DOL on verge of issuing MEP guidance

Six years since the Department of Labor (DOL) advisory opinion that required commonality between adopting employers of the multiple employer plan (MEP) in order for the MEP to be considred a plan, the DOL failed to issues guidance on MEPs. Yet when the President talks, the DOL listens.

The DOL is set to formally propose a rule seeking to expand access to workplace retirement plans, less than a month after President Donald J. Trump issued an executive order calling on the agency to do so. The DOL just dropped off a proposed rule to the Office of Management and Budget (OMB).

The text of the DOL rule must undergo a review by the OMB (for financial impact) before it’s released publicly and made available for comment. The rule would be finalized after the DOL weighs public comments.

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The Rosenbaum Law Firm Review

My latest newsletter can be found here.

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Detail those hardship requests

When I draw up a new 401(k) plan for a client, I tend to be liberal in distribution provisions by allowing loans, in-service distributions at 59 ½, and hardship distributions. I believe that there are situations where a participant really needs their 401(k) money and I think they should have access.

While I think they should have access, these types of distributions such as plan loans (I know it’s a loan and not really a distribution) can have administrative headaches. One of those headaches are hardship distributions and it’s imperative that plan sponsors get documentation from the participants requesting to make sure they have a real reason for the distribution.

The Internal Revenue Service has been looking at hardships as part of their audits and they want to make sure that the requests are documented with evidence of the financial need for a hardship. Plan sponsors just can’t take a participant’s word, they need backup.

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The Problem with 3(16)

Over the last few years, we’ve seen the proliferation of companies offering ERISA §3(16) services. This is a natural growth of advisors offering ERISA §3(38) services, so 3(16) was a great way for third-party administrates (TPAs). Like 3(38), TPAs and other providers could offer 3(16) as an outsourcing solution where employers can outsource the headache of plan administration to a 3(16) named fiduciary.

The “Plan Administrator” of a qualified retirement plan is defined in section 3(16) of ERISA. The Plan Administrator should not be confused with a “Pension Administrator” or a TPA.

Unlike the TPA, the Plan Administrator actually has the following primary responsibilities:

◦     Ensures all filings with the federal government (form 5500, etc.) are timely made;

◦     Makes important disclosures to plan participants;

◦     Hires plan service providers if no other fiduciary has that responsibility; and

◦     Fulfills other responsibilities as set forth in plan documents.

A TPA is delegated these responsibilities, but the plan sponsor bears the responsibility. The §3(16) fiduciary/administrator assumes that responsibility, as the plan sponsor outsources it.

This is great, isn’t it? While I have been working with TPAs and financial advisor in trying to help them offer these services (cheap plug), I do see an issue? Unlike a §3(21) or §3(38) fiduciary that requires some sort of registration as a financial advisor, a §3(16) administrator much like a TPA does not need any accreditation. So nothing would stop someone from coming in out of nowhere and proclaiming themselves as the king or queen of 3(16) fiduciaries without having either the competence and/or honesty to be one. This industry has had its share of incompetent and/or fraudulent plan providers and without any requirement to be one, there will be an issue when a 3(16) administrator does go badly. Just look at the Vantage Benefits fiasco where a Dallas based TPA offering 3(16) stole millions in plan assets.

Another issue is that there is a wide variety of services that ERISA §3(16) may offer from a heavy 3(16) where they offer support with payroll reports and a light 3(16) where they may not even sign the Form 5500. So as a plan sponsor searching for 3(16) providers, you need to vet them as well as understanding what services they may actually provide.

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Classic 401(k) Plan Sponsors Mistakes That Often Leads To Costly Fixes

My latest article on can be found here.

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My Problem With Networking Events

I used to attend a lot more networking events when I first started my law firm when I had very little clients and I think that experience, unfortunately, made me attend far fewer events.

Networking is an integral part of building any business whether it’s a law firm, third-party administrator, financial advisor, or even a limousine owner. For me, networking is all about building relationships that can help you generate business. It takes time, lots of effort, and is quite rewarding in the long run.

The biggest pet peeve I have about networking is what I call the obnoxious direct sell. Picture being at a networking event and you own a third party administration company. You meet a financial advisor and the first thing he asks you is who is the financial advisor on your 401(k) plan. You just met this guy and he’s already trying to be your financial advisor. You barely know him more than a stranger on the street and he’s trying to sell you a service you probably don’t need if you did a diligent job of hiring an advisor.

To me, the purpose of networking is to meet people who are spheres of influence, who can refer you business when someone they know needs someone of your caliber to help.  These relationships require trust and they require time, so doing the hard sell to sell a service to this potential source of business is going to backfire.

When I’m meeting another retirement plan provider or another professional, I’m not going to ask them who their ERISA attorney is. They know what I do for a living if they listened to the introduction. If they like what they hear what I have to say, they will develop a relationship and if they need an ERISA attorney, they’ll call or if someone they know who needs an ERISA attorney, they’ll send them my name.

Networking is like dating. If you go too fast to the hoop, you’re likely to get blocked/rejected. Any good relationship is developed from trust that takes time and you need to see the bigger picture. Concentrate on developing pipelines of referrals and less on the quick score.

If you develop a good reputation in this business and you develop great relationships, you’ll make it. If you see relationships just as a direct way of selling, you’re going to fail and offend a lot of people.

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The problem with nepotism

When you have a family run business, nepotism is in a strong possibility when the children get involved. When my local school board doles out jobs to their kids, that I have a problem with. When a family run business does it, that’s their business. However, the problem with family run business and the next generation is when the second generation really doesn’t take their position seriously.

For example, when my daughter was in kindergarten, we enrolled her in a  family run camp. The first generation was a husband and wife who were teachers and started their own camp because they met as teenagers at summer camp. The cam was well run and they were professional. As years passed, the second generation took over and it just felt that the professionalism was starting to fade with a more college-like atmosphere. When my wife worked there a couple of summers there so that my daughter could attend, I learned on the inside and how it was being run like some sort of fraternity with a disdain for certain parent employees of the camp who had to work so their children could attend while incompetent counselors and staff were juiced in with the next generation.

Again, there is nothing run with a family run business and bringing family in as long as the family members being brought in are competent and professional in the way they conduct themselves in a day to day business.

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They Say Their Plan is OK, But Plan Sponsors Usually Have No Idea

My latest article for can be found here.

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Don’t panic if a provider you knows gets sued, but….

As a plan sponsor, you’re always going to run into another plan provider that is interested in picking you as a client. Plan providers can only grow their business by adding new clients, so it’s a part of the game.

As part of any client solicitation, it’s not unexpected that a soliciting plan provider will run down an incumbent provider especially if they’re getting sued. A lawsuit isn’t evidence of any wrongdoing and it’s pretty hard to find any large plan provider (especially plan custodians) who hasn’t been sued. Lawsuits don’t mean much as settlements because a lot of class action lawsuits get tossed before there is any settlement or verdict.

That doesn’t mean that you should ignore any news about litigation against plan provider especially when it’s something you can’t ignore like a lawsuit over stolen plan assets.

You should always be aware of what is going on with your plan providers, but the filing doesn’t necessarily mean that something is wrong.

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Don’t let the best employees be low in the pecking order

I’m a big fan of Survivor since day one. One of the more memorable seasons in the beginning was the fourth season on the island of Marquesas. Besides the first appearance of Boston Rob (who played his worst game), it was known for the first time were members of a dominating alliance defected to the other side and switched sides.

Two contestants named Paschal and Neleh realized in one of the immunity challenges what their place was in the dominating alliances pecking order. They realized that they were at the bottom and made the decision to switch sides.

Speaking as someone who has made some moves in my life, most of the time I make a change is when I realize how low I’m in the pecking order. Once I was working for a third party administrator (TPA) and I was the only ERISA attorney on staff. There were a handful of salespeople, conversion staff, administrators, and financial advisors on staff.  Based on my hard work and competency, one would think I’d be one of the most treasured employees, but I wasn’t. We had someone in charge who was threatened by excellent employees and that person championed the mediocre. We called that person, the chief operating officer. When I realized I was low on the totem pole and the chief operating officer was trying to find ways to attack me, I decided it was my time to go.

When you have great employees, you need to realize that they have feelings and egos. People want to be appreciated for what they do, whether it’s in salary or in commendations. You need to keep your best employees at the top of the pecking order because if they realize they’re low, they’ll go.


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