The Rosenbaum Law Firm P.C. Blog

When I first started drinking beer, I hated it. Then again, when it came to the quality of it, it wasn’t very good. Whether it was Coors Light or Bud or even the bitterness of Heineken, the beer I was drinking wasn’t very good. When you ’re a kid in college and your budget is tight and your friends are drinking too, you’re limited to what you can get at the local 7-11. Most of the time it was Michelob, sometimes we’d be lucky and Molson’s was the same.

Around the time of the beginning of my senior year, I constantly heard radio ads for Samuel Adams beer and how it was winning all these awards.  The first time I brought it (Boston Lager), I was with friends in Vermont during winter break and it was something totally different. It was a quality beer. I later found out they had additional varieties including the long gone Double Bock, Scotch Ale, and Honey Porter (I wish they would bring them back). I even visited their brewery and took the tour three times in Boston, it’s still my favorite beer brand more than 25 years later.

What’s the point besides beer? The point is that Sam Adams stressed a quality where there really wasn’t any. The Boston Beer Company (the parent company) brought the idea that beers can have a premium taste and a premium price. It launched the micro-brewery revolution that showed that beer didn’t have to taste like malted water like Bud, Miller, and Coors. As a plan provider, you can step up your game by offering a premium level of service when others don’t. Remember those advisors who were touting 3(38) 10 years ago when others weren’t? It’s the same concept. You can up your game and increase the statute of your service by going premium by your level of service and you can afford to charge a premium price Give clients something that other providers aren’t offering.

When talking to a prospective client that deals with professional services or have deep pockets, it’s always worth a consideration on whether a cash balance is a good idea. When coupled with a safe harbor 401(k) and new comparability, cash balance actuaries can work some magic and provide huge contributions to the plan sponsor’s owners and key decision makers.

Clearly, there are some prospects that don’t have the budget for it or maybe have too many employees to make it work, but I still think it’s worth the discussion because most advisors never bring it up because they don’t understand it.

Cash balance is an important conversation that you can start to allow yourself to stand out in the business.

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

Callan’s annual Defined Contribution Trends survey listed fees as plan sponsors’ main concern when dealing with their retirement plan, ahead of education and communication. Four years ago, fees were only the 4^th main concern.

What does it all mean? It means that plan sponsors are certainly aware of the litigation over fees as well as hearing about fees from their plan provider or competing plan providers. It also means that pressures on pricing will continue and the question is whether further consolidation will lead to more competitive pricing.

So while retirement readiness and participant communication should be emphasized, you should also not lose the current focus on fees.

Over the last 35 years, Duke University has had a championship basketball team on the court. In another court, Duke didn’t do too well.

Duke University just settled a lawsuit alleging that it mismanaged its 403(b) plan for employees for $10.7 million. Plaintiffs in the case were represented by well known ERISA litigator, Jerry Schlichter.

Before the Duke settlement, universities were on a winning streak in beating back 403(b) fee lawsuits. It just proves that every case is unique and every university has to make the decision whether it’s costlier to settle or costlier to fight.

For the past 15 years, it’s been apparent that the Internal Revenue Service (IRS) wanted to be out of the favorable determination letter business. Over time, the IRS was limiting when they would issue determination letters.

When I first started in the retirement letter plan business, it was pretty much required that every retirement plan document that wasn’t a standardized prototype should get one. Then the IRS ruled that every line by line adopter of a volume submitter or prototype document (including non-standardized) didn’t need one either. Then they pretty ruled you only should get one when it was an initial plan document and when the plan was terminating.

What does it mean? It means that the IRS wants their agents less focused on opining how documents are drafted and more emphasis on voluntary compliance program applications and more audits. It means that since plans can no longer rely on IRS approval on their plan documents, they will need to have more emphasis on making sure that their plan document and their plan operation are in compliance, especially if there are more IRS audits in the field.

I recently spoke to an IRS agent about a determination letter application for a plan termination and he indicated major changes in his office and his change of operation to handling VCP applications. Less determination letter requests mean less work in my office for the last 8 years in that part, but it means I’ve had more work in voluntary compliance submissions, as well as late deposits of 401(k) deferrals.

I’ve probably said enough about the time that I came up with the crazy idea of having Sal The Stockbroker from The Howard Stern Show perform at my former synagogue when I was involved there.  The reason I did it was because I was tired of the same old tired fundraisers where the same 30-50 members showed up. I decided to offer an event that would interest the outside community because their money is just as good as the money from our members, actually I thought it was better since it was a new revenue stream.

When you’re involved in your practice, always look for small things that make your practice stand out. My idea was writing articles to help advisors and third party administrators garner business.  I added that401ksite.com and That 401(k) Conference to further increase my brand.

For your practice, I think a big thing is to stand out among the crowd. Maybe it’s pushing that new credit card that rewards users with a 401(k) deferral as a percentage of purchases. Maybe it’s a website with alliances among outside businesses that can help expand your brand.  Whatever it is, think something that is unique and might excite current and potential clients.

While 2018 may have had less 401(k) litigation than the previous year, there was more than $90 million in settlements.

While the cases involved large companies and institutions of higher learning, what it should do is teach a lesson to any type of 401(k) plans. The hope is that the number of settlements will encourage plan sponsors to be more vigilant in how they exercise their fiduciary duty because there is a price to pay for breaching their duty. While everyone thinks that only large plans suffer the hammer of litigation, renewed enforcement by the Internal Revenue Service and the Department of Labor should also bring the point home that continued vigilance by a plan sponsor in exercising their fiduciary duty will prevent greater harm later.

The private letter ruling that allowed a certain 401(k) plan to allow the employer to make payments to a participant’s student loan instead of a matching contribution piqued a lot of interest. But is it more hype than anything else? Perhaps, but people felt the same way about automatic enrollment too.

While the decision by the Internal Revenue Service to allow it to a specific 401(k) plan doesn’t open the floodgates to every 401(k) plan, it will likely lead to regulations that will allow this feature to all 401(k) plans.

Will it become popular? Probably not because I think employers are slow to that take of features like that and many providers (especially advisors) have little interest in setting the feature up. However, I like choice and the more choices out there for plan sponsors to help participants out and maybe get them more involved, is a good thing.