The Rosenbaum Law Firm P.C. Blog

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

I believe in the idea of redemption, that people who make mistakes can atone for them. Maybe that explains why Return of the Jedi is my favorite Star Wars films because Darth Vader was redeemed and brought balance to the Force as that original prophecy proposed. Unfortunately, the Jedi Order was almost destroyed and the Chancellor who was a Sith became the Emperor.

While I believe in redemption, I also believe if someone has done time for drunk driving, you’ll think twice about handing over the keys to your car.  Would you hire a plan provider with possible access to retirement plan assets that was convicted or sanctioned for financial improprieties? I wouldn’t

The whole Vantage Benefits story is alarming and maybe if plan sponsors and advisors would have Googled Jeff Richie, the head of Vantage Benefits, they would have been alarmed. Jeff Richie was sanctioned by the Securities Exchange Commission in 2008 for fraud in connection with the stock another company of his that was providing 401(k) services to the plan sponsors. I think if any plan sponsor and plan provider that would have bothered to do some research, would have thought twice.

In light of the Vantage Benefits situation, I’m alarmed that several of my colleagues in the New York area have advised me of a certain third party administrator (TPA) being used by some of the large insurance company plan providers here the principal of the organization was convicted of check fraud. I’d think twice of any TPA that charge $200 for ERISA 3(16) services on a $400,000 plan, even if the owner wasn’t convicted for a crime (for my 3(16) service, my minimum is $1,000).

I’d advise any plan sponsor to think twice before hiring a plan provider where the leadership has been convicted of a crime and/or civilly sanctioned by a government entity for fraud. What that means is that you should avoid plan providers that have had its day in court before a trier of fact and have been convicted/sanctioned of financial impropriety So that means you shouldn’t attract a scarlet letter to any plan provider that was under investigation without any charges filed or sued civilly.

Sometimes you ask for trouble if you just don’t do something as simple as doing a quick online search of the plan provider you’ve hired or are about to hire.

Since the FBI closed down Vantage Benefits on November 1, we haven’t heard much.

Here is an update:

1. MBA Engineering, Inc filed sued against Vantage Benefits, Jeff Richie and his wife, Wendy Richie, for the $2,269,653.43 that is missing from the MBA Engineering, Inc. Employees 401(k) Plan. The suit alleges that the Defendants falsified pan participant account statements and participant account website information to make it appear that participant account balances were whole and accurate. Unnamed people named DOES 1-10 were sued as well as MBA is trying to identify who is involved in the fraud. From my experience in the Matt Hutcheson disaster (as detailed in my forthcoming book), I expect that further suits will be filed and other plan providers in connection with this matter may be sued as well. Any provider entity that might have accepted an order from Vantage to liquidate and transfer plan assets for corporate and personal use maybe sued as well.
2. Jeff Richie is still not under arrest. I’ve talked to some of his former employees and even a plan participant in one of the plans where Vantage stole money and everyone is surprised no arrest has been made. A civil lawsuit is easy to file and there might be multiple shots at litigation by multiple plaintiffs. A criminal action allows the prosecutor only one shot at the apple, so expect the Department of Justice and the Department of Labor to act a lot slower than plan sponsors who want to track down plan assets. Again from the Hutcheson case, it took several months for a criminal complaint to be filed and an arrest made. I remember talking to Matt after the media disclosed the allegations against him and civil litigation filed against him. Matt was a little arrogant that he wasn’t under arrest and it wasn’t soon after, that he was arrested for his theft.
3. A concern for me is that there hasn’t been word as to the full amount of the possible fraud committed against Vantage’s plan sponsor clients. I’m concerned about the liability exposure for plan sponsors who hired Vantage and plan providers that referred Vantage or worked with Vantage in any connection with a transfer of plan assets to Vantage or the Richies.
4. If this situation is related to the theft of plan assets, I’m interested in whether other Vantage employees were involved in this disaster. If statements and website information were manipulated, assume that other employees might be involved as well. I just remember Bernie Madoff and how it was impossible to keep a Ponzi Scheme running without more help.

My latest newsletter for retirement plan providers can be found here.

My latest JDSupra.com article can be found here.

Starting this year, Fidelity will charge all new 401(k) clients a 5 basis point (0.05%) fee on participant assets invested with Vanguard index funds. The fee won’t apply to existing Fidelity clients and will be billed to the plan sponsor and not the plan participants.

Experts claimed that this type of fee is the first of its kind, but I think it’s the opposite effect of revenue sharing where Fidelity is now charging an asset-based fee for Vanguard funds that don’t pay them. Supposedly, Vanguard is the only fund family doesn’t pay Fidelity for shareholder and administrative services the company provides for access to Vanguard’s funds. In English, it’s the only fund company that doesn’t pay revenue sharing and sub t/a fees to Fidelity.

Before you become outraged, remember that Fidelity is serving as plan custodian and recordkeeper. If a plan sponsor is using Fidelity as a recordkeeper, why are they using Vanguard funds? I always thought that the reason you select a mutual fund company as a bundled provider is that you like their mutual fund. If a plan sponsor loves Vanguard funds, using Fidelity may not be a great idea especially when they can use Vanguard or an unbundled provider as their recordkeeper. If you like Fidelity, either use Fidelity’s index or actively managed funds. If you want Vanguard, you’re in the wrong place.

It’s a highly competitive marketplace and this is more about Fidelity trying to push plan sponsors to stop using Vanguard funds on their recordkeeping platform. Like the airline who match fares, expect other bundled providers to follow suit.

In another attempt at building excitement for my next book, Amazon is temporarily discounting the original: How to Succeed in the 401(k) Plan Business: (and 401(k)’d: A Life) at 50% off to $4.99.

Enjoy the original before you read the better sequel.

The original can be accessed here:
https://www.amazon.com/How-Succeed-401-Plan-Business-ebook/dp/B00ID252QY/ref=sr_1_1?ie=UTF8&qid=1517337189&sr=8-1&keywords=ary+rosenbaum

I always say the two worst things you can give people are false praise and false hope. One of the reasons that I started my own law practice is because I was an employee and for the most part, I didn’t like how I saw employers treat employees especially when it came to acting towards them by giving them sort of fake praise and then taking action against them.

It happened really early when I worked at a Boston law firm as a law clerk when I was completing my studies as an LLM student. There was this paralegal there who clearly was way in over her head. I never worked with her, but she looked like a deer in the headlights, so it was Christmas season and she was getting her end of the year review. She told that her work was excellent and she got a raise. Within two weeks, she was fired for being incompetent.

What’s the point of saying someone is doing a great job when they’re not? I’m sure people will say that the law firm was going to fire her anyway and so what’s the point of telling her that she really needed to improve? I have an expression that I don’t like to look bad and I believe that the law firm looked bad in her eyes, looked bad in the eyes of other employees (there was another paralegal who was really upset by it), and the leadership looked like a bunch of liars. I always say your word is your bond and if you go back on your word, people will never see you the same way again.

Employees won’t improve if you don’t tell them they need to improve. Getting rid of employees and hiring new ones can be an absolute ordeal, so it’s a good idea to salvage what you have. But you can’t salvage something where the employee thinks they’re doing a great job because you told them. Mixed signals aren’t a good idea when managing employees. Morale is an important aspect too. So when you’re firing an employee you’ve told what a great job they’re doing, it will impact the employees that are left.

So if you have staff and they’re not up to par, tell them. Give them an opportunity to get better because not having them see it coming is great on Survivor, it’s not great in the workplace.

Complacency can kill a retirement plan provider and their business. Complacency is a two-fold, being complacent in the retirement plan industry and being complacent with your clients.

Any business whether it’s retirement plan based or not has to change with the time because the fact is that no industry is immune to change. You need to be ahead of the game and understand any new changes that go on. Ask the folks at Blackberry about complacency. If you park your car on the raceway oval, don’t be surprised everyone else passes you by.

Working with your plan sponsor clients, complacency is all about taking your clients for granted and not reviewing their plan for new plan design studies, cost analysis, or plan provider searches. I’ve seen too many plan sponsors lose clients because these reviews come from a competing provider. Time and time again, I would hear the client ask why their current provider didn’t think of a new plan design first or review of plan fees.

Retirement plan and the retirement plan industry are fluid, which means what is good today maybe not good for tomorrow. You can never be too complacent because losing your client or your competitive edge is just around the corner.

In a shameless act of self promotion, I would like to announce that I’m working on a new Kindle Book. It’s a sequel to my first 401(k) book called: How to Succeed in the 401(k) Plan Business: (and 401(k)’d: A Life). The book, released in 2014 was smashing success; about three dozen in the industry bought the book.

The new book is entitled: “The Greatest 401(k) Book Sequel Ever.” Before I get criticized and condemned by people who have written two or more 401(k) books, it’s sarcasm.
The book picks up where the last one left off and I offer some fresh, new insights on the 401(k) business. I also succeed in the impossible task on how my terms as a synagogue vice president is a learning experience for those in the retirement plan business plus I finally mention the whole Matt Hutcheson debacle where the person I succeeded as a plan fiduciary on one multiple employer plan, accused of stealing $5 million from two other plans.

The book should be out sometime in February and there will be a sale on the first book to build up the necessary excitement.

For those who want to cover the book or offer the book as some sort of promotion for your plan providers, you know where to reach me.