The Rosenbaum Law Firm P.C. Blog

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

Bigger is not better. At least I think so since I come from the school of less is more.

While there is consolidation in the retirement plan business and you may be concerned that the competition is getting bigger and bigger and you stand pat, don’t fret. Mergers and acquisitions have their bumps in the road and with providers getting larger and larger, they may no longer be competitive in the market sector that you’re in. Larger providers are going to want to focus on the most profitable portions of their business and cut back the portions of the business that isn’t.

In addition, mergers lead to a cut back in staff where there is a redundancy, which may allow you to find talent in the retirement plan space that has been put on waivers.

I always have the belief that I try to treat people the way that I wanted to be treated. However, when someone stabs me in the back, all bets are off. So anyone who maybe had a problem with me when I worked with him probably wasn’t nice to me when they should have (sorry, Norma).

A few weeks back, I talked with someone I worked with at a law firm many years ago and he brought up a partner who broke away and started his own practice. 23 years later, I still remember how that partner wasn’t nice and he was really a bully when there really was no need to be that way. The person I talked to agreed with me and I think the point is that when you’re nasty to people and fellow employees, people will remember you.

One time, I was talking to another attorney about an ERISA attorney who taught me in law school. I said that I’m really still peeved at this well-respected attorney because 20 years ago, I sent him an email asking for employment suggestions and to this day, I’ve never heard back. This attorney told me how this well-respected attorney messed up a great referral opportunity by accusing one of the plan providers of malfeasance when there was none.

A family member just went through the process of locating retirement plan accounts at two different employers.  The employers changed providers and the million dollars of retirement assets were just sitting there. These were government plans, so ERISA wasn’t an issue for notices and required information.

If you have an ERISA plan, you know that you’re likely not providing the required notices for former employees. I will always say that when it comes to the two major plan audits I’ve had to handle, they came directly as a result of complaints from former employees.

I believe that as soon as people leave your employment, you develop a process to ensure that these former employees are reminded that they have an account balance and their opportunity to roll over plan assets.

I have some simple rules to live by. I never bet on the Mets, eat at a place called Mom’s, play cards with a guy named Doc, or do business with family.

Yet I have come across so many financial advisors who bemoan to me that they couldn’t get a new retirement plan client because the current advisor is someone’s relative. Since when did running a 401(k) plan all of a sudden become someone’s patronage mill for family members?

Seriously, being a plan sponsor or a plan trustee is a tremendous responsibility and you must act prudently. All plan providers must be screened carefully through a process involving the interview of other competing plan providers. Simply handing the role of a financial advisor to someone related to one of the plan’s decision-makers or participant may be a breach of the fiduciary’s duty of prudence in selecting a plan advisor.

Being a plan fiduciary bears a tremendous amount of responsibility. It requires the retention of responsible plan advisors, monitoring those advisors, monitoring plan fees, shopping the Plan to determine whether plan fees are reasonable, working on an investment policy statement, review of plan investments, and ensuring participant education. So why would a plan sponsor and/or plan fiduciary by hiring a financial advisor or any type of service provider because that person is someone’s cousin? There are quite a few hundred of thousands of financial advisors not related to anyone who will works for the plan sponsor, so I would recommend hiring someone who is not related to anyone connected with the plan sponsor.

For fair disclosure purposes, I am not the ERISA attorney for any plan where the plan fiduciaries or participants are related to me.

58 percent of defined contribution sponsors surveyed for the 2021 PLANSPONSOR Defined Contribution (DC) Plan Benchmarking Report said their organization has been using its DC plan recordkeeper for more than seven years, and another 12.3% said it’s been between 5-7 years. These numbers don’t surprise me as most plan sponsors stick to a certain recordkeeper for a long time.

With such “loyalty” to the recordkeeper, I think most plan sponsors are in a position where they need to look at their third party administrator and/or recordkeeper, as to seeing what else is out there with the competition.

Years ago, as a naïve associate at a semi-prestigious law firm, I got the short end of the stick to attend a quarterly Taft-Hartley meeting in Staten Island. If you ever have to drive from Long Island to Staten Island, you know what a short stick it is.

The head of the union wanted recommendations for an actuary for part of their request for proposal (RFP) process. I thought of a few actuaries I could recommend, based on my 9 ½ years working for third-party administrators. I mentioned it to the co-counsel and he pulled me aside. He told me the whole RFP process was a sham because the Taft-Hartley plan had absolutely no interest in hiring another actuary. They were happy with what they had.

The RFP process or the less structured process for reviewing plan providers includes getting competing proposals from other providers. It’s about a process and a process that is a sham is not a real process.The current provider should partake in the RFP process or at the very least, the plan sponsor should treat all providers as potential providers instead of just deciding that they will keep the status quo because the status quo may not be sufficient.

My latest newsletter for plan providers can be found here.

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

With July 31st passing (the deadline for Form 5500 without an extension), it’s a great way to ponder if you have any outstanding Form 5500 issues such as a late return or an incomplete return (such as one missing a plan audit).

If you have any of those issues, make sure you file with the delinquent fiduciary voluntary compliance program and pay the fee, rather than get a bill for tens of thousands of dollars in penalties.