They will remember what you do for them, good and bad

The retirement plan business is a relationship-driven business and I learned from the best in the relationship department. Richard Laurita was the top salesman at both third-party administrators (TPA) I worked at and 11 years after his untimely death at age 39, people still remember him with great affection because he really knew how to treat people well. Some of the relationships that Richard had I kind of inherited because Rich was kind enough to introduce these people to me and you see these relationships behind the scenes as That 401(k) Conference.

Speaking of That 401(k) Conference, an advisor who I talked on the phone a few years back attended the event at Wrigley Field. This advisor has done a heck of a job using social media and blogging and he was kind enough to mention to a plan provider how that when he called me years ago about social media advice, I took time out of being with my kids to talk to him on the phone and give him some free advice. While I remember talking to him, I don’t remember that I was eating dinner at the time, but the advisor remembers it vividly. The advisor has done a good job with social media because he’s putting out consistently great content.

The point here is that I helped this advisor and he remembers that I took time out of my day to help, on the house. I pay it forward because people like Rich helped me and I always remember who helped me.

On the flip side, I remember everyone who didn’t help me when they could or were cruel for the sake of being cruel. I’ve been fortunate to meet many co-workers, a few supervisors, and lots of other providers who helped me when I asked for it. For example, I was on vacation in a city where someone I used to work with, lived. Instead of reaching out, I remember sending him a resume when he became head of a TPA and never bothered to respond when the TPA we used to work at, was closing up shop. I try to treat people the way I wanted to be treated. Most of the time, it’s meant with pleasantries back, a few times it’s not. Regardless, I remember who have helped me and who did not.

I tell you it’s a lot nicer to hear some flowing things from someone who is grateful rather than hearing from others that you were mean to someone.

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The need to avoid the old mistakes of Open MEPs

As we await the Department of Labor’s (DOL) final guidance pursuant to President Trump’s executive order on multiple employer plans (MEPs)  and whether Congress tries to pass legislation, it’s important to think about some of the problems that Open MEPs actually had prior to the issuance of the Advisory Opinion in 2012 that held that MEPs weren’t a single plan if there was no commonality among adopting employers.

I’m not going to beat a dead horse, but one of the issues I’ve always had was the plan in the Advisory Opinion that was seeking the DOL’s blessing. It was a plan where the plan sponsor was essentially a company set up by a plan provider that was an affiliate of the financial advisor, I would call it a fake company. If I recall, the plan had over a billion dollars in plan assets and it contained such high fees that I believe the plan defeated the purpose of an Open MEP. I believe that one big purpose of an Open MEP is to allow small plans band together for better pricing and less fiduciary responsibility and this insurance based product (it was on an insurance company bundled platform) was extremely high in fees.

The second problem was who will be plan sponsors for Open MEPs. I say this as someone who had the unfortunate task of succeeding Matt Hutcheson as a fiduciary of the one MEP he didn’t steal from. Matt is still serving a 17-year sentence for stealing from two, trustee directed MEPs (Google for the amazing, true story). My concern is with any guidance, who will be able to serve as a plan sponsor and fiduciary, I just don’t want anyone like Matt Hutcheson to come out of nowhere and be in control of the retirement assets of multiple employers.

The third problem is that one bad apple rule, I would love to see guidance that would allow a MEP to have the full power to spin off the assets of an adopting employer that refuses to clean up the compliance issues on their end that may cause harm to the qualification of the entire MEP.

No plan is perfect and neither is the design for an Open MEP. Hopefully, the DOL can issue guidance that can clean it up.

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Make sure participant records are secure

Being a plan sponsor is difficult because you’re a plan fiduciary which requires the highest duty of care. Running the plan is hard and making everything operates according to the law is important. Not only that, but you also need to make sure that plan records are secure.

Cybersecurity is a big thing and it’s discounted way too much. There is a dark web there with people trying to pierce websites and steal plan participant information, especially social security numbers.

So as plan sponsor, you need to make sure that your records and the records held by your plan provider can withstand any cyber attack.

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The Boogeyman of MEPs

When they’re always talking about multiple employer plans (MEPs) and the tribulations with that 2012 Department of Labor (DOL) advisory opinion and the latest proposed regulations, talk often surrounds Matt Hutcheson.

Matt Hutcheson was the self-anointed fiduciary expert because of a fawning PBS Frontline episode on 401(k) plans who stole around $5 millions from several MEPs where he was the plan fiduciary. I had the unfortunate experience of knowing Matt and succeeding him as the fiduciary from the only MEP he didn’t embezzle from.

Matt has often become the MEP boogeyman because of his theft and is often uses an excuse for the DOL’s wariness of dealing with Open MEPs. I think his impact is overblown because of his crime wouldn’t happen with other MEPs and other fiduciaries getting the wrong idea that they should pocket plan assets for their own use. Matt had delusions of grandeur, the first time I talked to him in 2012, he claimed he was a candidate for Secretary of Labor under a second Obama or Mitt Romney administration. At that point, I should have run away, but I didn’t. He also wanted to be a savior in Idaho by buying a bankrupted ski resort, so he used plan assets to achieve that goal. He also used plan assets for his own personal gain including personal purchases. Matt was able to steal so much because the MEPs were invested in assets by him and not by plan participants. He was able to steal so much and get away with it for a time because participants didn’t direct their investments into mutual funds. It took the third party administrator (TPA) to wise up about Matt’s shenanigans and reported him to the DOL.

Matt’s theft is no different than the alleged theft of plan assets by a certain principal of a TPA in Dallas.  Jeff Richie from Vantage Benefits is accused of stealing more money than Matt and he allegedly did that as the TPA and the ERISA §3(16) administrator. Does that mean you shouldn’t hire a TPA who is also the ERISA §3(16) administrator? I don’t think so, thefts by plan fiduciaries can happen at any point at any time. What any good plan sponsor needs to do is to be properly insured and vet any plan provider. Anyone looking at Jeff Richie would find out that he was banned from the securities business by the Securities and Exchange Commission and Matt Hutcheson’s resume besides that PBS show was paper-thin.

There are a lot of issues about Open MEPs, but I don’t think that what Matt Hutcheson did is a reflection about those plans. A fiduciary with a deviant mind will steal from any plan if they can whether it’s a single or multiple employer or multi-employer.

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Bad Reasons For Hiring 401(k) Plan Providers

My latest article for can be found here.

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Be Real

When my grandmother was going in for surgery to remove the tumor on her Pancreas, I told my grandmother how much I loved her and I remember her telling me that she knew what I said was real. She told me that while other people profess love, she knew my feelings where genuine. When she died from complications from the surgery a couple of days later, there were a couple of relatives who felt a little uneasy about what my grandmother. Maybe they felt a little insecure in their feelings, maybe they felt guilty.

When it comes to feelings, people will know when you’re genuine and when you’re not. As a plan provider, you need to care for your clients and your clients know whether those feelings are genuine or not. When things go wrong or there are issues to discuss, they know whether you care for them or not.

Many years ago, I was going to a meeting with a client with that semi-prestigious law firm’s managing attorney where the chief operating officer was a former work associate. The chief operating officer was telling the managing attorney all about his kids and how his son was so involved with high school hockey It was interesting to listen and I certainly had no issues Afterwards, the managing attorney pulled me aside in her car and told me that she could care less for what the chief operating officer had to say about his kids. In the 20 years, I’ve been in this business, I have never heard anyone talk about their client that way. Clearly later, the client probably knew about those feelings and a change of law firms was made. You have to care for your clients and you have to be genuine in that care.

Dealing with clients is like any other relationship, they have to be properly managed and every client is different and should be managed accordingly. Clients have different needs and different temperaments. They often joke that 20% of your clients will take up 80% of your time and I’ve found that’s true. There is no one size fits all in dealing with your client, so every relationship has to be treated differently.

You can always try to fake interest or concern for your client, but over time, that lack of genuine feelings will be detected.  So be realistic in your feelings and relationships with your client.

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That possible RMD issue and what it means to you

While President Trump signed an Executive Order that directs the Department of Labor to promulgate regulations to make it easier for companies to join multiple employer plans, he also directed the Internal revenue Service to change the required minimum distribution  (RMD) rules as it pertains to the factors used in calculating them to reflect that people live longer.

By increasing the factors for RMD distributions to reflect that people live longer, people who have to take RMD distributions will end up taking out less money each year since actuarially, people do live longer.

What does that mean? It means clients who have Individual Retirement Accounts will be able to keep more of their money in those clients, so you will retain more assets under management. For your retirement plan clients, that means people working after 70 ½ and who are also 5% owners will be able to keep more money in those plans as well (as non-5% owners don’t have to take out RMDs until they retire).

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IRS to target excess 401(k) deferrals

When I do my own taxes and the income taxes for friends, the software I use will alert me when I make a mistake and perhaps, enter an amount in the 401(k) deferral box on Form W-2 that is in excess of the annual limit for plan participants. The annual limit ($19,000 in 2019, not including catch-up) is per participant, no matter how many 401(k) plans they’re in.

Yet, there are many individuals that somehow exceed the limit. The problem is that the Internal Revenue Service (IRS) will be after them.

The Treasury Department’s Inspector General for Tax Administrator (TIGTA) has a report that suggests that many 401(k) workplace retirement plan savers are pushing the limits, which is costing the U.S. Treasury.

TIGTA’s recommendation: bring lax employers and errant taxpayers into compliance. The IRS’ response: It will beef up employer education and conduct targeted audits for taxpayers who appear to have excess 401(k) deferrals, especially those with multiple 401(k)s.

The TIGTA reports that many 401(k) plans don’t have controls in place to prevent employees from exceeding the annual limits. The problem usually arises when taxpayers get tripped up when contributing to multiple 401(k) plans.

Based on a sample of 2014 tax returns, TIGTA estimates that 1,400 taxpayers appeared to have gone over the limits when contributing to one 401(k) and would owe additional taxes of about $8 million if found to be noncompliant. An estimated 13,200 taxpayers who contributed to multiple 401(k)s potentially exceeded the limits and would owe additional taxes of about $33 million.


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That 401(k) Conference will hit St. Pete this March

I am proud to announce That 401(k) Conference will be emanating from the confines of Tropicana Field on Thursday, March 7, 2019. Information on this site will be provided when ready.

This will be in addition to our inaugural That 401(k0 Plan Sponsor Forum, which will be catered to plan sponsors. That will be held at the same place, the next day, on Friday, March 8.

Any plan providers interested in sponsoring one or both events should contact me.

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It could be you

Prior to starting my own law firm, I made many different employer changes over the years to the point that my position as the managing attorney of myown law firm is the longest time I’ve been employed at one place and that’s only 8 years.

Am I going to blame the employers I worked for? Sure, they were short in the Christmas bonus department and I thought they didn’t have any long-term vision, but the only common thread between these four employers was your truly. So rather than blaming them for that checkered employment history, the fault lies with me. Some birds aren’t meant to be caged and some people need to work on their own So rather than blame them someone else, it’s important to look within.

If you’re a narcissist, there is no point in reading your article because you’re always right (at least in your mind). If you’re like most of us, you may realize that if you have a pattern of client problems or employee problems or problems with working with other providers, it may make sense to look at yourself. When you look at what you do, you may realize some of the mistakes you made in developing and maintaining relationships. I’ve learned in life and in business, growing as a person is just as important, if not more than growing your business.

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