The Rosenbaum Law Firm P.C. Blog

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

When I was at law school at American University Washington College of Law, I was the Executive Editor of The American Jurist, which was the student newsmagazine for my final year of law school. I wasn’t a particularly fond fan of my law school, I think they made promises to students that they couldn’t deliver on and some of the great opportunities like their law clinics were only available to a small group of students. For example, while I was led to believe my interest and coursework in tax law would merit me for consideration in the tax clinic, I did not get a slot for the tax clinic because my name was literally not pulled out of a hat. So my year as the top editor was dedicating my columns to lambast what was wrong with the school and suggestions on how to improve certain aspects of it like the career services office, the journal and law clinic selection process, and orientation.

Certain students and faculty were very critical of my views because they said my columns would have a negative impact on the school because potential students would read the columns and then not got to our school because of what I wrote. It was pure nonsense because my columns criticized the school and then offered suggestions on how to fix the problems I pointed out. After I graduated, many of my suggestions were acted upon by the administration and I am proud of my role in helping the school out.

People don’t like criticism, they can’t handle it. If you criticize, you get labeled as a hater. It’s a label to discredit you and your opinion. I see that all the time on the community Facebook groups where people who have criticized elements of my local village are told to move. If you only allow nice, happy thoughts about things, you never get better.

Many years back, an advisor I know sent an e-mail to one of the big movers and shakers in the 401(k) industry. The mover and shaker were one of these industry spokespeople who were against any type of fee disclosure regulation.  The e-mail had a simple quote from an outspoken columnist who has been critical of the abuses with the 401(k) industry. The 401(k) big shot was very offended by the quote and took many exceptions to it.

My point is that there are enough problems within the retirement plan industry to criticize and simply attacking those that do is certainly not going to help the industry out. Those that try to shout down those 401(k) critics do a disservice to the industry because it is those critics on fees and investments that have helped spur change within the 401(k) industry. That being said, there are those who consistently attack 401(k) plans without a suggestion to improve them or a realistic way to help the retirement savings crisis in the country. When managed correctly, a 401(k) plan is one of the best employee benefits out there that has helped plan participants save for retirement and lower their current taxable income. People within this industry don’t have to be like Anthony’s neighbors in the Twilight Zone episode “It’s A Good Life” and think “nice, happy thoughts.” If you see something wrong within the industry, say something and offer a way to make things better.

Those that believe that the retirement plan industry is perfect and call those that criticize it are haters are members of a flat earth society who don’t have tolerance for the free flow and exchange of ideas. There is a lot of right and wrong with the retirement plan business, don’t be afraid to speak up in trying to improve it.

I may not remember what I ate for lunch yesterday, but I remember everyone who was ever nice to me when I first started working and I remember better the ones who didn’t. I worked with a lot of people over the years and I just never wanted to be remembered as the backstabber, the yeller, or the insulter.

Even when dealing with impossible bosses, ineffective co-workers, or clueless fellow plan providers, I always made a choice that I wanted to be kind. I never wanted to come off as the workroom bully because life is short and life is tough and there is no sense in. hurting others. I have a friend of mine who I know back from the day when I was a law clerk for a law firm in Boston when I was getting my LLM while he was a first-year associate. When we talk, we will mention certain partners at the firm who may or may not still be there and I will mention the partners who were absolutely cruel. Everybody can have a bad day here or there, but I’m talking about people who were just cruel, all the time. It’s 22 years later and I’ve gotten over all of the nonsense, but I don’t forget.

You have a choice, be nice, or be cruel. It’s easier to be nice and it’s better for everyone to be nice.

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This summer will be Camp Ary as both of my kids had their camps canceled for the summer, thanks to the Coronavirus. My son’s sleepaway camp and my daughter’s day camp were canceled. While both camps were allowed to open, they both realized that camp with social distancing wasn’t camp, so they decided to cancel.

Realizing that they couldn’t be what they away were, these camps were honest with their customers that they couldn’t operate the way they wanted to. They had too much dedication to what they do to continue with a camp season that could pose damage to the health of staff and campers, as well as providing a subpar experience. A local camp that my kids used to go to has decided to open because the owner has three adult children to support as well as their children. With a poor refund policy and a very secret discussion of details and programming, this local camp will have a scorched earth policy that will probably negatively impact their business for years beyond 2020.

When dealing with clients, you have to be honest about what services you can provide and be honest about what you can’t provide. Being frank with your clients goes a long way in keeping them as long term clients.

It’s great that the Department of Labor (DOL) has finally embraced the electronic disclosure of important ERISA notices. It took them a long time, but when your business is trying to protect participant rights, this is what you have to do, wait.

I’m a big fan of e-disclosure because it eliminates the bulk of the headaches associated with participant notices, mailing them, Also, it will save the lives of countless trees and it should save money for plan providers by eliminating mailing costs (much of which is directly passed on to the participants). With so much competition in the retirement plan marketplace, I can’t see third party administrators simply putting any savings in mailings in their pocket.

The Internal Revenue Service (IRS) Voluntary Compliance Program (VCP) is one of the best methods for retirement plan sponsors to come clean and cost-effectively fix their plan errors, rather than getting hammered with substantial fines and penalties on an IRS audit. Like a good checkup, a VCP audit is a great way to find all the errors and correct them.Recently, a client retained me to work on a VCP issue. We needed the IRS approval on a retroactive amendment. A week later, they also realized that there was a loan mistake. They asked whether a new VCP application was necessary and I advised them that it wasn’t. Legal and program fees for the VCP program can be costly, so plan sponsors must discover all the plan errors that can be taken care of under one VCP program submission

When fee disclosure regulations were promulgated in 2012, you could see the changes a mile away. While some chicken littles thought the sky was falling, I knew it would lead to a more competitive marketplace and there would be no race to zero. While the COVI-19 pandemic doesn’t seem to be ending anytime soon, it might be a good time to ponder what changes this pandemic will have on the industry. I see two major changes:

1) There will be less business travel and there will be fewer mass gatherings. While I envision starting the regional That 401(k) Conferences again, That 401(k) National Conference might become a virtual event. I suspect those plan providers will think twice of allowing their professionals free reign in travel.

2) Virtual enrollment meetings are going to be more prevalent. Allowing plan providers the opportunity to enroll participants and provide plan/investment information virtually will allow plan providers to trim costs in travel (and possibly staff).

3) Push to adopt-disclosure regulations. Most plan sponsors will opt-in, it only makes sense to save money on mailing and paper.

My latest newsletter can be found here.

I knew Jeff Richie from Vantage Benefits, spoke to him a couple of times ago, and wrote an article for his company regarding fiduciary services. Like with Matt Hutcheson, Jeff Richie was embezzling the money clients entrusted him with as a plan fiduciary. 

Jeffrey and his wife, Wendy Richie just pled guilty for embezzling $15 million from their clients. Wendy Richie admitted to two counts of theft from an employee benefit plan and one count of aggravated identity theft. Jeffrey Richie pled to two counts of aiding and abetting theft from an employee benefit plan. Their company served as third party administrator and 3(16)  fiduciaries for dozens and dozens of retirement plans.

Instead of depositing 401(k) contributions into their clients’ accounts, Wendy Richie transferred it into Vantage’s operating account, then into personal bank accounts.

Wendy Richie now faces up to 12 years in federal prison, while her husband faces up to 10 years. They may be required to pay restitution as well as a $500,000 fine.

As a plan fiduciary, a client entrusts you with their money. Robbing as a plan fiduciary is far worse than mugging someone on the street because clients trusted you and you betrayed that trust. No matter how bad their finances were, I don’t understand the idea that they could simply steal $15 million and think they could get away with it. I say you have better chances of robbing a bank and getting away with it. As a plan fiduciary for more than $150 million in assets, I never had a thought in my mind to betray the trust of my clients and steal money that I was trusted to hold.

I always joke that anytime there is a snowstorm, the local channels should just recycle their old stories about how people get prepared for the storm at the local Home Depot or supermarket. The same can be said about articles concerning 401(k) matching contributions and a bad economy. Yes, Virginia, matching contributions get cut when the economy is bad.

Some 12% of employers have suspended matching contributions to their 401(k) plans, and an additional 23% were planning to cut their match or were considering it, according to a Willis Towers Watson survey. A separate survey by the Plan Sponsor Council of America found that nearly 22% of companies with 1,000 or more employees are suspending or reducing matching contributions to 401(k) plans.

Do we know when matching contributions are restored or increased? When the economy is better.