The Rosenbaum Law Firm P.C. Blog

My latest newsletter for retirement plan providers can be found here.

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

When dealing with companies that may act as an adopting employer for a multiple employer plan (MEP) or pooled employer plan (PEP), I think the worst thing you can do is to market the MEP and PEP to a company. You think I’m crazy, but I’m not.

Whether a plan you’re selling is a single plan, a MEP, or a PEP, a potential client doesn’t care. They have limited time to discuss this and they could care less that a pooled plan provider has to file their status with the Internal Revenue Service or Department of Labor. They don’t want to be bogged down with the details, they want to know solutions for retirement savings that could be a fit for them. Selling a PEP/MEP is the same as selling ERISA §3(16) and 3(38) solutions, what you would be selling is liability protection. Companies don’t need to know or care about the nuances of a MEP/PEP, all they care about what joining such a plan means to them. Cost savings should be talked about if cost savings are actual, not based on pipe dreams that are dependent on the plans achieving a certain asset size.

Companies want simple solutions they understand, not treatises on the SECURE Act and what it means for Open and Closed MEPs. Just my two cents.

You know the feeling, you’re competing for a retirement plan and you’re fairly confident that you are the best person for the job. Yet when the choice is made, you’re not picked and someone who won’t do as good as a job as you would get it.

On paper, decisions should be easy. We all have a belief that the best person should get the job. However, there is a thing called reality. While you might be the best provider to be hired, the ultimate decision-maker is a plan sponsor whop may not understand what they need to find in a plan provider. People are strange beings because many times, they defy logic. There are so many things that go into decisionmaking and there are several nuances that we can’t anticipate. Maybe one of the providers is related to a decisionmaker, maybe a plan provider and a decisionmaker belong to the same social club, Whatever the reason is, you will never get the insight as to why you weren’t picked and a lesser capable provider was.

I have a saying that you explain irrationality from a rational viewpoint. Just grin and bear the bad news. Ultimately, you will find plan sponsors that are more rational in picking plan providers.

One of the provisions of the SECURE Act increased the Internal Revenue Service’s (IRS’) penalties on late 5500s. Under the SECURE Act, late filers that miss their late-filing deadline will face a daily penalty of $250 versus the $25-per-day penalty in effect before January 1, 2020. Likewise, the maximum penalty has increased ten-fold, from $15,000 to $150,000. That doesn’t even include the Department of Labor’s (DOL’s) penalties, which is well over $2,000 per day.

So if you have a late 5500, consider a filing with the DOL’s delinquent filer voluntary compliance program to save thousands and thousands of dollars.

Fidelity has been under fire for its FundsNetwork 401(k) offering. The FundsNetwork is where various mutual funds, affiliates of mutual funds, mutual fund advisors, sub-advisors, investment funds, including collective trusts, and other investment advisors, instruments or vehicles that are offered to the plans through Fidelity’s FundsNetwork pay Fidelity to be a part of the fund lineup.

A class-action lawsuit by a participant of T-Mobile’s 401(k) plan claimed the payments were “secret payments to Fidelity for its own benefit in the guise of ‘infrastructure’ payments or so-called relationship-level fees” in violation of ERISA’s prohibited transaction rules.” Fidelity isn’t the only bundled provider with this type of fund lineup where fund companies make payments to be a part of the network.

The case was thrown out because Fidelity wasn’t a fiduciary and there was no proof that these “shelf-space payments” increase participants’ costs. Shelf space payments aren’t OK with me, but it is a giant loophole through the fee disclosure rules because there is no nexus between these payments and costs charged directly or indirectly by any plan provider to the plan.

Shelf-space payments will continue to exist as long as the Department of Labor doesn’t close the loophole that allows it.

Cross-selling is something I have always heard talked about, but not a lot of doing. Whether it’s a plan provider or a law firm, it’s something that should be done, but isn’t.

Participants in the 30,000 plans administered by Bank of America will have access to a new suite of banking and investment benefits. The 5.6 million participants in these plans will have access to retail banking options and reduced fees on mortgages if their employers opt to offer the benefits.

This is a no-brainer for Bank of America and probably any other provider that can offer other services and benefits. Of course, Bank of America isn’t a plan fiduciary and that it is a big deal for those providers that are because any type of selling by a fiduciary would raise possible prohibited transaction rule situations.  

My latest newsletter can be found here.

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

As a 401(k) plan sponsor, you need to make sure that all your plan providers understand any ownership interests in other companies that you may have and make a determination whether those interests constitute a controlled group or affiliated service group.

The problem is that if you don’t do the analysis, you may run afoul of the qualification rules because controlled and affiliated service rules treat the members of these groups as a single employer for most purposes. So if your company is a part of these groups and you do nothing, you may have a huge coverage problem if the other companies don’t have a similar retirement plan. Even if they do have similar plans, there could be discrimination testing problems since all companies need to be tested as one.

So when you get the census information, make sure you answer correctly when it comes to the questionnaire asking you about other ownership interests.