The Rosenbaum Law Firm P.C. Blog

Ascensus and Newport Group announced that the two companies have closed their previously announced merger.

The merger will now serve more than 15 million participants and oversee more than $745 billion in assets under administration as of December 31, 2021. As of now, the unified company employs more than 5,400 employees across the U.S. Unfortunately, I expect that number to lower, as with most mergers and the look for cost savings.

David Musto, president, and chief executive officer of Ascensus, will serve as CEO of the combined company.

The federal Thrift Savings Plan will allow participants to allocate some of their assets through a self-directed brokerage account (SDBA) this summer.

SDBAs are popular among larger plans and small to medium-sized plans that belong to professional firms. While half of the large plans now offer SDBAs to plan participants, less than 3% of participants in a given plan make use of the brokerage window. It’s usually the high earners that want it and some of them want their advisor to help handle the investments in the SDBAs.

I know I’m talking to a wall when I say that SDBAs aren’t a great idea since participants as a whole, do better with the core fund lineup than they do with their directed investments in an SDBA. I don’t have the numbers to back it up, but it’s just based on a hunch.

SDBAs can lead to increased fees if the plan’s advisor can’t charge for those assets and I think it’s a potential liability headache for the participant that might sue over the losses they created through the SDBA as well as the mistakes by the plan sponsor in not offering the feature to all participants.

But when a plan sponsor wants to add it,l I give it to them, since it’s their ultimate fiduciary decision.

For almost 10 years, we’ve had fee compression in the retirement plan industry.

The question is whether the two-headed monster (inflation and consolidation) means that we will see an increase in pricing?

Time will tell. I don’t think inflation will be tamed so quickly, thanks to a Fed that was slow on increasing the prime interest rate. Consolidation has cut back on the competition, which should see an increase in pricing, but that hasn’t exactly materialized.

My village is finally getting a contested election for the school board for the first time in forever (I’m a big Frozen fan). One of the incumbents is one of those who went into volunteering to make money and money for his kids while he doles out school district jobs for friends and family. 9 years in his position and he can’t cite anything he’s done that has benefited the school district, while it suffers since he’s been in the position.

As a retirement plan provider, your chances of being retained are by citing what you have done and what is best for the retirement plan and the plan sponsor. In a show and tell world, show does it all.  If you can’t cite positively what you’ve done for the plan, your charm and personality aren’t going to help get you retained.

While the Department of Labor (DOL) has been focusing on missing participants, expect them to question plan sponsors about missing participants and the automatic rollover provider that they use. Why? Because I was asked that question for a plan sponsor on an audit and I assure you, saying to pick the automatic rollover provider just because the third party administrator (TPA) you use, uses them isn’t a valid reason.

I think in the future, plan sponsors are going to have to review their automatic rollover provider, how they were hired, and what fees they collect. In addition, I think DOL may look at the stable value product that these rollover funds are in, and raise concerns on how little these missing participant account holders are collecting in this fund.

A portion of a lawsuit filed against Pentegra Retirement Services in the U.S. District Court for the Southern District of New York has been dismissed but a large part remains.

The lawsuit was filed against Pentegra Retirement Services and the Board of Directors of the Pentegra Defined Contribution Plan, a multiple employer plan for which Pentegra provides recordkeeping services. The complaint alleged that Pentegra engaged in self-dealing and failed to ensure the payment of only reasonable fees by the plan.

Pentegra was able to get the allegation that Pentegra’s CEO was self dealing and breached a duty of loyalty, thrown out.

I have a limited amount of time as a solo practitioner plus I’m a stay-at-home since I have the home office.

I don’t have time to do writeups of legislation that aren’t law because I take almost no interest on what the law might be and it’s irrelevant to my clients if it doesn’t become law. So while I do follow what the SECURE Act 2.0 looks like, I’m not going to analyze it thoroughly until it’s the law.

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

Eventually, COVID will come to some end. I don’t know what that end will be, but I’ve been contemplating life after COVID when it comes to hosting That 401(k) Conference.

As a plan provider, you will have to figure out what parts of the virtual world will remain for you as the world has been opening up quite a bit over the last few months. I still think travel will still be cut back and plan providers will want to keep the cheaper virtual world in their toolbox to cut back costs.

I once worked with someone who told me that he put in100% of his 401(k) investments in a mid-cap fund because it was in the middle of the market. It’s absurd, but people do think that way.

So aside from the glid path issues that I still have about target-date funds (TDFs), an issue is those plan participants still use them, as one of many investment options, instead of it being the only investment option they use.

A TDF is like a smorgasbord, that one fund that represents a variety of investments split between fixed and equity. Yet, plan participants still treat it as a side dish, instead of a main course investment.