The Rosenbaum Law Firm P.C. Blog

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You can be a great financial advisor and have a terrific way of communicating with plan sponsor clients, but that doesn’t mean you can effectively communicate with plan participants.

Quite honestly, most advisors have a tough time dealing with it and I think the biggest problem is making a connection with them because most advisors don’t talk to plan participants on a level they can understand.  It’s a problem because increased participation by plan participants on the salary deferral component of the plan is a great metric to show plan sponsors that advisors are doing their job well.

One great way is to liven up the enrollment meetings because most are alike, they’re as exciting as my Secured Transactions class in law school.  Introduce trivia contests and award prizes to plan participants who engage in the enrollment meeting. Doing something that is unique will be memorable for plan participants and get them more engaged.

Oregon announced that their OregonSaves retirement program will now allow individuals, such as self-employed or gig economy workers, to join and start participating in this program for small employers.

OregonSaves began with a pilot program in July 2017 and is expanding statewide.

Since the program launched in November 2017, workers have set aside $9 million towards retirement. Individuals can now join the 45,000 employees that have enrolled through an employer.

While I’m all for plans that increase participation to employees who couldn’t get retirement plan coverage from their employer on their own, I still think that these programs won’t become popular. When it comes to government and money, I still believe that people have a libertarian streak and don’t want government involved with their retirement savings especially with the jaded views we have about Social Security. Just look at the numbers, OregonSaves has 45,000 participants with $9 million in assets. That is $200 per participant, hardly a win to reduce the retirement plan gap.

As I have always stated, it will be multiple employer plans (MEPs) created by associations and plan providers that will be able to effectively increase participation to employees that wouldn’t have been covered under a single employer plan, just my two cents.

As I’ve been saying for a while, advisors need to offer health savings accounts (HSAs) to the plan sponsors clients they have. They can make money on increased assets and their clients get to offer a tremendous employee benefit.

Many plan providers understand that and that’s why they are offering that benefit to the list of the services they provide. Vanguard just announced a partnership with HealthEquity, the nation’s largest independent HSA custodian, to provide plan sponsor clients with a new service integrating health and wealth planning for retirement.

If you’re an advisor, why should you offer HSAs to clients? It’s a tax dream for employees. Participants investing in an HSA enjoy several benefits, including a triple tax advantage: 1) contributions are made pre-tax or are tax-deductible; 2) earnings and interest accumulate tax-free; and 3) withdrawals for qualified medical expenses are also non-taxed. After age 65, account owners can make withdrawals for any expense without a penalty; however, withdrawals used for anything other than medical expenses are taxed as income.

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

The idea of That 401(k) Conference is based on creating memorable events and it probably can trace itself to the time I brought Sal The Stockbroker for a comedy show as Vice President of my old synagogue.

My old synagogue was like many synagogues who would always run the same old fundraising events like a journal dinner and a Monte Carlo event. They must have been strong environmentalists because they kept on recycling tired old events that would only be attractive to its members. We also had a fundraising chairman who wouldn’t publicize the event until 2 weeks before the event would take place which would depress attendance.

I wanted a fundraising event that would attract non-members because their money is just as good as members’ money and since we only had a solid core of 50 people who regularly attended events, I wanted something unique that would have broad appeal to the outside.

Since a fellow member and a good friend worked on the Howard Stern Show, I inquired whether he could get Sal to appear at a comedy show. Sal agreed and I ran the event and allowed minimal involvement from the fundraising chairman to make sure he didn’t ruin the event. The only drawbacks that I had to deal with are that I had opposition to a $50 charge (I agreed to the suggested $40) and I had to cut in our caterer in for $12 ahead. The event was a raging success as we packed in around 200 people with most coming from the outside community. A few weeks back, a current synagogue trustee lamented that he wished we’d have fundraisers like the Sal show again. I told him that they still think it’s 1978 and run events that cater to a select few.

While That 401(k) Conference is a growing endeavor, what I like about is that it’s something unique for plan advisors. You can always offer a rubber chicken from the local Sheraton, but offering a memorable event for either plan sponsors or plan providers goes a long way. Hopefully, you can join me at the next That 401(k) Conference and That 401(k) Plan Sponsor Forum soon.

The retirement plan business is a relationship-driven business and I learned from the best in the relationship department. Richard Laurita was the top salesman at both third-party administrators (TPA) I worked at and 11 years after his untimely death at age 39, people still remember him with great affection because he really knew how to treat people well. Some of the relationships that Richard had I kind of inherited because Rich was kind enough to introduce these people to me and you see these relationships behind the scenes as That 401(k) Conference.

Speaking of That 401(k) Conference, an advisor who I talked on the phone a few years back attended the event at Wrigley Field. This advisor has done a heck of a job using social media and blogging and he was kind enough to mention to a plan provider how that when he called me years ago about social media advice, I took time out of being with my kids to talk to him on the phone and give him some free advice. While I remember talking to him, I don’t remember that I was eating dinner at the time, but the advisor remembers it vividly. The advisor has done a good job with social media because he’s putting out consistently great content.

The point here is that I helped this advisor and he remembers that I took time out of my day to help, on the house. I pay it forward because people like Rich helped me and I always remember who helped me.

On the flip side, I remember everyone who didn’t help me when they could or were cruel for the sake of being cruel. I’ve been fortunate to meet many co-workers, a few supervisors, and lots of other providers who helped me when I asked for it. For example, I was on vacation in a city where someone I used to work with, lived. Instead of reaching out, I remember sending him a resume when he became head of a TPA and never bothered to respond when the TPA we used to work at, was closing up shop. I try to treat people the way I wanted to be treated. Most of the time, it’s meant with pleasantries back, a few times it’s not. Regardless, I remember who have helped me and who did not.

I tell you it’s a lot nicer to hear some flowing things from someone who is grateful rather than hearing from others that you were mean to someone.

As we await the Department of Labor’s (DOL) final guidance pursuant to President Trump’s executive order on multiple employer plans (MEPs)  and whether Congress tries to pass legislation, it’s important to think about some of the problems that Open MEPs actually had prior to the issuance of the Advisory Opinion in 2012 that held that MEPs weren’t a single plan if there was no commonality among adopting employers.

I’m not going to beat a dead horse, but one of the issues I’ve always had was the plan in the Advisory Opinion that was seeking the DOL’s blessing. It was a plan where the plan sponsor was essentially a company set up by a plan provider that was an affiliate of the financial advisor, I would call it a fake company. If I recall, the plan had over a billion dollars in plan assets and it contained such high fees that I believe the plan defeated the purpose of an Open MEP. I believe that one big purpose of an Open MEP is to allow small plans band together for better pricing and less fiduciary responsibility and this insurance based product (it was on an insurance company bundled platform) was extremely high in fees.

The second problem was who will be plan sponsors for Open MEPs. I say this as someone who had the unfortunate task of succeeding Matt Hutcheson as a fiduciary of the one MEP he didn’t steal from. Matt is still serving a 17-year sentence for stealing from two, trustee directed MEPs (Google for the amazing, true story). My concern is with any guidance, who will be able to serve as a plan sponsor and fiduciary, I just don’t want anyone like Matt Hutcheson to come out of nowhere and be in control of the retirement assets of multiple employers.

The third problem is that one bad apple rule, I would love to see guidance that would allow a MEP to have the full power to spin off the assets of an adopting employer that refuses to clean up the compliance issues on their end that may cause harm to the qualification of the entire MEP.

No plan is perfect and neither is the design for an Open MEP. Hopefully, the DOL can issue guidance that can clean it up.

Being a plan sponsor is difficult because you’re a plan fiduciary which requires the highest duty of care. Running the plan is hard and making everything operates according to the law is important. Not only that, but you also need to make sure that plan records are secure.

Cybersecurity is a big thing and it’s discounted way too much. There is a dark web there with people trying to pierce websites and steal plan participant information, especially social security numbers.

So as plan sponsor, you need to make sure that your records and the records held by your plan provider can withstand any cyber attack.

When they’re always talking about multiple employer plans (MEPs) and the tribulations with that 2012 Department of Labor (DOL) advisory opinion and the latest proposed regulations, talk often surrounds Matt Hutcheson.

Matt Hutcheson was the self-anointed fiduciary expert because of a fawning PBS Frontline episode on 401(k) plans who stole around $5 millions from several MEPs where he was the plan fiduciary. I had the unfortunate experience of knowing Matt and succeeding him as the fiduciary from the only MEP he didn’t embezzle from.

Matt has often become the MEP boogeyman because of his theft and is often uses an excuse for the DOL’s wariness of dealing with Open MEPs. I think his impact is overblown because of his crime wouldn’t happen with other MEPs and other fiduciaries getting the wrong idea that they should pocket plan assets for their own use. Matt had delusions of grandeur, the first time I talked to him in 2012, he claimed he was a candidate for Secretary of Labor under a second Obama or Mitt Romney administration. At that point, I should have run away, but I didn’t. He also wanted to be a savior in Idaho by buying a bankrupted ski resort, so he used plan assets to achieve that goal. He also used plan assets for his own personal gain including personal purchases. Matt was able to steal so much because the MEPs were invested in assets by him and not by plan participants. He was able to steal so much and get away with it for a time because participants didn’t direct their investments into mutual funds. It took the third party administrator (TPA) to wise up about Matt’s shenanigans and reported him to the DOL.

Matt’s theft is no different than the alleged theft of plan assets by a certain principal of a TPA in Dallas.  Jeff Richie from Vantage Benefits is accused of stealing more money than Matt and he allegedly did that as the TPA and the ERISA §3(16) administrator. Does that mean you shouldn’t hire a TPA who is also the ERISA §3(16) administrator? I don’t think so, thefts by plan fiduciaries can happen at any point at any time. What any good plan sponsor needs to do is to be properly insured and vet any plan provider. Anyone looking at Jeff Richie would find out that he was banned from the securities business by the Securities and Exchange Commission and Matt Hutcheson’s resume besides that PBS show was paper-thin.

There are a lot of issues about Open MEPs, but I don’t think that what Matt Hutcheson did is a reflection about those plans. A fiduciary with a deviant mind will steal from any plan if they can whether it’s a single or multiple employer or multi-employer.