The Rosenbaum Law Firm P.C. Blog

I always say one of the main reasons that a provider gets fired is when the plan sponsor feels that the provider doesn’t care and one of the main reasons is when the plan sponsor can’t get their phone call returned.

I worked at a third party administrator (TPA) that often reminded me of an insane asylum, but one of the great rules in that office is that all phone calls must be returned within 24 hours. The same was said of emails. There is no reason why communication from a client can’t be responded to within one day. From experience, there is nothing more upsetting than not getting a call from someone you hired and need help with an issue.

I always have a saying that says: “I needed you, you weren’t there, I don’t need you anymore.” If that is a client who thinks that, you’ll be gone as the plan provider.

In a move that should shock no one, the Department of Labor (DOL) pretty much left the fiduciary rule to die by rolling over and effectively letting the rule die. The last deadline for resuscitating the fiduciary rule passed when the DOL’s declined to ask the U.S. Supreme court to reconsider the appeals court’s decision in the 5th Circuit that knocked out the rule.

This should come as shock to no one since it was pretty much the goal of the Trump administration to find anyway to scrap the rule.

Before brokers go around the country, being happy about the end of the rule. I ask them one question: you won, but at what cost? The brokerage industry spent billions in legal fees to comply with the rule and some broker-dealers decided to go the full fiduciary route whether the rule was going into effect or not. I worked with an insurance company who were complying with the rule and they sent out letters to many clients, especially on the smaller SEP-IRA plans, effectively firing them as a client.  As much as the brokerage industry would like to turn back the lock to the days before the rue went into effect, they can’t. I also think they can’t because many plan sponsors want an advisor who can act in a fiduciary capacity and I also believe that once a different administration goes into effect, a more restrictive fiduciary rule will come into effect. That’s why I believe the latest fiduciary rule would have been better for 401(k) brokers than anything that comes down the path later.

It should be the simplest thing to do, yet so many plan sponsor fails to do it. What I’m talking about is the late deposit of deferrals and it’s been the biggest reason I’ve seen why the Department of Labor (DOL) are auditing plans.  It’s an easy target for them since it’s a question on Form 5500 and they compare that to the list of plans that have applied to their voluntary fiduciary compliance program. They’ll target plans who didn’t apply and they’ll target those who have failed to do that in multiple years.

Something as simple as being late by a couple of days on a payroll can lead to thousands of dollars of legal fees to pay for representation for a DOL audit.

Either avoid these silly mistakes or pay me a call when the DOL contacts you.

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

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

I love Clint Eastwood movies and one favorite is “In The Line of Fire’.  John Malkovich is playing a wannabe Presidential assassin named Leary and Clint is playing  Frank Horrigan, the Secret Service agent who is trying to catch him. For me, my favorite scene is when Clint and John Malkovich are on the phone and John calls Clint’s character a friend.

Frank Horrigan: I know who you are – Leary.

Mitch Leary: I’m glad, Frank. Friends should be able to call each other by name.

Frank Horrigan: We’re not friends.

Mitch Leary: Sure we are.

Frank Horrigan: I’ve seen what you do to friends.

Mitch Leary: What’s that supposed to mean?

Frank Horrigan: You slit your friend’s throat.

While not the same thing is slitting a friend’s throat, it is amazing to me how large 401(k) providers handle the 401(k) plans of their employees. I can attest that as someone who worked for a third party administrator once, I can tell you that our 401(k) plan wasn’t very good. It’s kind of like the old adage about the cobbler’s children having no shoes.

There have been several large 401(k) providers who have been sued over their 401(k) plans. While a number of cases are outstanding at this moments, there have been several that have forked over millions as part of a settlement.

If these large plan providers overcharge their own employees, does that mean they do it for their “real” clients? That’s not for me to say, that’s for an independent review to find out.

Aside from my children and my wife, my favorite person of all-time was my grandmother Rose. She was the most selfless person I ever met, who was full of life, and love for family. When my grandmother decided she would move upstate to live with my aunt, she started cleaning out her apartment. She put her trash on the side of the street for sanitation pickup and she was amazed that people on the block were looking through her trash. She said: “what do they think I threw out, gold?”

It was a funny line, but I think my grandmother didn’t understand that to some, her trash might be gold.

As a professional plan provider, we usually think we’re great and we’re stumped when a potential client cherishes an incumbent plan provider that we know is no good and we’re dumbfounded by it. It’s human nature to question what a plan sponsor could see in such a plan provider, but we see this all the time whether it’s business or in a family. What we may think is trash is someone’s gold and what we think is gold is someone else’s trash.

I worked for a third party administrator, where the chief operating officer would champion some administrator or actuary or salesperson as a superstar. Theynever were a superstar, but since this fellow cared less about good administration and more about paying employees on the cheap, they were his superstars.  He would tell me how he got an actuary for a $75,000 salary; the actuary wasn’t worth $75,000 after he was woken up while he was sleeping at work.

I remember when a relative of mine dated someone she unfortunately married. I would hear my mother tout that he was a businessman. Dropping out of a community college, operating a hot dog stand at a flea market, and owning a dry cleaning store that did none of its dry cleaning doesn’t make a businessman. 30 years and 3 careers later, the jury is still out. But some people have such wacky (we think of low) expectations of their plan providers, that no matter how great you are and how bad the incumbent is, it’s not going to change.

It’s like the Olive Garden. Having grown up in such an Italian-Jewish neighborhood such as Canarsie, Brooklyn who all moved where I live in Oceanside, Long Island, I hate the Olive Garden. When you grow up with great Italian food, you find Olive Garden an affront because it tries to be the McDonalds of Italian food. Some people out in the Midwest where there are not many Italians may think the Olive Garden is the greatest thing ever. I’m not going to debate someone who loves the Olive Garden because you can’t properly debate opinions.

The lesson here is that there are sometimes; you’re not the answer because the plan sponsor loves the plan provider. Maybe the plan provider is a relative; maybe the plan provider went to the same college as the owner of the company; maybe the plan sponsor likes to surround himself or herself with incompetent people to make himself or herself competent (that TPA COO did that).  Whatever the reason, it’s a waste of time to crack that nut.  Just remember you’re not crazy, but maybe the plan sponsor is.

The crazy idea of starting another 401(k) Advisor Conference plus adding some unique elements made its debut on June 7th at Citi Field.

That 401(k) Conference debuted with some great presentations by Kravitz, Millenium Trust Company, Alliance Pension Consultants, Oppenheimer Funds, Millennium Investment and Retirement Advisors, Principal, RPG Consultants, Colonial Surety, Unified Trust, and Bright Worxx. The event was also supported by great sponsors such as Associated Pension Consultants, John Hancock, Lincoln Financial, Cohen & Steers, PCS, TMI CPA, P.C., and Paycor.

The highlight of the event was the Citi Field Stadium Tour and a meet and greet with New York Mets Hall of Fame member Dwight Gooden.

Great content, unique site, great bonuses like Dwight and a stadium tour is just one way that That 401(k) Conference can stand out. For $100, I’m sure most advisors thought they got their value.

As with any inaugural event, most things worked and we’ll add somethings that might work better in time for the Chicago event in September.

That 401(k) Conference will next emanate from the friendly confines of Wrigley Field on September 13th. There will also be a game outing, the night before on September 12th. Tickets for the September 12th game and the September 13th conference is available now.

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

As a plan sponsor, you really need to let your third party administrator (TPA) what you have in terms of retirement plans and interrelated businesses.

Correct compliance testing is dependent on the TPA getting all the information you need.  I’ll never forget when at a TPA I served as head ERISA attorney, we working on a defined benefit plan for a business owned by a famous politician. We did such a great job that they wanted us to handle their 401(k) plan. Of course, we asked: what 401(k) plan? Not letting a TPA know all about the retirement plans and businesses you own will make compliance testing meaningless because they’ll be wrong. The problem with incorrect compliance testing is that it may negatively impact the tax qualification of the plan, but it’s also something that may not be corrected for a number of years.

So it’s extremely important that you tell your TPA everything in connection with your plan that is relevant.