The Rosenbaum Law Firm P.C. Blog

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

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.

I’m a little frank. Sometimes people think they have great ideas and they’re really not. The problem is those with great ideas and fails with it.

I worked with someone for a time concerning a great idea and they dragged their feet so long, that the great idea was killed by a certain Department of Labor advisory opinion. I know people who had the idea of shopping rewards for 401(k) plans before EvoShare and they failed because they couldn’t get enough participants before the money ran out.

You can have the greatest idea of all time and you can fail.

I always talk about my time at that old law firm because it was the most frustrating experience of my life, even worse than law school. There is nothing worse than thinking you can build a national ERISA practice as an associate attorney and failing. I failed because of a bureaucracy that didn’t let me succeed and that’s why I went on my own.

I kept on insisting that since partners at the firm wouldn’t refer me to their clients, I needed social media to attract clients and referrals from other plan providers. I was met by a law firm bureaucracy and managing attorney that thought social media was a joke. While I’ve built a national ERISA practice and the firm is 40% smaller than when I left 10 years ago, who is laughing now?

A month or so ago, I wrote an article on the self-correction and voluntary correction programs from the Internal Revenue Service and Department of Labor. Recently, a financial advisor found the article and reached out to me with a client that needed an ERISA attorney for a Voluntary Compliance Program application. The purpose of social media is to develop your reputation and standing in this business, it’s all about communicating with people who may need you for your services, that’s it and that law firm didn’t get it and they never will.get it and they never will.

Small business retirement plans look great on paper. A Simplified Employee Pension (SEP) plan or Savings Incentive Match Plan for Employees (SIMPLE) Plan or a SIMPLE 401(k) is a great opportunity for small employers to maintain a retirement plan and avoid some of the headaches of being a qualified plan sponsor such as discrimination testing and in most circumstances, filing a Form 5500. There is also the savings impact with the lack of a need for a third-party administrator (except for SIMPLE 401(k) plans).

The problem with savings in administration is coupled that most of these small plan sponsors receive a lack of support. Over the past couple of months, I’ve had to deal with small plans that have had to spend thousands in correcting errors through the Internal Revenue Service for such items as not properly restating their plan documents in a timely fashion.

In addition, smaller plans have smaller contribution amounts, as well as requirements for uniformity between owners and employees. The plans may be free with little administrative costs, but there is a cost to them in multiple ways. If you have clients with these types of plans, make sure they have the support they need.

One of the greatest parts of my job as an ERISA attorney is helping financial advisors out with potential clients and current clients. I never charge for a phone call or an email because helping other plan providers out will get me referrals when their clients need an ERISA attorney.

I have been an ERISA attorney for 22 years and know advisors around the country for many years. The advisors I have worked with are interested in utilizing my knowledge to help grow their practice for their clients, they are interested in a relationship with me because I help them.

I used LinkedIn to develop relationships with other professionals to further increase the distribution channel for my articles, blogs, and platform. I just accepted a LinkedIn invitation from an advisor because a big chunk of my job is helping advisors out, on the house.

Instead of someone trying to network, this is the response I get from the advisor:

“Hi Ary, I was on LinkedIn and viewed your profile today, I saw that you were doing some great work serving the legal Industry and I’m impressed. I just want to introduce myself. The reason why I reached out to you is because my team and I help attorneys and others in the legal industry with comprehensive financial planning. I wasn’t sure if you needed any help with this, but I wanted to reach because I was curious if you share the same concerns as many of my other clients in this industry. If so, would you be open to a quick 10 min chat?”

If you spent 3 minutes reviewing my LinkedIn profile, you would know that I work with many financial advisors around the country. This advisor clearly doesn’t understand or doesn’t care what I do because he says I am “doing great work serving the legal industry.” No, I am serving the retirement plan industry as I have very few clients that are lawyers. Like men who throw strange lines at women in a bar, I wonder if this approach at trying to drum up business actually works? Even if I needed help with my financial planning, wouldn’t I use an advisor that I have built trust with over decades of time?

Relationships are built on trust, not cold calls/ cold LinkedIn DMs. By the way, I received three similar messages from him after I didn’t respond to the first. I thought after the first one, he would have received the hint.

The retirement plan business as any other business is predicated on relationships, not quick scores.

I have to say that I’ve been seen a huge uptick in 401(k) plans forced to submit Voluntary Compliance Program applications. Whether it’s failed implementation of plan documents or screwing up the definition of compensation, I can’t believe the uptick. This could be about more pro-active plan sponsors and plan providers, but this a boom time for my practice in submitting plans to the Internal Revenue Service. You can avoid Voluntary Compliance Program by identifying plan errors immediately, that will allow you to self-correct without having to shell out thousands of shekels in compliance and legal costs.

The SECURE Act introduced the concept of a “long-term, part-time employee.” Starting in 2021, 401(k) plans are going to need to consider these employees for eligibility, vesting, and company contribution purposes, as they become eligible in 2024.

A “long-term, part-time employee” is any employee who in each of the last three consecutive years (long term) worked at least 500 but less than 1000 hours. For eligibility purposes, only those years starting in 2021 are counted. That means that the first year any long-term, part-time employee will be required to be eligible for the 401(k) Plan is 2024. They will be eligible for the deferral component and plan sponsors can still require 1,000 hours of service for employer contribution purposes.

Plans are going to need to ensure they can track hours appropriately to make sure they identify who will be eligible.

A new survey from Willis Towers Watson has nearly 10% of U.S. companies have used the crisis to cut or suspend the 401(k) match. It’s an amazing statistic. While big business seems to be making record profits, small and medium-sized companies have been crushed because of COVID, so I’m surprised that it’s only 10%, I would have assumed it would be higher.

Coca-Cola Consolidated Inc.’s $784 million 401(k) plan is one of the latest class-action ERISA lawsuits for breaching their fiduciary duty.

The complaint says the continued offering of the actively managed Fidelity Freedom Funds target-date fund (TDF) suite represented an ongoing fiduciary breach.

Also, the complaint takes issue with other fund options on the plan menu: Carillon Eagle Small Cap Growth Fund Class R5 and the T. Rowe Price Mid-Cap Value Fund, which the plaintiffs contend underperform their underling indexes. 

The plaintiffs here allege that also alleges that Fidelity, as recordkeeper for the plan charges high fees.

The lawsuit contends that the average cost for recordkeeping and administration in 2017 for plans much smaller than the Plan was $35 per participant and that the Plan contracted for per-participant annual recordkeeping fees of $59 a head. Plaintiffs claim that plans of that size should pay recordkeeping fees of no more than $14-21 a head.