The Rosenbaum Law Firm P.C. Blog

I’m glad that the Sixth Circuit has joined other Federal appeals courts in stating that arbitration provisions are invalid as a prospective waiver of rights and remedies guaranteed under ERISA.

In this recent case, Parker v. Tenneco, the participants claimed that plan fiduciaries didn’t use a prudent process for selecting, monitoring, and replacing plan investment options and that fees for managed account services, recordkeeping, and account administration were excessive. The fiduciaries sought to compel arbitration, arguing that the plans contained individual arbitration provisions that required participants to arbitrate their claims on an individual basis rather than suing on behalf of the plans or in a representative capacity (such as in a class action). The trial court sided with the participants, however, ruling that the individual arbitration provision impermissibly limited participants’ substantive rights under ERISA.

While I don’t like frivolous court cases (hello cases against some target date funds), people should have a right to pursue class action claims for excessive fees.

I’m old enough to remember when they would do ads for the Yellow Pages and they told you should let your finger do the walking.

When getting ready for that Internal Revenue Service audit, you may not need to let your fingers do the walking. However, you should always have your plan document and an annual valuation nearby. When I say plan document, I mean the plan document, IRS opinion letter, and amendments. The valuation report is the annual testing summary that lists the census, compensation information, and testing. If you don’t have those documents, get them. Whether you have an audit or not, you need them.

If you have a great product, but lousy distribution, you’re not going to do well. Yet the same thing is on the flip side if you have great distribution, but a lousy product.

Whether it’s a pooled employer plan, a great IRA product, or anything retirement plan-related, great distribution is certainly key.

However, you need a great product you go along with it. How often, do I hear about plan providers with these great distribution channels, yet are offering a product that won’t get much traction in the marketplace?

A PEP that’s more expensive than a single employer plan or a 3(16) service that does nothing isn’t going to succeed even if you have distribution channels the size of Coca-Cola’s.

There is always that line that you’re hired to be fired. No matter how great you are as a plan provider, you will certainly get fired by a client if you haven’t already.

However, if you’re consistently losing clients, it might be time to look in the mirror. I’m not talking about a client that fired you, I’m talking about a recent downturn and numerous terminations of your services.

There might be a lot of reasons that could be affecting you (referrals to another provider that has gone bad, costs, competency, lack of communication, etc.), but you need to start looking in the mirror and developing a plan to right your ship.

I’ve worked at some companies that struggled and the reason they struggled is because they couldn’t deal with the truth.

It’s 2024 and let us face some facts: behavior that might have been tolerated in the 1970s and 1980s isn’t tolerated today.

Thankfully, I’ve worked on my own for the last 14 years, so I don’t have to deal with the day-to-day nonsense that goes on with being an employee (there is a reason I went out on my own). If you have employees, understand their perspective and understand their feelings. They might not think your joke is funny and how you handle some sensitive topics as a joking matter.

My wife has worked for some law firms for the last few years and her tales from the workplace truly stagger me that they still operate as it is 1974, not 2024.

You’re running a business, not a locker room. If you want to continue with the approach that it is, don’t be surprised if you get caught up in a joke that went awry and led to an EEOC complaint or litigation.

I write a ton of articles as you may know and I will have advisors contacting me and suggesting some topic titles. I have adapted some of these suggestions, but there is one article idea that I had to turn down a few years ago.

I had an advisor who wanted me to write an article against the concept of trustee-directed/pooled 401(k) plans.

I won’t be writing that article anytime soon as I think plan participants are better off if trustees direct investments. But theorizing that is like telling people that Betamax was better than VHS, what is better isn’t always popular. Participant-directed invested 401(k) plans on a daily valued platform are the present and future, so no point in pushing trustee-directed plans either.

Trustee-directed plans are better because the smarter people in the room (advisors supporting the trustees) would be making investment decisions rather than the people with the least amount of background to do it.

Recently had a client going through an Internal Revenue Service (IRS) audit and while talking to an agent, they didn’t disagree with my theory that the idea of being able to reduce employer contributions through forfeitures is something that will no longer be an option, isn’t farfetched.

Before EGTRRA restatements, I remember that paying plan expenses wasn’t an option in what to do with forfeitures. Now if a plan sponsor can pay off administrative expenses through forfeitures, but decides to save a couple of bucks on their employer contributions, how is that going to be allowed to continue to be permissible? I think it’s a matter of time before the government says no.

I don’t need studies to tell me that States with mandated SIMPLE IRA programs for employers who don’t have a plan will spur the adoption of private retirement plans. There is no crowd in effect, the fact is that people are wary of the government’s role in retirement plans.

Being forced to proceed with a plan, they will pick a 401(k) plan or join a Pooled Employer Plan because participants can save more and they don’t trust the government. It’s that simple.

Federal court cases are a game, like chess. You file a complaint, you fight the inevitable motion to dismiss, and once you survive that, you either settle or take the chances with the case and see if the defendants settle later down the line.

ERISA attorneys front the money for these class action cases. They take the risk with the hopes of a quick settlement. If they can withstand a motion to dismiss, they are almost home. So until we see more and more cases dismissed, expect more class action cases for larger plans that used forfeitures to reduce contributions. It’s like shooting fish in a barrel until district judges get sick of them or the government eliminates reducing contributions as a forfeiture option.

I own a piece of a business and provide services to it, through my sole proprietorship. Pretty much all of that business for the sole proprietorship is performing services for that business I own a piece of.

This type of situation arises all the time, usually through a professional. The problem is when that sole proprietorship has a retirement plan and that affiliated business does not or has a retirement plan with lesser benefits.

If you have a situation like this, you might have an affiliated service group issue, and it’s advisable to contact someone like me. You might have a retirement plan coverage issue.