pay reasonable plan expenses for the services involved. Plan fiduciaries can only determine whether the fees they pay are reasonable by shopping their plan to other service providers. If they don’t shop around and overpay in fees, they may subject themselves to liability from plan participants. It should be noted that plan sponsors don’t have to pick the cheapest providers because often, there is a reason why some providers are cheap.

How to determine whether a plan sponsor is paying way too much? Like Justice Potter Stewart would say, I know it when I see it. I have seen the information shown on Form 5500. Whether it’s the plan sponsor paying a Big 4 accounting firm $54,000 for a limited scope audit or another plan sponsor paying a broker 60 basis points (.60%) on a $14 million 401(k) plan, there are plan sponsors seriously overpaying for services. Fee disclosure has made it easier to detect if plan sponsors are overpaying, but again, the only way to determine that is if plan sponsors survey the 401(k) marketplace to see what other plan sponsors are paying.

One of the problems with a Department of Labor (DOL) guidance, there are certain professionals who read too much into things.

Quite honestly, the DOL’s wariness of a crypto brokerage window doesn’t mean that they have a change of view of normal brokerage windows. Cryptocurrency is unregulated and prone to huge price swings. Investments in normal brokerage windows are. While I don’t think there will be a change, I have always felt that the Dol should formulate criteria for the setup and oversight of these windows with liability protection for the plan sponsors that offer it.

Washington University reached a settlement agreement in the lawsuit filed against them in a federal court in Missouri for $7.5 million

One part of the settlement agreement will require that defendants provide annual fiduciary training for all members of the Washington University Retirement Plan Advisory Committee.

The agreement also requires the committee to evaluate the plan’s investment policy statement (IPS) at least annually, with input from the plan’s financial advisor, and implement any updates to the IPS that the defendants deem appropriate.

Also, there must be a request for a proposal for plan recordkeeping services before the conclusion of the settlement period.

The lawsuit had alleged multiple violations of ERISA over the school’s selection and monitoring of its 403(b) plan investments.

I’m the guy who will travel to a Target further from my home because the Target in Farmingdale is far better than Westbury and Valley Stream and people think I’m crazy to travel 15 minutes more for a better run store with better clearance sales. When my family has had medical issues, we travel to the best doctor out there whether it’s in the same town or New York City, which has some of the best medical care in the world.

So I’m still shocked when plan sponsors want plan providers who are local. Shopping locally for pizza or food makes sense, but technology makes requiring your plan providers to be local silly.

Thanks to technology, the plan provider across the country can virtually be in any meeting you need them to attend. As an ERISA 3(16) plan administrator with clients around the country, I’m always there when my clients need me even if they are in San Francisco. The Internet has made the world smaller, so there is no need to hire a plan provider that is local. Since you can have online meetings and constant email messages, there are no requirements that your providers be local. Find the best plan provider out there, whether they’re in town or thousands of miles away.

In real estate, it’s all about location, location, location. When it comes to plan providers, it’s about competence and reasonable fees.

If you have a retirement plan with more than 100 participants, you probably have a plan audit (if you have more than 120 participants, you do). Like with any plan provider, there are a lot of great auditors out there and some not so good.

So if your auditor brings up issues dealing with plan compliance, confirm those findings with plan providers and/or ERISA attorneys because auditors may be great at accounting, they aren’t legal experts. I have an advisor-client (cheap plug here) who asks me to confirm what the auditors are saying on the compliance end and occasionally, they’re wrong and their answers could lead to compliance headaches, especially where the Department of Labor and Internal Revenue Service are concerned.

I’m a big New York Giants fan and one of my least favorite players was Tiki Barber, who had an affinity for turning over the ball. That’s why I’m not a fan favorite of the current starting quarterback, Daniel Jones.

When it comes to your third-party administrator (TPA), employee turnover is a big deal. I worked at a TPA, where I joked we should have a revolving door in front because we had such a high employee turnover. If your TPA’s main contacts in handling your plan are constantly changing and the prior contacts have left, to me this is a sign of volatility that you don’t need. Turnover talks time and training and you want someone that you can consistently rely on in providing services to your plan. A change all the time gets in your way and negatively impacts the service to your plan.