I would take it with you

One of the things that many experts disagree with is whether participants should keep their account balance within their former employer’s 401(k) plan or roll it over to an IRA. Obviously, cashing it out is never a good option.

There are many financial experts that will tell you that former employees are better off keeping their money in the 401(k) plan because of the lower cost of investments because of the size of the assets in the 401(k) plan. My two cents is that in an ideal world, that would make sense. However, we don’t live in an ideal world. Former employees may not receive important notices and are less likely. To get important investment education that current employees would get. Also, knowing how things work in plan administration, I’d want to take my retirement money with me if I left a job.

Posted in Retirement Plans | Leave a comment

October was a light trading month

It seems that October was a light trading month for 401(k) plan participants, according to the Alight 401(k) Index.

Just 0.012% of 401k balances were traded daily. Trading inflows mainly went to stable value, money market and bond funds. Outflows were primarily from target date, company stock and large U.S. equity funds.

The asset classes with the largest percentage of total balance at the end of October were target date funds at 29%, large U.S. equity funds (26%) and stable value funds (10%). Target date funds accounted for 50% of contributions in October, followed by large U.S. equity funds (20%) and international equity funds (7%).

Posted in Retirement Plans | Leave a comment

SECURE 2.0 will eventually happen

So much of what happens with the retirement plan business is dependent on politics. Almost all of our rules are put forth by the Federal government, so what happened in the mid-term elections had an impact.

I don’t know if SECURE 2.0 will get passed in a lame-duck session of this current Congress, but I think it will get passed eventually because it’s one of the few pieces of legislation that will garner support from both sides of the political aisle.

Posted in Retirement Plans | Leave a comment

The Stranger Things That 401(k) Plan Sponsors Should Be Aware Of LinkedIn Facebook Twitter Send

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

Posted in Retirement Plans | Leave a comment

The problem of Fred

When your practice is successful as a retirement plan provider, you’re going to want to hire people who work outside the retirement plan business to help you manage your firm because the day-to-day running of a business doesn’t just need someone who is experienced in retirement plans. Hiring a chief operating officer or office administrator is extremely important for growing any business and you’re going to want someone who is experienced in helping run a business.

I’ve worked for several businesses over the years and the most smoothly run businesses are usually the ones where the owners seek outside help in many of the important business functions like practice management and Human Resources.

When you hire someone to help with the day-to-day running of the business, you need someone who has experience in dealing with the nuts and bolts rather than someone who likes to talk and write about practice management without actually practicing it.

In the 12 years, I worked for someone other than myself, I worked with hundreds of different employees including bosses, people on my leadership level, and those who worked below and I have to say the co-worker I liked least was the law practice administrator at a law firm I worked at, called Fred.

Fred was the law firm administrator or at least he claimed he was. Other than reminding attorneys to submit their timesheets, he did very little in helping the managing attorney run the firm. He tried to act as the gatekeeper to the managing attorney, but he was, was a snitch. I remember him telling me that I should send a proposed client solicitation letter to him so he could edit it and send it off to the managing attorney so it would help with the process. So I drafted a solicitation letter to Fred and he never edited it, he gave it to the managing attorney and I had to get an earful from her on how bad it was. I remember Fred once told me that my goal of starting a national ERISA practice is one of the ones he concentrated on expanding for the Firm in 2007. I’m still waiting on him in 2022 to help.

My biggest gripe about Fred is his use of the marketing department to publish his articles. Now I’d write articles for the firm to get clients or build relationships with plan providers. In the two years I was there, I’d write three articles, which is less than my haul at my practice in a week. The problem was that not only did my article have to get approved by three different partners. I had to deal with the fact that Fred was clogging the marketing department with his articles. The problem with his articles is that they had to do with law firm management and that’s not one of the businesses that my law firm was in. We were in the business of law and his articles on law firm management weren’t going to draw us a dime. Fred was using law firm resources to prop up his image as some sort of law firm management guru, which he wasn’t. No one in the firm or the marketing department would say anything because he supposedly had the managing attorney’s ear. He’d write an article a month, which was wasting law firm resources that could have easily been spent publishing articles from attorneys that could help generate business.

The production of his articles ended at some point and I think it coincided with the fact that I started my firm and I would write articles lampooning what he was doing. I knew he was reading my work because he was accosting members of the marketing department, accusing them of egging me on in my articles which weren’t true. After all, I don’t need any help in getting egged on. Needless to say, Fred moved on from that law firm, and of course, moved on to a larger law firm where he tweets articles he doesn’t write and he’s not misusing that law firm’s resources to publish his articles.

The point is that you need to hire the best of the best to help your practice, not some narcissist who thinks they’re a celebrity in their own right when all they are is a fan of the concept of practice management without practicing it.

Posted in Retirement Plans | Leave a comment

The things about ultimatums

What’s an ultimatum? It’s a final, uncompromising demand or set of terms issued by a party to a dispute, the rejection of which may lead to a severance of relations or to the use of force.

Even though I’m very opinionated and that rubs certain people the wrong way, making ultimatums is not something I do often for a variety of reasons and I suggest that it’s something you should issue very infrequently in business.

The problem with ultimatums is that most people don’t understand the consequences of making one. Usually, they issue it in haste and when their demand isn’t met, they fold or pretend they never issue done. The only thing worse than making an ultimatum isn’t following through when you issue it, it shows your word and your bond is weak.

The other problem with making an ultimatum is that when people make it, they usually think the other side will actually give in so that means that they’re not prepared that they‘re going to fulfill the obligation of their threat. You make an ultimatum, you have to think that they’re not going to give in and you’ll have to make good on your threat.

You need to try to avoid making ultimatums. Life and relationships are a game of give and take, there should always be some line of communication to bridge a gap between you and the parties you have a problem with, whether they are clients, employees, or family members.

I’m sure many of you know that I was a Vice President of a non-profit organization. There were going to be new elections and without being consulted, they were going to bring back a former President as another Vice President. While this former President did a good job in cutting expenses, his record on fundraising was dreadful. He tried to hire an inexperienced member of the organization as a secretary and he had no interest in growing the organization. I told the incoming President (who obviously made the choice) that I couldn’t work with the former President after the things he did and that if she did not withdraw his nomination then I would withdraw my nomination for re-election. I know things about people and I knew she wasn’t going to back down and she was probably called my bluff. She called my bluff and I withdrew my re-nomination. You should always be prepared so that they won’t give in to your demands.

Ultimatums aren’t best business practices and should only be issued when your personal integrity is at stake if your demand isn’t met.

Posted in Retirement Plans | Leave a comment

Web access makes it easier to steal

14 years ago, I worked on a union money purchase plan. A participant claimed that their distribution check was stolen and demanded his benefit. The only problem is that the check was cashed at a check cashing place and a camera caught that plan participant cashing in his check. The union didn’t want to prosecute, so I had the participant waive his claim since he was paid.

I started in this business when everything was done by paper or by phone. In 1998, I didn’t think the web would allow such access that loans and distributions would be requested online. In 2000, I was just lucky to get my 401(k) balance by source and fund. Easier web access is only going to increase theft. These attempts will be far more successful than those who claim my Wells Fargo bank account was frozen since I don’t have any.

As a plan sponsor, you need to be more vigilant about the capabilities of your plan providers to detect fraud and do your job to avoid these thefts.

Posted in Retirement Plans | Leave a comment

Delaware latest state to add Auto IRAs

Delaware is the latest state to require employers to offer a State IRA program that doesn’t offer a 401(k) or similar workplace plan.

Delaware Gov. John Carney signed into law, legislation that will create a state-run program to automatically enroll eligible private sector workers in Roth IRA accounts.

The program, Delaware EARNS, will be enacted in 2025. For advisors in that state, it may be another opportunity to push Pooled Employer Plans (PEPs).

Posted in Retirement Plans | Leave a comment

Empower sued over 457 plans

A class action lawsuit was brought forth by former 457 plan participants in run by Empower Retirement and affiliates Great-West Funds and Putnam.

The lawsuit was filed under the Investment Advisers Act, the federal law that regulates investment advisers.

Additional defendants are Advised Assets Group, Great-West Lifeco, Great-West Life & Annuity Insurance Company, Empower Annuity Insurance Company of America and Empower Advisory Group.

The lawsuit alleges Empower used deceitful sales practices to boost use of managed accounts and that fraudulent sales practices comprised a breach of fiduciary duty to participants. It is alleged that Empower told government plan advisers to use fraudulent sales tactics that caused employees to sign up for the higher fee managed account option, filled with Empower-affiliated Great-West and Putnam funds and owned by Empower.

The lawsuit seeks class action status. The complaint was filed in U.S. District Court for the District of Colorado.

Posted in Retirement Plans | Leave a comment

A 401(k) Plan Sponsor’s Guide To Hiring A Financial Advisor

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

Posted in Retirement Plans | Leave a comment