The Rosenbaum Law Firm P.C. Blog

When it comes to Super Hero movies, the best by far is The Dark Knight. It was a gripping drama with well-written characters that just happened to be about super heroes and villains. The movie is full of great, thought provoking lines. One great line that isn’t so well remembered as others is when Commissioner Gordon tells his son about Batman: “He’s the hero Gotham deserves, but not the one it needs right now.”

I’m sure as plan provider you’ve met potential plan clients and you thought being hired was a slam-dunk. Maybe the incumbent plan provider costs too much or didn’t do their job. Maybe the providers you were competing against didn’t have the experience you did. Yet when it came time to choosing a plan provider, you didn’t get picked and you’re in complete shock.

There are many situations in my life where I thought I was a great asset as a person, as a relative, as a volunteer, as an employee, and a plan provider where I wasn’t what they needed at the time. I understood at those situations is that while it may be clear to you, some people don’t understand what the clear choice is or there may be an underlying reason why I wasn’t the chosen one. How many times did you compete against another plan provider and then you found out that they were either related to a decision maker or they were “juiced in”? Maybe the other plan provider developed a deeper connection with the decision maker even though you do a better job?

Whatever the reason is, don’t take it personally. These things happen and you can’t let it get to you because tomorrow is another day and there are enough plan sponsors who need a plan provider like you. So go back to doing what you do best.

Thanks to the damage caused by Hurricane Harvey and Hurricane Irma, the Internal Revenue Service (IRS), Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC) have granted extensions of certain deadlines for both plan sponsors and participants directly affected by these hurricanes.

The IRS has also provided special rules for plan sponsors that want to offer hardship distributions or plan loans to employees or former employees that have been affected by Hurricane Irma. These rules apply to all qualified plans, 403(b) plans, and governmental section 457 plans.

Loans and hardship distributions will not be limited to plan sponsors or individuals living in the affected areas. Under this IRS relief, loans and hardship distributions may be made available to employees and former employees who live or work in affected areas, or whose family members were directly affected by the disaster.

Loans granted under this special relief continue to be subject to standard loan limits.

When I think of Gucci, I think of a high-priced brand. Coincidentally or not, they are being accused of running a high-priced 401(k) plan. Selling high-priced leather goods is OK, running an expensive 401(k) plan is not.

Like many cases today, the lawsuit seeking class-action status is accusing the plan sponsor of using expensive proprietary products from its bundled recordkeeper. The plaintiff accuses Gucci of using expensive Transamerica proprietary funds and failing to rein in revenue sharing payments. These proprietary fund lawsuits are a no-brainer for ERISA attorneys because these make plan sponsors an easy mark for litigation.

What is interesting about the plan is that Gucci’s 401(k) plan only had $96 million in it, hardly a large plan. That’s something every plan sponsor and plan provider should recognize: that litigation is trickling down to smaller plans, it’s not just for billion-dollar plans anymore.

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

The 401k Averages Book is one of the great publications in the retirement plan business and I recommend it. I won’t recommend a report they just did because it was stating the obvious.

According to their report:  “Are All $5,000,000 401k Plans Created Equal?”, the size of a 401(k) plan’s average participant account balance will influence the amount of fees they pay.

The report states that there can be a big price difference for a $5 million 401(k) Plan if the plan has 100 participants as opposed to 500 participants.

According to their report, the total bundled cost for a plan with 100 participants and an average account balance of $50,000 is 1.25 percent as compared to 1.56 percent for a 500-participant plan with an average account balance of $10,000.

Of course it is. Most third party administrators I know charge a per head price in addition to other fees, so a plan with more participants will usually pay more than one has less even if they have the same amount of assets.

When Donald Trump was elected President last November, there were quite a few people who promised gloom and doom as if it was the end of our republic. Despite the tweets and the drama, that really hasn’t panned out yet.Many in the 401(k) plan industry have been predicating that any tax reform will jeopardize 401(k) plans. Despite denials, the rumor is that a Trump tax reform proposal will end the tax-deferred treatment of 401(k) deferrals, effecting making all salary deferrals as Roth after-tax contributions. While there are tax benefits to making Roth contributions, the fact is that many rank and file employees will stop making 401(k) contributions if they are made

Many in the 401(k) plan industry have been predicating that any tax reform will jeopardize 401(k) plans. Despite denials, the rumor is that a Trump tax reform proposal will end the tax-deferred treatment of 401(k) deferrals, effecting making all salary deferrals as Roth after-tax contributions. While there are tax benefits to making Roth contributions, the fact is that many rank and file employees will stop making 401(k) contributions if they are made post tax because time are tough to make ends meet. If rank and file employees stop contributing, then there will be a domino like effect because thanks to deferral discrimination testing, highly compensated employees may be constrained from deferring.

Even if this does make part of Trump’s tax reform proposal, don’t be so sure it will pass. Just ask everyone who though a replacement for Obama care was a fait accompli. When you factor that he 401(k) plan is the #1 retirement savings vehicle in the U.S., with more than 55 million active users contributing over $5 trillion to the plans as of March 2017, don’t be so sure that plan participants and Wall Street won’t have a say.

We have a retirement savings crisis in the United States and any proposal to curtail the tax deferral component of 401(k) deferrals will be dead on arrival in my opinion. Everyone loves the idea of tax reform and a flat tax until important tax deductions are proposed as being taken away.

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

I was a Vice President of a synagogue once and the biggest problem I had is that the people who had a greater say that I did were the same people who turned a synagogue from 750 member families to 300. They were ineffective and they didn’t understand how incompetent they were.

If your company’s retirement plan got into some trouble because the powers that be who run the plan (whether it’s the C.E.O., human resources director, or retirement plan committee) took their eye off the plan, it may be a time to replace them especially if they haven’t learned from their mistakes.

They often say that people can’t change, but I believe that people can change if they learn from their mistakes. If their arrogance doesn’t let them learn from their mistakes, then they will never change and they will consistently make the wrong choices. Sounds like most of my family.

When I was at my old law firm, the 401(k) plan was poorly run there. The Human Resources Director who was the trustee didn’t bother to hire a financial advisor, she provided no investment education to participants, and plan investments weren’t updated for 10 years. In addition, she had no idea the third party administrator (TPA) received revenue sharing payments. Based on my advice, they hired a financial advisor. It wasn’t the one I recommended, but at least they hired one. The Human Resources Director eventually without my input, hired a new TPA. Many years later after I left, someone told me that the plan owed a lot of money in corrective contributions that made no sense to me, but it was the same Human Resources Director in charge. Pat always thought she knew best and she didn’t.

A retirement plan that had major compliance issues will have them again if the powers that be that didn’t learn from their ways will make consistent poor plan provider selections like pat. It’s my opinion is that these powers that keep on making bad choices should step aside and let the people who can make the right choices take their spots. It’s hard for people with large egos to do such a thing because their egos won’t let them understand that what they have been doing all along is wrong.

The Dark Knight Rises is one of my favorite movies and one great scene at the end is when Catwoman tells Batman: “You don’t owe these people anymore. You’ve given them everything” and Batman says: “Not everything. Not yet.”

Whether it’s in my practice as an ERISA attorney, or a plan administrator, or working on this site, or working as the Vice President of a synagogue, I have given everything I have most of the time. So it’s disheartening at a time when I’ve seen people I’ve worked with who didn’t give it all. Dedication to what you do and dedication to your clients comes from the heart.

There was a plan provider once with two owners, one worked tirelessly for their clients and the other one didn’t and didn’t care when the business of providing for the client didn’t live up to the promises. The one who worked tirelessly did it from the heart and the other owner did it for the money.

You can’t go through the motions and you can’t fake it. You have to be dedicated to what you do for your clients and that dedication comes from the heart.

I serve as the attorney for a registered investment advisor out on Long Island and they forwarded me an email from a plan sponsor regarding a news article from last year of a potential class action lawsuit against a well-known provider.

When I went on Google, I found many articles concerning the case including one which quoted a blog item of mine where I said that claiming that this plan provider as a fiduciary was an uphill battle. Since the articles were about a year and a half old, I took upon itself to get the docket sheet through my online Pacers account to find out what was going on with the case.

A reading of the docket and of the opinions and motions filed, the plaintiffs are on the ropes. The court denied the class action claim and the case has stalled since the plaintiffs wanted leave to amend the complaint, which the court denied. Have you seen any news articles regarding the plaintiff’s problems? Of course not.

Litigation in the 401(k) space is serious business and any aggrieved participant can sue, it just doesn’t mean that’s evidence that the provider did anything wrong Anyone can file a claim, many just don’t survive the defendant’s motion for summary judgment.

News of cases gives us a clue about what’s going on in the 401(k) space, but lawsuits are based on a complaint of allegations. So while you hear news of many lawsuits, you don’t hear much when these cases fail and there have been some big failures in the 401(k) litigation space, but that news isn’t as exciting as one emanating from the press release of an ERISA litigation firms. If it bleeds, it leads.