The Rosenbaum Law Firm P.C. Blog

One of the big parts of my practice is assisting third party administrators (TPAs) who cant or don’t want t afford an ERISA attorney on staff.

I recently had to answer correspondence regarding the payout of a participant who was deceased and still required to take out the required minimum distribution (RMD). The beneficiaries of the deceased claim that the TPA advised them that they could take the RMD and roll it over. The only problem is that law won’t allow them to do it.

The initial response by the TPA wasn’t wrong, it was just full of a lot of jargon that really didn’t fully answer the beneficiaries’ concerns. I helped with the second response and just fully explained that no matter what they were told they could not rollover an RMD because it’s not an eligible rollover distribution.

Rather than go through a lot of words, it’s just a lot easier to tell them straight and just tell then what they can and can’t do with the deceased participant’s benefit.

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

I worked at a number of places in the 11 years before I started my own law firm practice and I will vouch that I didn’t try to hurt or attack any of my co-workers. People maybe upset with some of the stances I took in one fashion or another, but I never tried to throw a fellow employee under the bus and I never was gratuitous in any criticism I had for them. I try to treat people the way I wanted to be treated.

If you’ve read my articles over the last few years, you’ll notice that I’ve had some choice words for some former co-workers who were nasty for the sake of being nasty. If I had a supervisor who was critical, I’d accept that, but I don’t forget the people that weren’t nice because they were trying to gain some traction on their own or whatever the convoluted the reason is.

People will hold a grudge and I still hold a grudge for those that treated me in a way that I found unacceptable. So the point is that you should never knock and underling or a co-worker down because you never know where they turn up. Maybe they’ll have a blog and regurgitate your bad behavior years later.

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

As I’ve stated before, I wouldn’t 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 think, employers typically don’t have a treasure chest of jewels they’re 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.

As you know, I’ve been a member of a few Synagogues because I’m a wandering Jew and the thing I’ve noticed is the usual coldness I’d get when joining. Aside from the last synagogue I joined last year (hopefully, the last one I’ll ever enjoy), there were several people who called and dropped of welcome packages to welcome my family to the synagogue. I got a call from the Rabbi to meet. The other places, it felt like they just wanted me for the dues.

So when a plan sponsors joins your roster of clients, the best thing to do is make them feel welcome. So much of what happens in life is based on feelings, the way we affect the feeling of others goes a long way in whether we can maintain long-term relationships with people. That’s why empathy is one trait most people aren’t very good at and the experts of that trait can use that knowledge to further their business.

Plan sponsors have feelings too and they just want to feel they are more than just one number. Making them feel welcome from the get go is extremely important because my experience has shown that if you don’t get off the right foot with a new client, they are not a new client at all.

So once your salesperson closed the sale, send out some welcoming package to show that their addition to your client roster is well appreciated.

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

I have been an ERISA attorney for almost 19 years now and it’s gone by pretty quickly. I have worked for a few ERISA attorneys and have seen quite a few out there giving speeches around here and there.

Probably my greatest talent for helping my own practice and the worst talent in working for another law firm has been the ability to connect with my audience. My audience is going to be plan sponsors, third party administrators (TPAs), and financial advisors. My articles, newsletters, and speaking engagements meet the attention span and interest of my audience. When I was working at law firms, that wasn’t going to work out because most law firm partners have a tendency to speak above the level of their clients and other attorneys and that’s because they feel the need to justify their fees and their experience by speaking legalese and jargon.

I bill on a flat fee, I have a low overhead, people hire me because the fees are reasonable, I don’t need to justify my fees. I’ve seen a lot in this industry (and some of it was pretty absurd, so I don’t need to justify my experience.  As a retirement plan provider, don’t confuse your clients with jargon. Spit it out; tell your clients what you do for them and why your service is better than the one being offered across the street.

Throwing jargon and technical speak isn’t going to justify your fees, service, or experience, it’s only going to confuse your clients. Tell them what you do in simple terms, because no matter what, they aren’t going to do your job. Communication is any business is key and the lack of communication often dooms any relationship. Speaking above the level of your clients isn’t communication because there is going to very little comprehension.

No one is denying that the work you do isn’t important, but if you can’t communicate what you to do your client, often they will find another provider that will.

Last week, I published on JDSupra.com my annual article regarding payroll provider third party administration (TPAs) firms and my recommendation that using them is a bad mistake.

The article gets a lot of raves from other TPAs and the financial advisors that aren’t the biggest fans of the large payroll companies who do TPA work. The article is my opinion based on almost 19 years as an ERISA attorney including 9 years working for TPAs. My qualm about payroll provider TPAs is that their work is inferior to the TPAs I usually work with. Payroll provider TPAs offer a no frills type service with limited plan design options and lots of errors in administration.

Again, it’s my opinion. Now I don’t think there is anything wrong with using a payroll provider TPA if you’re dealing with a small plan that has a safe harbor plan design, so you don’t have to worry about most of the compliance testing. Otherwise, I think TPAs where their bread and butter is plan administration is the best option out there for a plan sponsor. I just don’t think you can dabble in plan administration and that’s what I find payroll provider TPAs do.

I understand that people who work for payroll provider TPAs have a different view than I do and I respect that. They’re going to defend the work of fellow employees and the folks that sign their paycheck. I understand that there are plan sponsors whom maybe happy with their payroll provider TPA and that’s fine too. My opinion is my opinion and I have no issues with people whose views contradict my own.

One issue that I have with payroll provider TPAs that I haven’t included in my payroll provider TPA articles is the fact that these payroll provider TPAs curry a lot of favor with brokers and registered investment advisors by referring plan sponsors that don’t have a financial advisor to them. It builds goodwill, but my concern is that it’s just a cheap way to get referrals by referring business to advisors. Are plan sponsors getting the short end of the stick by being recommended to use a payroll provider TPA because their advisor has received referrals from the payroll provider TPA? I don’t know, but if the advisor is a fiduciary, that could be an issue one day.

One of the rules I live by is that I believe that you should never let someone who dislikes you be in a position where they can hurt you. Let’s just say that I worked for someone who should have taken that advice. That is why I’m surprised that retirement plan sponsors don’t make more of an effort to entice former employees to rollover their account balance into an individual retirement account.

Former employees can be a headache; I know I’ve been one. When a former employee leaves, it’s best to cut all ties. When it comes to a participant, who is more likely to complain to the Department of Labor or sue a plan sponsor over their retirement plan, a current or former employee? I say a former employee, because of fewer repercussions.

While the distribution rules under retirement plans require a former employee’s consent for distributions of $1,000 or $5,000 (depending on the plan’s terms), it’s a good idea to tempt them to roll over their account balance and there are a number of reasons for that. Distributing required notices is tough enough to participants at work, it’s going to be more difficult to distribute notices to former employees that you may not have current addresses for. You’re also less likely to offer investment education to participants who no longer toil on employer soil. Participants who receive no investment education may cause you unnecessary liability for their investment losses because they will contend they didn’t receive the necessary information so that the employer could avoid liability under ERISA  §404(c).

Having former employees as a participant is a headache when you can’t find them or when they die and they have no valid beneficiary information. Working on the human resources needs for employees is enough, why do you need the hassle for employees who no longer work for you?

In addition, having too many former employees as participants may also require you to file an audit for your Form 5500 if you hit that magic 120 number thanks to those former employees. Nothing worse than to pay an auditor $12,000 to $20,000 for an audit you may not have needed if you tried to get former participants to take their money and run.

When your former employee has that exit interview, make sure they understand that they have an account balance under your retirement plan and it’s probably the best bet for them to take it with them and invest it any way they choose and tell them of the opportunity to roll over those assets into their new employer’s 401(k) plan.