The Rosenbaum Law Firm P.C. Blog

Georgetown University is now the 5th university that has won its case after being sued by plan participants over their 403(b) plan.

In the Georgetown case, plaintiffs alleged that there was a breach because of annuities being included in the plan and for some restriction on transfers. The judge dismissed the case by citing that 403(b) plan were considered a tax-deferred annuity, years before they were considered like 401(k) plans.

While the defendants are winning these cases, don’t count the plan participants out. I think courts see 403(b) plans as a different animal and I also think that plaintiff attorneys have become a little lazy because high plan fees don’t necessarily mean that plan sponsors breached their fiduciary duty. I think ERISA litigators have to do a better job by exciting what a plan sponsor may do is an actual breach of their fiduciary duty

There are a lot of 401(k) conferences, but there are very few memorable 401(k) conferences.

When I came up with That 401(k) Conference, I wanted something fun, something that was informative, and something memorable for the 401(k) advisors in attendance and the plan providers that were nice enough to sponsor.

I continue that tradition with That 401(k) Conference at Dodger Stadium on Friday, February 22, 2019.

$100 gets you 4 hours of content, lunch, a Dodger Stadium tour, and a meet and greet with Steve Garvey. I spoke to Steve and he seems excited to be there and hopes you will be there too.

You can sign up on this site and anyone interested in sponsoring (which only starts at $500) can contact me.

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

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

You know it’s all about New Year’s Resolutions when Target gets rid of the Christmas items and starts offering organization and cleaning supplies. The beginning of the year is about self-care and taking care of things that you either promised or finally have the time for.

For a plan sponsor, I think part of keeping a New Year’s resolution is getting your plan reviewed by an independent plan provider. I have a Retirement Plan Tune-Up legal plan review for $750 which can be paid from plan assets and other plan providers offer these type of reviews.

I think it’s important to discover errors before they become bigger and costlier to fix. I know mot plan sponsors don’t want to do it, but I find that getting things corrected before they become unavoidable plan problems is costlier and causes fewer headaches.

With time before your third-party administrator asks about the end of the plan year census information, it’s important to get a plan review because now it’s the season.

When I was at law school, I lived in a graduate dorm room and the walls were paper thin. So my next door neighbor was playing a movie really loudly at a late hour of the night while I was trying to study.  I did what most people would do and knock on the wall. My next door neighbor then knocked on my door and started yelling at me why I’d knock on the wall and I told her it was too loud. She continued to yell at me and then went back into her room and turned down the volume after her tantrum. A day later, the resident assistant (RA) who lived across from us, admitted that she was in her room and didn’t want to come out to stop the fight. She was an RA, that was her job.

I’ve run into so many plan sponsors with issues and it’s the plan provider’s fault and the plan provider just doesn’t want to fix it. Whether it’s the financial advisor who didn’t let the plan sponsor know there was a market value adjustment or surrender charge for a plan investment that is being terminated or a third party administrator (TPA) that didn’t do testing right or an ERISA attorney who didn’t give a complete voluntary compliance program submission, it’s a problem. You have to do the job for what you’re contracted for, whether you like it or not.

I have been involved with the multiple employer plan (MEP) business for about 14 years now ever since I worked for a third party administrator (TPA) and one of our clients, the main office of a well known national charity wanted to create a MEP for the local offices. The main contact at our client even cajoled my boss to co-sponsoring an event in Boston and have him speak on it. My boss had his misgivings and he was right, the MEP never took off the ground.

A MEP is supposed to be a can’t lose proposition for the TPA and financial advisor who want to get involved with one. Yet, it’s almost always a loser. I have more fingers than the number of MEPs that I’ve seen succeed. I tried a MEP of my own and it failed miserably. The problems are multiple, but it starts with the failure of getting enough adopting employers and plan participants involved. The funniest part is that when the headcount hits the audit requirements, that’s where the problem happens because once you hit that limit of 100-120, you might not have enough participants to properly pay for the audit because absorbing that fee may make the MEP expensive, which defeated the whole purpose of the MEP.

In addition, it’s hard to find an association willing to sponsor these MEPs because of the headaches and potential liability of being a fiduciary. Even if the association agrees to be the plan sponsor, there has to be money spent on marketing and building the brand of the MEP in order to garner the very first adopting employer. I work with and created a handful of MEPs that achieved enough “critical mass” to be successful. The recipe for success is persistence because it takes a long time to grow, as well as a value proposition to the association members, and support of the association.

As I start another idea of a MEP, I’ll just tell you how many plan providers came to me about a MEP and it never even got off the ground. Even the handful that did, many failed because it never got big enough for cost savings. Like opening a restaurant, starting a MEP, the odds are against you. You need help, you know where to reach me.

Every week on 401(k) Help Center, I see an article about some retirement plan provider being bought out by another. The consolidation in the retirement plan business has been an ongoing theme ever since fee disclosure regulations were implemented in 2012 and it continues to gain steam.

The question is whether a bear market (which is certainly possible in 2019) and maybe a likely recession will increase consolidation. I think it certainly will because bleak times and challenging times may force people to sell and it will allow some of the purchasing providers to get some great deals when valuations for plan provider decrease.

I’ve been in this business for the last 20 years and when the economy is in the doldrums, that usually means the markets are south and people talk less about retirement plans and concentrate more about costs. So if we have something in 2019 that isn’t good for the market, expect more consolidation.

The Department of Labor (DOL) has been accepting comments regarding its proposed rule on multiple employer plans (MEPs) which they issued after President Trump directed them to under an executive order.

The comments are consistent with my thoughts that the proposed rule did very little to expand the proliferation of MEPs because it maintained the nexus/commonality requirement between adopting employers that was part of their advisory opinion in 2012 that pretty much froze what we call Open MEPs.

As I’ve discussed previously, the DOL clearly has no interest in Open MEPs where unrelated employers with no commonality can be a part of a cooperative plan to reduce costs and liability. I think the DOL punted with the proposed rule and wanted Congress to act by passing legislation, which they haven’t done for the last 7 years.

I believe that if the DOL doesn’t expand their proposed rule by eliminating commonality, the rules will do nothing to increase 401(k) plan coverage.

Edward Jones is going to pay $3.2 million to settle a lawsuit alleging they were using investments in the 401(k) plan to enrich themselves.

The lawsuit alleged that Edward Jones loaded its 401(k)plan with certain investment options in order to further its business ties with those fund companies, instead of prudently selecting other funds that were less expensive.

The lawsuit alleged that many of the mutual funds were managed by the brokerage firm’s “partners” and “preferred partners” — fund managers that worked closely with Edward Jones brokers and agents and paid revenue sharing to the firm based on marketing the funds to Edward Jones clients.

It seems that 40 of the plan’s 53 investment options are managed by the partners or preferred partners.

Whether the allegations were true or not, Edward Jones decided to settle the case and as I always say, plan sponsors that are in the financial service/retirement plan business are going to find themselves as targets for ERISA litigators.