The Rosenbaum Law Firm P.C. Blog

You’ve got a lot on your plate as a retirement plan provider and the last thing you need is more headaches. So don’t add to your workload and headaches by deciding to bill for the work of another provider.

I’m an ERISA attorney and if I refer a plan sponsor to a third-party administrator (TPA), I’m not going to bill for that TPA’s work. Your job is to provide the best service for your client, your job isn’t to be the billing office of another provider. Forget about the accounting aspects of it, what if the other provider doesn’t provide the work promised? Are you know going to have to refund money that was never yours, to begin with?

The road to hell is paved with good intentions and nothing good could come by doing another provider a solid by acting as their billing office.

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

My latest newsletter can be found here.

The sales process in the small to medium-sized retirement plan business is slow. It’s slow because plan sponsors are slow. A can’t lose proposal takes time because a plan sponsor doesn’t have the urgency to get things done. You can show them that you can save them tons or the other providers aren’t doing their job, but it’s crickets.

It’s why I always that plan sponsors are reactive, not proactive. They are only urgent with the plan when something goes wrong or the plan gets audited by the government. It’s not urgent until it becomes urgent for them. The best way to succeed in this business is to understand human nature and the human nature of a small to medium-sized plan sponsor.

The one drawback in the fee disclosure regulations was that the Department of Labor (DOL) never bothered to develop a model fee disclosure form for plan providers, I understand the hesitancy of the DOL because it’s hard to group fees clearly in a business where everyone has different fees, especially the business of third-party administration (TPA).

When it comes to marketing, I’m a fan of thinking outside the box and simplicity. I think a TPA firm would be wise to try to contain all their fees in one 8.5 x 11 piece of paper, creating a model form, such as a car sticker price or those Federal truth in lending forms. Describing fees as a summary in an easy-to-understand language will go a long way in helping with clients and potential clients.

That’s just my two cents.

I had 3 That 401(k) Conferences postponed from 2020 and I wanted to reschedule them since I was holding on to plan provider sponsorship money and I already outlaid money for the venue, game tickets, and athlete appearances.

Last March, I rescheduled these events for September. I was in the midst of getting my vaccine shots and I figured that the pandemic would end. My grandmother always said it best, that life never goes to plan. Of course, we plan G-d laughs. The Delta variant put a snag in things and getting advisors to attend in-person live events is a struggle. I know that people who have planned bigger events for this time frame have experienced the same with attendance and unlike me, their bread and butter is revenue from live events.

That’s why I’m taking a wait-and-see attitude when it comes to live events for 2022. The only scheduled event live right now is Las Vegas and hopefully, we can have some more live events in places like Seattle, Miami, Charlotte, and others. Time will tell. Planning live events now, expect lower attendance until this pandemic finally breaks.

Someone I know was let go during COVID in April 2020. Thankfully, they were reemployed rather quickly since they had an outstanding job offer that they didn’t reject.

With a decent 401(k) account balance, they asked for and received a rollover distribution that July. The weird thing is that after 2021 began, they got a letter from one of these rollover companies that they were a missing participant and they were due over $3,000. It was rather odd since they never were a missing participant as the former employer was able to process a distribution request just 6 months earlier.

What infuriated this former employee is that this rollover company was going to charge $30 for the distribution. This former employee did what people who are educated about this business do, they went to the Department of Labor. For six months, this matter was investigated and it was clear that this employer made many mistakes, including never furnishing a summary plan description or blackout notice when the third party administrator was changed. In the end, the employer got a slap on the wrist, but not it’s what I called, “tickled into the system.” That means they are on the radar for the Department of Labor, and no one in their right frame of mind, should want that. All this because a former employee was aggrieved about how they were treated during COVID. It’s the former employees you have to worry about.

A character in This Is Spinal Tap said it best: “there is a fine line between being clever and being stupid.”

Recently, I came across a rather unique issue dealing with a 401(k) plan and self-directed brokerage accounts. A plan was offered to an employee, who eventually became a former employee. The problem was that this former employee refused to hand over information, as well as statements to his brokerage account. The plan needed that information for Form 5500.

I thought it was odd as every brokerage window I’ve come across allows the plan to get such statements since it’s a plan asset and the brokerage account is in the name of the plan. This wasn’t the case here, as the plan allowed participants to open up individual retirement accounts, which contravenes the terms of the plan and the bar on in-service distributions prior to 59 1/2. What was also odd was that the third-party administrator didn’t understand the potential problem here.

I’ve never been a fan of self-directed brokerage accounts, but those things aren’t my call. However, if you offer them, work with your plan providers and make sure that any acco7nt set up, still makes it a part of plan assets.

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

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