The Rosenbaum Law Firm P.C. Blog

Ron Nehring, my long-time college pal, and current Republican political operative said it best about political campaigns: “he who frames the issue, wins.”

The same thing can be the same way that you market a pooled employer plan (PEP) if you haven’t been scared away from offering one. Rather than promise cost savings that may not happen if the plan asset size doesn’t reach critical mass, frame the PEP as a matter of fiduciary delegation. Frame PEPs as the opportunity for the employer to have more time to deal with the business by taking the burden of being a fiduciary away from them by having them join your PEP.

PEPs will come in all shapes and sizes and very few will muster the cost savings through a PEP against the costs had the employer remained with a single employer plan. I would focus on marketing on fiduciary outsourcing as our friends in the PEO world have done wonders.

Just my two cents as we come to January 1.

Small business plans are a challenge to me because there aren’t many situations where that will help grow my practice. When it comes to plan documents, I can’t compete with free plan documents from the plan custodian.

Most of these small plans are so poorly run, they don’t know when their plan is possible legal trouble. In this retirement plan business, you get what you pay for and sponsors of these small plans (SEPs or SIMPLEs) pay nothing. They get no administrative help and absolutely zero financial guidance. The people who need the most don’t get it because they have convinced themselves that simpler small business plans are better. When it comes to savings and compliance, a fully qualified plan is the way to go.

That is why I believe more focus is needed in trying to convince these small plan sponsors that the world of qualified plans might cost more, but the costs are outweighed by the efficiency and retirement savings they bring.

It is amazing that with the advent of Pooled Employer Plans (PEPs) just a few weeks away, there is still a great unknown.

We just got the registration requirement down pat and that’s about it. One of the great unknowns is any prohibited transaction issues if one of the current plan providers takes on the role of the pooled plan provider. Will there be exemptions made?

I’m sure the pandemic played a part in this strange rollout, but we usually get more concrete rules in place before all of us in this industry take a big step towards something new.

The Department of Labor has finally announced a final rule establishing registration requirements for pooled plan providers under the SECURE Act.

The SECURE Act established the pooled employer plan (PEP). Pooled employer plans must be administered by a “pooled plan provider.”

The SECURE Act allows pooled plan providers to start operating pooled employer plans beginning on Jan. 1, 2021 but requires that pooled plan providers register with the Secretary of Labor and the Secretary of the Treasury before they begin operations as a pooled plan provider.

The final rule establishes a straightforward electronic registration for entities that want to operate as a pooled plan provider. Except for the period of Nov. 25, 2020, to Jan. 31, 2021, the process will require pooled plan providers to register at least 30 days before beginning operations. 

Registration with the Department of Labor will satisfy the requirement to register with the Secretary of the Treasury.

With a President Joe Biden in January, expect some major changes with the Department of Labor.

However, there might be a race with certain rules. Any rules that have not been published in their final version in the Federal Register within 60 days of the inauguration, which is scheduled for Jan. 20, can be reversed by Congress and the Biden administration can freeze progress on any proposed rules that have not been finalized.

The DOL’s finalized rule, which targets the use of ESG funds in retirement plan investments, would require a lengthy rulemaking process to reverse. Assume that the current DOL will race against the clock to finalize the proxy voting and investment advice rules. Assume if the new, new fiduciary rule isn’t finalized, a Biden administration will try a new fiduciary rule of their own.

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

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

A restatement process isn’t required by the Internal Revenue Service so that ERISA attorney can bill for drafting new plan documents. It’s required so that a retirement plan has a document that is current with the law.

As we start a new process, it’s a great time for a plan sponsor to review terms of the plan to make sure it’s still applicable to the employer. Perhaps eligibility needs to be changed, perhaps Roth 401(k) should be added. It’s a perfect to see what provisions of the plan still work and what needs changed.

I have spoken to many third-party administrators (TPAs) regarding Pooled Employer Plans (PEPs) and many are hesitant to offer them. Rather than offering them, they are considering offering better pricing on the micro or small plan market.

By focusing on more competitive pricing, they may avoid some of the disappointment in creating PEPS, where hopes don’t equate substantive plan assets.

Articles about presidential nominees and their 401(k) proposals are always amusing because all they are, are proposals. Political reality always gets in the way of proposals.

There was much discussion that Joe Biden would try to jettison salary deferrals in favor of some type of tax credit.

Thanks to Republican gains in the house and likely control of the senate, it’s unlikely that Biden could get that proposal off the ground.

Expect any changes through a Biden controlled Department of Labor that may issue a stronger fiduciary rule and the likely end of that ESG investing proposal.