The Rosenbaum Law Firm P.C. Blog

There is a reason I stopped working for people, so I understand the Great Resignation and people’s disgust with working with others, and that was way before COVID.

One of the major problems with the great resignation is going to be former participants that wild decide to keep money in their plan, which invariably leads to missing participants.

So that’s why I think it’s necessary to implement a missing participant program to ensure that people are located and contacted about their account balance.

Workers attended more virtual 401(k) investment education sessions in 2021 than ever before, according to Schwab Retirement Plan Services.

This is clearly obvious, as COVID shutdowns and concerns limited live meetings. I love when data states the obvious. I still believe that virtual meetings whether live or on-demand will remain a part of an advisor’s shelf of services because it will cut costs for the plan provider (time and travel savings) and the employer will like that participants may use after work time to work on their 401(k) plan.

Connecticut announced the launch of MyCTSavings, a new retirement savings option for the more than 600,000 Connecticut private-sector workers who aren’t covered under a retirement plan through their employer.

Employers are required to register for the state program if they have more than five employees and don’t have a qualified retirement plan.

Vestwell is the program’s third-party administrator after a competitive bidding process.

Again, I’m all for retirement plan coverage and this will add more interested employers for pooled employer plans.

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

The consolidation in the retirement plan industry continues as World Insurance Associates acquired Pensionmark.

Pensionmark has more than $80 billion in assets. Pensionmark has been serving its employer and individual investor clients via its network of 300+ top retirement plan specialists, financial advisors, and staff. Headquartered in Santa Barbara, CA, Pensionmark has more than 65 locations in the United States.

While the Biden-led Department of Labor (DOL) has given the green light for environmental, social, and governance (ESG) funds within 401(k) plans, I don’t get the push.

The push isn’t from many plan sponsors and I don’t see many plan participants demanding it. To me, it seems more hype than anything else.

I’m not a fan of ESG funds because you have 3 ESG funds out there and you’ll have 4 different explanations on what it means to be ESG. In addition, an ESG fund to me is no different than a sector fund and I’m not a huge fan of sector funds within a 401(k) plan.

Costco has reached a settlement that will see them pay $5.1 million to resolve allegations that it committed fiduciary breaches within their 401(k) plan.

A participant in the Costco 401(k) Retirement Plan filed a lawsuit against Costco by claiming the company breached their ERISA duties by authorizing the plan to pay unreasonably high fees for recordkeeping; failing to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent in terms of cost; and maintaining certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.

As part of the settlement, Costco “will ensure that the plan administrative service per capita recordkeeping fee deducted from plan accounts does not exceed $3.25 per plan account per quarter.”

The auditing business for retirement plans has been cleaned up over the years, and quite a few auditors who have no business conducting audits were moved aside by the Department of Labor (DOL), and further changes for the 2021 plan year are now in effect, including the end of the limited scope audit.

The limited scope audit was a cost-saving for plan sponsors when they used a corporate trustee that could self-certify trust statements

The limited scope audit will be replaced by an ERISA Section 103(a)(3)(C) audit.

Under this new standard, the auditor ultimately will be expressing an opinion on the plan financial statements, even though the auditor will still be permitted to exclude the investments from the audit if the information is appropriately certified.

Auditors will not be able to accept an audit engagement unless the plan sponsor acknowledges their responsibility to maintain a current plan document, administer the plan,  and provide the auditor with a substantially complete draft of Form 5500 before the completion of the audit. The plan sponsor will need to provide written acknowledgment regarding their responsibilities for determining whether their plan qualifies to have an ERISA Section 103(a)(3)(C) audit, whether the investment information is prepared and certified by a qualified institution, whether the certification meets DOL requirements, and that the certified investment information is properly measured, presented and disclosed in the financial statements.

The auditor will need to consider the necessity to test specific plan provisions and the new audit report will contain a two-pronged opinion that is based on the audit and the procedures relating to the certified investment information.

So plan sponsors are going to need to spend more time preparing for and ensuring that they fully understand their responsibilities before their plan audit, as well as making sure the Form 5500 is completed earlier than years prior.

When I grew up, we had one type of Cheerios and when they added Honey Nut Cheerios, we had two. I think if you go to the grocery shelves, you may have 20 today. This was General Mills appealing to a marketplace to sell more Cheerios by offering so many varieties.

401(k) plans aren’t boxes of cereal. I don’t see the need to sell a 401(k) plan that has a niche investment focus because I believe that the best 401(k) plans offer plan participants a wide breadth of plan investments, as long as they don’t offer too many investment options.

Recently, an investment advisor focused on solving climate change, has decided to introduce a climate-focused 401(k) plan for employers. As an Exxon-Mobil shareholder who first started buying that stock in April 2020and the proud owner of a 2012 Toyota Prius V, I don’t understand why an employer would be interested in a 401(k) plan that was limited in its investing options. Plan sponsors are plan fiduciaries, I think narrowing the investment options within a 401(k) plan makes no sense because you’re cutting participants off from sectors that could lead to top investment growth over time.

My latest newsletter can be found here.