The Rosenbaum Law Firm P.C. Blog

As an ERISA attorney an ERISA 3(16) administrator, I’ve been asked by many clients, advisory firms, bundled providers, and third-party administrators. Many advisory firms want their own pooled employer plan (PEP) and I think they should think again.

As someone with a lot of experience with open multiple employer plans (MEPs), I’ve been down this road before. Like with MEPs, almost everyone will come out with a PEP and 95% of them are going to fail. Why? It’s an asset accumulation game and while a PEP looks great on paper, it’s still a hard sell for many potential adopting employers. I also know that most advisors won’t cannibalize their existing business by shifting single-employer plan clients into the PEP. Without assets, the costs of an audit are going to eat into any potential savings for adopting employers. I work on an association MEP that has been in business for 7 years and it’s finally north of $100 million and audit costs are still an issue.

Unless you know you can attract $20 million in the first 18 months, think again about your PEP and think of larger PEPs that will able to offer your fund lineup and the opportunity to white-label their plan for your purposes.

As you know, I’m always here for a call regarding PEP opportunities.

Your third-party administrator (TPA) might be asking for the work email addresses and you’re wondering why? Don’t worry that they’re selling products and services. The email addresses are preparation of your TPA getting into the 21st century with the new electronic disclosure of plan notices regulation.

Getting your participants to get email disclosures is going to eliminate the headache of mailing out and distributing paper notices. It’s a win-win because tons of trees will be saved and there are potential cost savings. Of course, participants can always opt-out and receive paper disclosures, but life under e-disclosure rules will never be the same.

I planned on a Las Vegas conference for December, way back in May. I don’t think I was ahead of myself because I anticipated the COVID pandemic was going to be done by the end of the Summer.

Of course, we’re near the end of the summer and this COVID doesn’t seem to be going anytime soon. I got an email from someone I respect in this business and she told me that her firm won’t allow outside travel until April 2021. With that kind of rule from such a large provider, I don’t see how I could schedule anything live until next spring. Hopefully, we have a vaccine before then but looks like more virtual events from here until next Spring. It is what it is.

That’s why That 401(k) National Virtual Conference will be totally virtual on January 21-22, 2021.

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

It seems like every week, there is another major lawsuit against a plan sponsor and one of their service providers.

Allegations of impropriety are just allegations until decided by a trier of fact of whether they are substantiated or not. Just because a plan sponsor and their service provider is being sued, doesn’t mean they did anything wrong.

ERISA litigators have to eat too and sometimes they pick cases that aren’t going to put food on the table. I’ve seen too many lawsuits against some big-time plan providers that I know will end up going nowhere because the service provider is alleged to have done something wrong is being sued because the ERISA litigator is considering that service provider is a fiduciary. Alleging that a service provider is a fiduciary is one thing, proving that is a lot harder.

ERISA litigators like to go fishing and they like big fishes like Fidelity and Vanguard. Whether they catch them or not is a whole other story.

It seems everything is political. I believe the purposes of Environmental, Social, and Governance (ESG) is political and I believe that the Department of Labor’s questioning of a fiduciary’s use of ESG funds on a fund lineup is political too.

That being said, it’s really important to review your investment policy statement as it pertains to ESG funds if you hold them to make sure that you comply with the DOL’s current thinking/guidance.

If you’re ever audited by the Department of Labor, it’s important to have your ducks in a row.

I love Las Vegas and the last two times I was there; I didn’t gamble a nickel. I hate gambling because I hate to lose. For me, getting up in the morning is a big enough gamble.

A lot of plan sponsors gamble when they refuse to self-correct a compliance error, trying to gamble that the statute of limitations will run out on the plan year’s Form 5500, so it won’t be audited by the government. When the cost of correction is dwarfed by any potential levy bt the government, I think it’s a fool’s bet to gamble against an audit because if you’re the plan sponsor, you’re gambling your money, not the house’s.

Self-correction and voluntary compliance are the ways to go in correcting plan errors, gambling against an audit isn’t a way. Not only will refusing to fix an error get you fired by any reputable third party administrator, it also means you are at the mercy of an auditor when audited.

I always joke that I get rid of old grudges to make way for new ones. Recently, an advisor asked about a well-known third-party administrator (TPA) for a plan that I serve as a fiduciary. This TPA has a very good reputation as is well known for a certain part of the 401(k) industry.

Being too honest to a fault, I told the advisor about my issues with the TPA, which results from a job offer that went awry a very long time ago. Let’s just say the job offer salary was well below what they advertised the ERISA attorney position for. When I asked about flexible scheduling that they mentioned during my interviews, the job offer was yanked. In the end, I think things worked out better for me. It was a time in my life when my kids were much younger, the job would have been sort of a demotion at the time, and the travel (when gas was around $4 a gallon after Hurricane Katrina) would have been brutal.

The TPA looked like a great fit and I told the advisor because I wanted him to know the grudge I had and that the grudge would not be the reason I wouldn’t hire them. In the end, whatever you do, it has to be in the best interests of the plan participants. Get rid of grudges that might negatively impact your clients and plan particpants, and make ways for new ones.

Our world has been turned upside down by COVID. Even with me, I had to put all my live conferences on hold for 2020 and make changes when school was cancelled. We’ve all had to make sacrifices in one form or another.

What we can’t sacrifice is our reputation, our professionalism, and our relationship with our clients. If you’re a financial advisor, you still need those fiduciary reviews with your client, no matter how much they dry to delay you.

You have a contract, you get paid, just do your job.

Captain Kirk didn’t believe in the no-win situation, he learned the hard way in Star Trek II: Wrath of Khan.

There are certain situations as a plan provider where a client relationship puts you in a no-win situation. It could be the difficulty of the client or difficulty in working with other providers. A few weeks back, a registered investment advisor advised me of issues with a brokerage team they had to work with on a particular 401(k) plan. The problem is the advisor was the stick in the wheels for the brokerage team, who made it very difficult for the advisor to properly work with the client. The advisor resigned, as it clearly was a no-win situation in working with a brokerage team that was more interested in their inflated fees, than providing quality services to the plan sponsor. The advisor knew that this was a relationship that could never be cordial or built on trust, it would be a fight every step of the way.

As I’ve said before, there is no shame in quitting when things don’t work out and there are certain no-win situations where quitting is the best option.