The Rosenbaum Law Firm P.C. Blog

As I have stated so many times, I don’t want to hire employees because I was an employee once too. That pretty much means that I never met an employee whoever thought they were overpaid. For that matter, I never met an employer who thought that they pay their employees too little.

Despite what my former colleagues at union-side law firms, employers typically don’t have a treasure chest of jewels they are keeping away from their employees, it’s just the dynamic of a relationship where an employee wants to make as much as they can and an employer wants to pay as little as possible. It’s not evil, just human nature.

For those that never ran a business, they don’t understand how costs of payroll and benefits must be tied to revenue because an employer’s pocketbook is not limitless.

Thanks to medical costs and taxes, it’s expensive to have employees. Employers are taking away benefits and not putting benefits out there that are really enticing to current and prospective employees. As an employee, regardless of where I worked, the health plan got worse and worse because medical costs are spiraling out of control and the employer had to rein in costs.

While employers may feel free to cut back on the benefits they offer, the one benefit that they can’t afford to neglect is a retirement plan. An employer can certainly cut back on the contributions they make to their retirement plan(s), but they can’t just cut back on the services to their plan by sticking the plan with a cheap provider (if they are the ones paying for administration, rather than the plan) if it’s going to negatively affect the plan’s administration and compliance.

The reason is because employers as plan sponsors are also plan fiduciaries too. So employers still may want to cut back on benefits, they need to make sure that they don’t do something that could negatively impact their role as plan fiduciaries.

Any change of plan provider or even in a change in benefits should be done in consultation with your plan providers and/or ERISA attorney to make sure that any cutbacks in benefits you must make won’t increase your plan fiduciary liability exposure.

A great scene is in GoodFellas is when Jimmy chastises Henry for getting arrested because he allowed himself to be incriminated through wiretaps. For years, I’ve been warning advisors about the referrals they make and it seems to have sparked a lawsuit in connection with the allegations of theft by Vantage Benefits.

Architectural engineering company Allpoints Inc. is suing their advisor, World Equity Group Inc. for negligently choosing Dallas-based Vantage Benefits Administrators Inc. as Allpoints’ new administrator for its employee retirement funds. It is alleged in the lawsuit that Vantage stole over $400k from the Allpoints’ 401(k) plan.

Allpoints claims that World Equity Group should have researched Vantage Benefits and its owner Jeff Richie where it could have come up with information about Richie and his punishment by the Securities and Exchange Commission. Richie was previously a registered broker who was barred from the financial services industry following an action for securities fraud.

Whether World Equity Group should be liable for making a referral and/or having a strong hand in getting Vantage hired, the fact that they are being sued in a Cook County Illinois court is all that advisors should be concerned about since there is a price to be paid for a bad referral.

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

I didn’t have such a great time at law school because I felt the administration and much of the faculty weren’t honest when it came to the study of law and more importantly, our job opportunities. There was one law professor who was a shining light because he told it like it was and was just up front and honest with people. His name is Bernie Corr. I don’t mind the C+ in Civil Procedure because he told us that some of us were getting that grade and I did better with him in two other classes.

History has shown that I love people who are upfront and honest about things and I show less love for those who hide the ball.

When it came time to a Bankruptcy seminar course, he told us that any changes in bankruptcy are a boon to bankruptcy law and was insisting that many of these changes might have to do with making money for bankruptcy attorneys.

Every 6-7 years every retirement plan has to be restated into a new plan document and every few years, there needs to be ancillary amendments. I admit that I steal professor Corr’s line that all these amendments and restatements are to keep ERISA attorneys like me employed.  Seriously, retirement plan laws change and plans have to be amended to reflect that.

For the past 15 years, there has been a host of plan restatements and ancillary amendments that have been required for all retirement plan sponsors. There have been so many ancillary amendments, that even I have to keep a full checklist of what was done. Plan sponsors are in worse shape because many don’t have all the ancillary amendments (whether they were done or not and whether they were actually signed or not) and the Internal Revenue Service (IRS) knows that especially when it comes to plan audits. Not having all the required plan amendments and restatements is an excellent way for the IRS to make a few shekels on penalties when auditing a plan.

The problems with plan sponsors missing amendments probably has increased since the IRS has pretty much eliminated the favorable determination letter program.

So it’s a good idea for a plan sponsor to take inventory of their plan documents and amendments to make sure they have a set that is up to date and correctly dated. If not, a submission to the IRS’ voluntary compliance program beats getting penalized on an audit because it costs a lot less.

Every 6 years or so, the Internal Revenue Service (IRS) requests that retirement plan documents be restated to comply with current law. While it’s a great thing for ERISA attorneys and third-party administrators, it’s not so great for plan sponsors who have to pay for it.

In the interim period between restatements, the IRS may require ancillary amendments, which are tack-on amendments with model language to comply with a small change where the IRS wants an amendment, but not a full-blown restatement.

We’re currently in the interim period and while there is a change in certain aspects of the disability retirement provisions that might require an amendment, there is no need for a full restatement. I recently saw a third party administrator tell an advisor whether they want to restate the plan document they didn’t draft.  Beware that there maybe plan providers out there that want to charge for a full restatement when a tack-on amendment will suffice. Plan documents are usually only restated when there is a change in the law, substantial plan changes, and when a plan sponsor leaves plan providers whose prototype document they rely on. Otherwise, they may be more for what they really don’t need.

My newsletter for retirement plan providers can be found here.

My latest JDSupra.com article can be found here.

Multiple employer plans (MEPs) are a topic that many plan providers talk about, but don’t really know what’s allowed and what’s not.

A multiple employer plan is a plan where unrelated employers adopt a plan and it should be treated as one plan for purposes of filing a Form 5500.

There was something called an open MEP where the employers were unrelated to each other. Then there was something called a closed MEP, where there was a connection or nexus between all of the adopting employers, such as members of a trade group.

In 2012, an Open MEP unwisely sought guidance from the DOL on whether their MEP qualified as a single plan for purposes of Form 5500. The DOL said it did not because there was no connection between adopting employers and the Open MEP plan sponsor wasn’t an employer, it was just a company created by the financial advisor to sponsor a MEP. The DOL stated that all of the adopting employers needed to file a Form 5500, which defeated one of the most important features of a MEP.

People thought this was the death of Open MEPs. It was in the sense that there is no more Open and Closed MEPs, there are just MEPs that will qualify as a single plan and MEPs that won’t. Most importantly, the DOL never provided any further guidance on MEPs which means that the advisory opinion issued in that Open MEP case was only applicable to that Open MEP in question. It gave the DOL’s thinking on MEPs and a blueprint for MEP operators to develop a MEP that could be considered a single plan for 5500 purposes.

Almost years later, there is still no guidance and there are plan providers who are spreading stories about MEPs on what qualifies as a single plan and what does not. In the end, it’s just opinion without real DOL guidance.

I believe that one day, Congress will pass legislation that will create Open MEPs because the DOL doesn’t seem to be in a hurry to offer any guidance. Open MEPs absolutely makes sense if you believe that employees should be covered under a plan and offering a plan that will be more costs effective and liability effective for employers to join. It’s funny that the DOL had no time for Open MEPs, but had time for government-sponsored IRA programs that few employers want to join.

Will this be the year we get Open MEPs back? We shall see.

There are a lot of industry-wide 401(k) conferences that are great in the ideas of getting people together, but not so great in helping 401(k) advisors out and by nearly bankrupting those who want to sponsor the event and speak.

That is why this June, That 401(k) Conference will launch with its inaugural regional conference at CitiField in Flushing, New York.

What will make this conference different from all other conferences? The attendees will be 401(k) advisors with books of business, culled from data and from my database of financial advisors.

It will be unique because it won’t be just 401(k) plans. We’re going to be at CitiField, so there will be a stadium tour and a planned appearance by a former Met great.

For attendees, $100 will get them 4 hours of information to help their practices, breakfast, lunch, a stadium tour, and a meet and greet with one of my favorite former Mets.

For plan provider sponsors, sponsorships start as low as $500 and up.

Tentatively scheduled for Thursday, June 7th at 9 am, this will hopefully be the first of many regional conferences with the goal of a National Conference that won’t bankrupt attendees and sponsors.

Further information and signup will be on that401ksite.com soon.

If interested in sponsoring the inaugural event or being part of the next regional event (Boston, Philly, Chicago, Miami, LA, and SF come to mind), please contact me at ary@therosenbaumlawfirm.com

My latest newsletter can be found here.