The Rosenbaum Law Firm P.C. Blog

Coca-Cola Consolidated has settled an Employee Retirement Income Security Act lawsuit filed against the company for its 401(k) plan.

The settlement includes $3.5 million that will be paid to the participants who were a part of the class action. lawsuit.

The lawsuit included allegations that the plan used the actively managed Fidelity Freedom Funds target-date funds rather than index funds. The plaintiffs said the funds were too “high risk” for the plan’s participants, as well as expensive. They also allege the recordkeeping and administrative costs of the plan were excessive.

The Internal Revenue Service has released proposed regulations that would restate the required minimum distribution (RMD) rules to incorporate changes made by the SECURE Act.

Those changes include the increased the age for determining an individual’s required beginning date to age 72 from 70-1/2 (for individuals attaining age 70-1/2 after 2019), a change in life expectancy tables, and also significantly altered the timing requirements for RMDs made to beneficiaries after a participant’s death.

The proposed regulations would be effective for RMDs for 2022 and later years.

A plan provider once asked me if I had written a full-blown article on why trustee directed 401(k) plans are better than participant-directed plans. I haven’t even if I believed in it (which I do), but it’s not going to get many eyeballs because everyone has been programmed over the last 20 plus years to offer participant-directed plans.

Trustee directed plans are better than participant-directed plans for a variety of reasons and the number one reason is that trustees are better equipped to make investment decisions than participants, almost all of the time. While trustee directed plans are better, it reminds me of how Betamax was a better VCR than VHS. It didn’t matter because the public dictated that VHS was the better format for a variety of reasons (multiple manufacturers made VHS while only Sony made Beta and Betamax tape was only 60 minutes originally).

To be successful in this business, you need to understand what the client wants. Don’t think multiple employer plans if the public wants pooled employer plans or vice versa. You need to be flexible to make it and stubbornness doesn’t help anyone.

Since 2012 with fee disclosure regulations, we have seen 401(k) fee compression and the latest 401(k) Averages Book shows that it’s continuing.

Among the key findings in the newest edition of the 401(k) Averages Book:

• Large 401(k) plan fees: Fees for larger plans with an average range of 1,000 participants and $50 million in assets declined from 0.90% to 0.88% in 2021. It was 0.95% in 2017.
• Small 401(k) plan fees: Fees for plans with an average range of 100 participants and $5 million in assets declined from 1.20% to 1.19%. In 2017, it was 1.25%. Note the huge difference in fees as compared to larger plans.

My grandmother always said that life doesn’t go to plan. She said that years before her death and years before I decided to host conferences. When you start planning a national conference 10 months in advance, you don’t think it was going to be impacted by a pandemic. Attendance was on the low side, but I was able to hold it before everything shut down. Over the past 6 months, 4 local conferences held with a new COVID variant negatively impacting attendance (Delta in the Fall, Omicron for January).

Life throws you a curveball at times in business and you have to learn how to hit the curve or you will strikeout. You have to roll with the punches. Whether it’s the market or changes in the industry or bigger competition, you have to deal with when your plan doesn’t go through the way you thought it would.

I was a volunteer and officer for an organization where I stated that the leadership (not including me) was stuck in 1986.

What it meant was that this leadership couldn’t adjust to the current age when it came to recruiting new members and raising contributions. What worked well 30 years ago doesn’t mean it will work today.

I worked for a law firm that acted as if time stood still. I tried to use social media to generate discussions that would help me net clients, but the Managing Attorney didn’t get it even though her husband was doing the very same thing for his own law practice. She actually acted as if her husband was doing something that was embarrassing.

The point here is that the retirement plan business continues to evolve. Retirement plan rules change; the attitudes of plan sponsors change. The opportunity to get new clients changes. You need to be open to what’s new out there and determine what will work and what still works.

By the way, the best thing to happen in 1986 was the New York Mets. Thank you.

Over the years, I worked with many organizations starting back with student political organizations and the school paper at Stony Brook. This includes actual businesses, civic and religious organizations. Many of these businesses and organizations thought that advertising was the be-all and end-all in getting new business for these companies and members for these organizations. I even designed and wrote copy for these ads.

The problem with advertising is that it’s not a be-all and end-all to help a business that’s struggling or an organization that wants members. Advertising can never fix what troubles many businesses and organizations and that’s culture.

If you’re a business with a culture of poor customer service, advertising won’t fix that. If you’re a civic organization and you run it like an exclusive clique while not interacting with new members, advertising won’t fix it.

As a retirement plan provider, you need to identify the issues as to why business isn’t growing because advertising may help, but it won’t fix the problems that might ail your organization.

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

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

It’s easier to steal when no one is looking.

In Ohio, a former plan participant is facing criminal charges for a fraudulent hardship request.

The participant submitted to the plan’s third-party administrator (TPA) two hardship withdrawal applications to obtain money from their 401(k) account. The first was made in June 2019 and the second in October of the same year. The applications stated the distributions would be used to purchase his primary residence and pay medical expenses. Prosecutors allege that the participants used the funds for other purposes, such as personal expenses, and falsely represented the purpose of the withdrawals on the applications. In addition, it’s alleged that the defendant forged a plan trustee’s signature on the applications.

As a plan sponsor, you’re a plan fiduciary, so it’s necessary to make sure that all hardship applications have substantiation for the valid reason for them and processes in place that no one presents a forged application to the TPA.