The Rosenbaum Law Firm P.C. Blog

I worked at a law firm that supplied dinner if you stayed later. It was cool until you realized the clients were being charged for that. That’s cheesy.

It’s also cheesy for any volunteer of a 401(k) committee or any other type of volunteer organization, where they just want to be compensated for things. I’m not talking about dinner, I’m talking about small expenses incurred with being a part of the committee. The problem with paying committee expenses is that it often has not spelled out boundaries. You start going from picking up a dinner tab to spending thousands on travel expenses to a plan sponsor event that will benefit no participants.

Being on a committee is all about the better good, which is for the benefit of the plan participant. Everything else, besides that, is not necessary.

I’ve been running my events, That 401(k) Conference, since 2018. It’s been fun and there are times when it wasn’t. When I had no interest in events booked for Oakland and Detroit last year, I took a breather. We came back in 2024 with great events in Arlington and New York. As it goes, I think we will have 2-3 live events going forward. The days of doing 9 events a year like we did in 2019 aren’t going to happen, but 2-3 is manageable.

When it comes to these events, it’s $100 to attend. I charge $50 a head if multiple people come from the same firm if you ask. If people can’t make it, I understand. Getting people to live events is a challenge.

When you get an invite, ignore it or attend. Just don’t be weird. It’s not a time to sell me your advisory services, especially when I’ve known some advisors as long as I know my wife. Don’t claim you won’t attend because you’re a plate licker since the event isn’t free. Whatever it is, just avoid being weird.

When I started my practice in 2010, the idea was that my content would create referral sources from advisors and Third-Party Administrators (TPAs) using my articles to help retain and recruit plan sponsor clients.

Occasionally, I would get companies that would solicit me because their service was to cold call plan sponsor clients. I always thought it was a waste of time because I don’t believe that plan sponsors seek out ERISA attorneys on their own. Thanks to electronic filings of Form 5500, some databases plan providers can use to cold call plan sponsors. As a plan sponsor and plan fiduciary, I know this because I get the cold call.

Does cold calling work? I don’t know, I usually hang up as soon as I identify the caller as a telemarketer. Recently, I was invited to an event for plan sponsors by financial advisors. I immediately said no, because the last reason I’m hiring a financial advisor is because they fed me on some junket.

For me, I’d rather develop relationships with referral sources than spend time, calling people and dealing with the angry hang-ups, but that’s me.

A federal judge in San Diego rejected Qualcomm Inc.’s motion to dismiss a lawsuit by a 401(k) plan participant over forfeitures.

The key issue here is whether Qualcomm could use forfeitures to reduce employer contributions.

The Internal Revenue Code allows 401(k) plans to use forfeitures to reduce employer contributions to the plan or reduce plan expenses. Qualcomm chose to reduce employer contributions, according to Antonio Perez-Cruet vs. Qualcomm Inc. et al.

The plaintiff, a former employee sued in October 2023 claiming ERISA’s guidelines say plan executives’ fiduciary duty is to reduce plan expenses. The plaintiff claims that ERISA trumps the IRS.

With a motion to dismiss rejected, a settlement is quite possible.

A lawsuit against TIAA’s cross-selling a managed account service will proceed after their motion to dismiss was denied by a federal district court judge in New York.

John Carfora, Sandra Putnam, and Joan Gonzales sued TIAA in the U.S. Southern District Court of New York alleging that TIAA breached its fiduciary duties to participants ERISA for cross-selling their adviser-managed account service known as Portfolio Advisor, which comes at a higher cost than remaining in the plan that these participants were in.

The plaintiffs were participants in different university-defined contribution plans serviced by TIAA, but aren’t suing the schools for breach of fiduciary duty.

U.S. District Court Judge Katherine Polk Failla denied TIAA’s motion to dismiss and stated that the lawsuit shows “in great detail the systematic efforts on TIAA’s part to drive members from their ERISA plans and into TIAA-sponsored offerings, with little upside to those participants.”

The lawsuit claims that TIAA placed participants into individual model portfolios that often included TIAA-affiliated funds, which had higher fees than if they kept their assets in the employer-sponsored plan. The lawsuit also alleged TIAA advisers cold-called participants by offering free financial planning services but with the undisclosed intent of moving participants to the managed account offerings.

Vestwell announced the expanded distribution of J.P. Morgan Asset Management’s Everyday 401(k), as well as the expansion of the Everyday 401(k)’s capabilities, including allowing financial advisors to serve as a 3(38) investment manager in the workplace retirement plan.

J.P. Morgan’s workplace savings platform for small businesses will continue to be offered through JPMorgan Chase business banking and will now be available to financial advisors, jointly distributed with Vestwell.

Small employer plans like a SEP or a SIMPLE-IRA are great opportunities for small businesses to save for retirement because of the no administration costs. However, like clothing for kids, there will be a time when these plans no longer fit.

When do they no longer fit? When you start adding employees that aren’t owners or related to owners these plans allow no disparity in employer contributions. So if you want a 15% employer contribution, you have to give it to the employees who have been there for a year full-time. There is also no salary deferral component in a SEP and a limited one for SIMPLEs, so the bulk of the retirement plan contributions are what you’re going to fund.

So that’s why you need to look into something that’s a better fit like a 401(k) plan or one that’s in conjunction with a cash balance plan. So you need to know when the SEP no longer fits.

ERISA requires disclosure of certain plan documents to participants including a summary plan description, statements, and notices. The problem is what do you do with people who aren’t participants such as potential employees?

If you’re scared about providing an SPD to a potential employee, maybe you should worry about what’s in your SPD. As for other information, you have to measure risk vs. offending the person requesting the information. You just don’t want to land in trouble by disclosing too much information and you also don’t want to offend those asking for information by just saying no especially if the goal is to hire them. There are certain things I wouldn’t disclose such as plan provider contracts and anything about plan governance.

The retirement plan business is all about trust. It’s built on trust and trust takes time.

So when an advisor calls me up and asks if I can refer them clients, it’s a faux pas on their part because they aren’t interested in building any kind of relationship with me, they just want to sell, sell, sell, kind of like the Dukes at the end of Trading Places.

I don’t get many direct clients from plan sponsors, it’s mainly through referrals from advisors and third-party administrators with plan sponsors in trouble. Even if I do have a client who needs a financial advisor, am I going to refer them to people I trust and work with, or someone who just cold-called me?

I believe one of the most important games I play is game theory, I try to deduce what the other side will do, in any given situation. With my game theory, I can’t imagine any advisor who isn’t just going to give me clients without some relationship-building. Yet so many advisors out there, think that I’ll just give them clients out of the blue.

I always say that the world would be better off, just if every human being would realize that there are other human beings out there. The person who plays on their phone without an earpiece, the person who won’t return the shopping cart to the corral, and the person who is a pig parker, would serve humanity better, just by understanding that there are other people out there.

Every act you make in whatever you do can react. I learned that when I offended a third-party administrator (TPA) by taking my client’s side over a billing issue. The problem is that the TPA referred me, but the plan sponsor was a client. Lets just say, I never got a referral from that TPA again.

Everything you do, no minor the job, can react, and sometimes it’s not going to be positive. So when I pulled a Larry David because the camp photographer was taking pictures, mostly of her ugly children, I lost a friendship out of it, because a friend of mine was a friend of this photographer. These are the breaks.