The Rosenbaum Law Firm P.C. Blog

Secretary of Labor Alexander Acosta indicated that the Department of Labor will try to roll out a new fiduciary rule, in coordination with the Securities and Exchange Commission’s rollout of their own version of a fiduciary rule.

Acosta announced these plans in an exchange during an oversight hearing held by the House Education and Labor Committee, Rep. Marcia Fudge, D-Ohio, questioned Acosta on Labor’s fiduciary plans.

When these proposed rules may be rolled out is anyone’s guess, But I wouldn’t hold my breath that it will be anytime soon.

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

As Congress and the Department of Labor (DOL) still keep the status of open multiple employer plans in legal limbo, individual states are still going ahead with state-run programs.

New Jersey has become the sixth state to pass legislation requiring that certain employers offer to employees a state-sponsored individual retirement account (“IRA”) program with automatic enrollment and pre-tax payroll deduction contributions.

Employers will be subject to the NJ Auto-IRA Law and required to automatically enroll their employees in the program if they:

• Employed no fewer than 25 employees at all times in New Jersey in the prior year;
• Have been in business for at least two years; and
• Have not offered a qualified retirement plan (e.g., a 401(k) plan or 403(b) plan or a plan sponsored by an employee leasing company or professional employer organization that the employer has used in the preceding two years).

State-run programs have been around for a few years and my belief that unless they have a mandatory requirement like this one from New Jersey, they won’t catch fire in terms of gathering employers and assets because I believe that employers and employees are wary of government getting involved with retirement savings (like Social Security).

By forcing employers to join this IRA program, it may incentivize New Jersey employers to sponsor their own plans or join a multiple employer plan to avoid having to join this IRA program.

With May here, plan sponsors and plan provider may not be aware of an Internal Revenue Service (IRS) deadline that isn’t that far off. All organizations that sponsor 403(b) retirement plans must restate their plan documents by March 31, 2020, using either the IRS’s pre-approved document or an individually designed plan document.

Whether you sponsor a plan or have a client that does, don’t let them wait until the last minute to restate since a late restatement will require submission to the IRS voluntary compliance program.

The plethora of class action lawsuits against colleges and universities over their 403(b) plans have brought a variety of settlements and wins by the defendant schools.

Add Vanderbilt University to the universities that settled up and paid upon a lawsuit against them. Vanderbilt has agreed to fork over $14 million as a settlement for the class action lawsuit.

The lawsuit had claimed that the fiduciaries of the plans breached their fiduciary duties by locking the plan into a CREF stock account and into the services of a certain recordkeeper (TIAA, which was the TIAA of TIAA-CREF); breaching their fiduciary duties by paying unreasonable administrative fees; engaging in prohibited transactions by paying excessive administrative fees; breaching their fiduciary duties by agreeing to unreasonable investment, management, and other fees and failing to monitor imprudent investments; engaging in prohibited transactions by paying fees to certain third parties in connection with the plan’s investment in those parties’ investment options (see TIAA-CREF above); and failing to monitor other fiduciaries.

Bonuses are nice, I wouldn’t know because in the 11 years I was an employee, I got $300 for the holidays after I started in September 1998 and never received one again. This article isn’t about my lack of bonuses, but it’s about bonus payments and 401(k) plans because if you pay one, you might have a problem that you didn’t realize.

401(k) plans are governed by their plan document and most plan documents use W-2 compensation (plus deferrals) as the point to measure salary deferrals and employer contributions. W-2 includes bonuses, so that means that salary deferrals and employer contributions should be made from bonuses (unless the plan document excludes it).

So I have found many plan sponsors having issues because they forget that, which means they owe corrective contribution for missed deferral opportunities and employer contributions that should have been made. The problem with those errors is that it’s usually discovered after years and years of failing to account bonuses as compensation, which will require a lot of corrective contributions that will also have to be adjusted for earnings.

If you regularly handout bonuses, make sure that your definition of compensation meets what you are currently doing.

I think the one thing that 401(k) plan sponsors really forget is that the plan is an employee benefit. As with all benefits, it is a tool to recruit and retain employees. A great plan with great tools for participation and an employer contribution is going to be a lot more attractive than a plan set up with limited participant tools and zero education and contributions.

If you look at the experience and you think it’s dreadful, then you need to do something about it. You need a participant website and you need investment educational tools (or investment advice) that will engage the participants and get them to defer.

Like with health insurance, the coffee machine, and the break room, you need to focus that a 401(k) plan is a tool to help you with your employees. If you focus on that, you’ll also be able to minimize your fiduciary liability because it means you will focus on your plan and not neglect it like most plan sponsors.

I was speaking to one the best 401(k) marketing gurus out there and when talking about my idea for a national conference, he told me that he warns smaller plan providers about how many conferences they attend. I agree because I think f you look at the schedule, you can go broke attending many national and regional conferences.

It’s one of the reasons that I try to keep the enrollment and sponsorship fees for my conferences to a minimum. Maybe I can get three times what I charge, but at least I have attendees and conference sponsors that don’t feel they got ripped off. Having wasted money on advertising, conferences, and networking events that weren’t beneficial, I know the feeling.

Before you decide to attend or sponsor an event (whether it’s retirement plan related or not), identify whether it’s worth the time or money especially if you’ve attended similar events by the same host. Years ago, I’d attend many small business networking events hosted by a really nice guy on Long Island, but after quite a few events, it was quite clear it was the wrong market for my business as I didn’t draw a dime from them. When looking at conferences, see if there are networking opportunities and whether there are any exhibitors or speakers that are worthwhile to talk to. Location is great (I will never attend a conference in Albany), but so is time to actually network. For my events, I make sure (after the first event) that there is enough time for networking. Presentations are great, but so is just talking to fellow plan providers.

If a conference or event isn’t working for you, you can always try someone else’s event, but these events take time and money, which is a luxury most of us don’t have.

Maybe it’s a simplistic approach when it comes to certain things, but I see things the way they are in very simplistic approaches.

When it comes to employees working for a client, I always say that happy employees never leave. When it comes to clients of a retirement plan provider, I also say that happy clients never leave.

There was so much concern with fee disclosure regulations that retirement plan clients would drop their current providers to save a quarter or a small amount of money across the street and I don’t believe that has really materialized because fees have fallen industry wide and again, happy clients never leave. Clients that changed providers and saved a lot of money in doing, in my opinion, were never happy to begin with and just used that fee savings as cover.

Plan sponsor clients leave when they’re unhappy. They leave when they’re not satisfied with their service and/or a lack of communication. Keeping them happy will go a long way into keeping them as a client.

Maybe I’m oversimplifying things, but keeping clients happy goes a long way in keeping them as clients.

There is further consolidation in the retirement plan business as TD Ameritrade is selling its retirement plan and custody assets to Broadridge Financial Solutions/ Matrix Financial Solutions≥

TD Ameritrade is not getting out of the business completely as they said they would continue to serve as a retirement plan administrator and recordkeeper.

Upon closing of the transaction, Matrix is expected to have approximately $420 billion in assets under administration and over 118,000 plan accounts in custody.

Every week, it seems that someone else is selling out. Wells Fargo just made their announcement recently that they were leaving the 401(k) plan business. As the business becomes more competitive, which has been the case since fee disclosure regulations were implemented in 2012, more and more consolidation has happened and will continue to happen.