The Rosenbaum Law Firm P.C. Blog

As an attorney, I hate dressing up. If I could wear a Mitchell and Ness sports jersey to meetings and synagogue services, I would. One thing I hate is buttoning up the dress shirt. There always seems to be one button unbuttoned or one done incorrectly, that it looks like a mess.

As a 401(k) plan sponsor, you need to make sure you button everything in your plan and the problem is that most forget that last button, That last button is making sure that your participants get the investment education they need to make informed, investment decisions on their own.

You have to make sure your financial advisor gives participants the tools they need to make smart investment decisions. Otherwise, your plan might be unbuttoned.

There is always that line that you’re hired to be fired. No matter how great you are as a plan provider, you will certainly get fired by a client if you haven’t already.

However, if you’re consistently losing clients, it might be time to look in the mirror. I’m not talking about a client that fired you, I’m talking about a recent downturn and numerous terminations of your services. There might be a lot of reasons that could be affecting you (referrals to another provider that has gone bad, costs, competency, lack of communication, etc.), but you need to start looking in the mirror and developing a plan to right your ship.

It’s 2019 and lets face facts: behavior that might have been tolerated in the 1970s and 1980s aren’t tolerated today.

Thankfully, I’ve worked on my own for the last 10 years, so I don’t have to deal with the day to day nonsense that goes on with being an employee (there is a reason I went out on my own). If you have employees, understand their perspective and understand their feelings. They might not think your joke is funny and how you handle some sensitive topics as a joking matter.

You’re running a business, not a locker room. If you want to continue with the approach that it is, don’t be surprised if you get caught up in a joke that went awry and led to an EEOC complaint or litigation.

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

My latest newsletter can be found here.

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

I grew up in Brooklyn and the area I originally lived in is called Midwood and I lived right off a street called Avenue M. It has always been a Jewish neighborhood and over the last 35 years, it’s become more Orthodox.

Proof of that is a fish store located on Avenue M, a block away from the elevated Q train. The fish store is owned by a Korean family and they’ve been around for more than 30- years. When they first opened in the 1980s, they sold fish, which was next to shellfish (which isn’t Kosher). A few years later, they relegated the shellfish to the opposite wall. Eventually, they got rid of the shellfish and started to be Shomer Shabbos (closed on Saturdays and all other Jewish holidays). In 2019, they are still around and doing well. They knew where the customer base of the neighborhood was heading and they adjusted. They didn’t stubbornly decide to keep to the status quo. They realized that the customer base was changing and they changed their operation to meet that changing demographic. They’re still in business while the greatest Greek diner that ever existed a few blocks away, Caravelle, is long gone.

As a plan provider, you need to be ahead in the game and identify where the potential customer base is going and make sure your services and pricing meet that need. make sure your services and pricing meets that need.

When the 5500s are due and audits have to be completed, there is always an issue regarding late deferrals when the employer failed to remit these contributions as soon as possible.

As of right now, late deferrals are my most popular error to fix for clients. It’s not surprising as plan sponsors who make the mistake of late deferral deposits do it again and again. Any plan that has late deferrals have to self-correct their issue and make any earnings adjustments, based on how long it took to correct their error. While many auditors say that all a plan sponsor does is to self-correct, I disagree. I believe that any plan that has to self-correct, should also apply to the Department of Labor (DOL) Voluntary Fiduciary Compliance Program (VFCP). Why do I suggest that? Well, I’ve had clients who admitted that they made late deferrals and received correspondence from the DOL, noting that they don’t have a VFCP application from that particular plan sponsor. It’s a strong suggestion from the DOL that a VFCP application should have been filed. So that’s why I suggest that plan sponsors file a VFCP application because I don’t like correspondence from the DOL and it’s my concern that the lack of a VFCP application could make the plan sponsor a target for a DOL audit.

All plans with late deferrals need to self-correct, but I suggest a DOL VFCP filing (there is no user fee and the flat fee costs I charge won’t be that expensive).

Small employers have a tough time affording 401(k) plans, that’s a fact. 401(k) plans aren’t cheap and most of the savings touted by multiple employer plans aren’t there. So many companies and governments are offering SEP-IRA or other IRA programs (SIMPLEs) to get employees covered if the workplace doesn’t have a retirement plan.

The problem with SEPs is that there is no deferral and SIMPLE IRAs have lower deferral amounts. Also, employer contributions must be uniform (no new comparability). Also, many of these IRA programs don’t offer a financial advisor to offer guidance.

I prefer that an employer offer a 401(k) plan and based on the compliance and filing requirements, there are reasons to keep it SIMPLE (pun intended). You should only have a retirement plan that you can afford, so you might have to deal with an IRA program until you can foot the bill of something better.

When you look at the problems of retirement plans, one that gets short shrift is coverage and that is one of the pillars of qualified plans needed to be fulfilled to be a qualified plan. It’s a forgotten rule of compliance that can always end up leading to plan disqualification if the employer fails to properly cover enough of their employees to satisfy minimum coverage tests.

I don’t want to get into a complex discussion on coverage, but you need to know that every plan sponsor must annually meet coverage to ensure that the minimum amount of people that need to be covered are.

One big problem with coverage is that there are third-party administrators (TPAs) that may forget to perform the test or tests and if a plan would have failed, then the corrective methods aren’t made and it becomes a bigger headache many years later especially when caught on a government audit.

The other problem with coverage is understanding that a group of corporations that have some common ownership and/or some affiliation may be counted as one company under the controlled group or affiliated service group rules which means that employees of these other companies may have to be covered under the one company who sponsors a retirement plan. How does an error like that happen? A TPA not getting the rules analyzed correctly based on the corporate fact pattern or the plan sponsor failing to tell the A that there are these affiliated companies with common ownership that needs to be reviewed.