The Rosenbaum Law Firm P.C. Blog

I’m that turd in the punch bowl, being frank and honest which makes some people very uncomfortable. Over the last 10 years, the 401(k) industry deserves much praise for doing a better job in terms of fees, transparency, education, and coverage. Yet, we have so much more to improve.

The “average” balance in a 401(k) retirement plan handled by Vanguard is $129,157. The median account balance is just $33,472. Half of their plan participants had a balance below $40,000 and about 30% had a balance below $10,000.

While the industry isn’t the reason that people save very little for retirement, but it does mean we have more work to do.

AON sold off its US retirement and retiree health insurance brokerage businesses in a $1.4 billion transaction to get Department of Justice approval for their proposed merger with Towers Watson.

AON announced that its US retirement business will be sold to asset manager Aquiline, a $6.4 billion investment firm, and its Aon Retiree Health Exchange platform will be sold to business services provider Alight.

AON and Willis Towers Watson expect to complete an all-stock merger this Fall to form the world’s largest insurance broker, resulting in a $80 billion company.

Revising the new fiduciary rule is on the drawing board for the Department of Labor (DOL). the Employee Benefits Security Administration (EBSA) plans to issue a Notice of Proposed Rulemaking (NPRM) addressing the definition of fiduciary. EBSA plans to issue the NPRM by December 2021.

The amendment will consider the practices of investment advisers and the expectations of plan officials, participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including the ways that advisers are compensated that can lead to conflicts of interest. EBSA will also evaluate prohibited transaction class exemptions and consider proposing amendments or new exemptions to ensure consistent protection of employee benefit plans and IRA investors.

Employee Benefit Security Administration plans to amend and restate its Voluntary Fiduciary Correction Program (VFCP). The amendments will expand the scope of some transactions currently eligible for correction and streamline the correction procedures for certain others. EBSA says it will issue a restatement of the VFCP in its entirety and request public comments.

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

My latest newsletter for plan providers canoe found here.

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

My latest newsletter can be found here.

A third-party administrator (TPA) and/or plan fiduciary stealing plans assets is easier than you think. TPA Vantage Benefits stole $14 million from 6-7 of their clients wasn’t be surprising to me because I saw it before with Matt Hutcheson and I saw it before at the TPA I worked at.

A plan administrator working at my TPA was close to getting a distribution from the 401(k) account of a client’s participant. The only reason he got caught is that the plan custodian found out that the administrator got the wrong account number for his rollover IRA. So if the administrator wasn’t so dumb in getting his IRA account number, he would have been able to get that distribution. The administrator was caught and fired. Charges were never pressed because the TPA was not going to acknowledge that they have no processes in place to prevent it.

Why is it so easy for TPAs and financial advisors to steal plan assets? The problem is you have plan custodians and in the Matt Hutcheson case, a TPA assumes that orders to liquidate and transfer are on the up and up. You can’t blame these providers who unwittingly got involved in a criminal case, but it’s understandable. Plan providers assume liquidation and transfer requests are lawful because a fiduciary or TPA who steal plan assets will eventually be caught because their fingerprints will be all over the embezzlement.

While we can’t fathom why anyone in a fiduciary or fiduciary-like setting will steal plan assets because they will eventually be caught, this is why we should understand that things like plan embezzlement can happen.

I’m the guy who will travel to a Target further from my home because the Target in Farmingdale is far better than Westbury and Valley Stream and people think I’m crazy to travel 15 minutes more for a better run store with better clearance sales. When my family has had medical issues, we travel to the best doctor out there whether it’s in the same town or New York City, which has some of the best medical care in the world.

So I’m still shocked when plan sponsors want local plan providers. Shopping locally for pizza or food makes sense, but technology makes requiring your plan providers to be local is silly.

Thanks to technology, the plan provider across the country can virtually be in any meeting you need them to attend. As an ERISA 3(16) plan administrator with clients around the country, I’m always there when my clients need me even if they are in San Francisco. The Internet has made the world smaller, so there is no need to hire a local plan provider. 

Since you can have online meetings and constant email messages, there are no requirements that your providers be local. Find the best plan provider out there, whether they’re in town or thousands of miles away.