The Rosenbaum Law Firm P.C. Blog

When I was a kid, there were two varieties of Cheerios, one version of Listerine, and one type of Crest toothpaste.  If you got to the supermarket these days, there are about a dozen varieties of Cheerios, more than a half dozen versions of Listerines, and so many varieties of Crest that your head can spin. The bottom line: there is always something for you to buy.

If you’re a plan sponsor, there are so many things for you to buy. Plan sponsors need the services of plan providers, an ERISA bond, and fiduciary liability insurance.  The problem is that many times, plan sponsors are being sold services that they don’t really need and the plan sponsors are really unaware of it unless they have an ERISA attorney or trusted plan advisor helping them.

For example, I have a client with a 30-year-old sharing plan. The bulk of the assets are in an insurance policy that the owner/sole participant bought on the advice of the insurance salesperson/plan advisor.  The owner wants to terminate the plan and transfer the insurance policy to himself at distribution. The insurance policy has been paid up for years, so what does another insurance salesperson try to do? He tries to sell the owner a new insurance policy for a company that is about extinct and where the owner is around 70.  Thankfully, this owner has an ERISA attorney (cough, cough) and a third party administrators who knows what’s best for the client,.

The point is that plan sponsors have money and there will always be plan providers willing to take that money especially those that are a little unscrupulous and selling plan sponsors stuff that they don’t need.

If you’re being sold something, make sure it’s something you need as a plan sponsor.

My latest JDSupra.com article can be found here.

When I worked at that law firm, I always felt I was Al Czervik, the Rodney Dangerfield character from Caddyshack while the Managing Attorney was like Judge Elihu Smails or maybe Smails’ wife since the Managing Attorney was female. Regardless, I was always treated as if I didn’t belong. Didn’t matter if I brought in business or got my name quoted nationally or gave away U.S. Open tickets at Bethpage, the Managing Attorney didn’t like me.

They were so serious there. Like the Joker in The Dark Knight, I always wanted to know: “Why so serious?” If you read my blog posts and articles, besides the grammatical errors, you probably notice the humor. Maybe I’m a failed comedian, but comedy here and there is my way of making the audience more comfortable when they have to digest some dense topics like ERISA and 401(k).

You should never take yourself too seriously. You shouldn’t belittle what you do, but a little humor goes a long way in breaking down walls that might be placed up by an audience that feels they’re going to be bored with what you’re going to say in your role as a retirement plan provider.

Don’t operate your business as a retirement plan provider as a stuffy country club. Marketing materials and discussions tinged with a little humor is a great way of breaking down barriers with potential clients who view talking about retirement plans the same way they think about going to the dentist.

I want to thank all my readers that helped me get recognized as the JDSupra Readers’ Choice Awards 2016 top author for he insurance industry (which includes ERISA).

Details can be found here.

I’m a beer snob and I’m proud of it. I like the taste of beer and I’m not going to waste my time, money, and calories on a mass-produced inferior product like Budweiser, Bud Light, Coors, and Miller. I would rather drink water than their beer-flavored water. Bud Light and Budweiser are produced for the masses, Sam Adams and the other microbreweries are produced for people with taste for beer.

I’m also a TPA (third party administrator) snob. I believe that plan sponsors have better outcomes when they hire better TPAs. They have less administrative issues and plan designs that are more efficient.

For the past 6 years, I have been highly critical of payroll providers that serve as TPAs. Annually, I have written an annual article that has been circulated by the good TPAs and financial advisors around the country.  Other than being threatened with litigation by one payroll provider TPA (which they never pursued after threatening me to change the article, which I didn’t), I had not been contacted by representatives of a payroll provider TPA. While part of me thinks that it maybe best to ignore someone like me, the plan provider in me who wants to get better thinks it’s a good idea to engage your critics.

So a representative of a payroll provider did contact me a few years back. He might be a lower level representative, but I give him credit for making the attempt. He suggested that he would have a higher up contact me to go over the issues that I have with payroll provider TPAs in general. Despite my criticism of them in the past, I have enough of an open mind to know that I can be wrong about payroll provider TPAs. Once again, it was proven to me that my opinion is still reasonable.

The representative made the typical payroll provider TPA mistake to justify why my opinion was wrong. He claimed they are one of the largest TPAs out there. The mistake is trying to equate popularity/size (number of plans they serve as TPA) with competence. That’s like trying to equate Bud Light (the most popular beer in the United States) with taste.  We know that many times, the more popular product in the marketplace is not necessarily better (PCs vs. Apple Macs, VHS vs. Betamax). The fact that plan sponsors think that it’s a good idea to have their plans administered by their payroll provider doesn’t mean in reality that it is.

So a higher up contacts me with this payroll provider who is involved with the administrative side of the ball. While this payroll provider stated that they did new comparability/cross tested allocation, they do not do any work in the form of aggregated testing with a defined benefit plan (which is inconsistent what some of their salespeople have claimed when a TPA client of mine was trying to recruit one of their clients). In addition, when I told him of some of the glaring mistakes they have made and how fixing their plans through self-correction or voluntary compliance is a boon to my legal practice, there was no answer. I was just very underwhelmed that he had no explanation for these issues.

Again, I have an open mind and my views are not set in stone. However, the payroll provider TPA have gone out of their way not to prove my opinions are wrong. Until then, I’ll continue to mount my criticism.

My latest JDSupra.com article can be found here.

An MFS Defined Contribution Investment Trends Study found that nearly 6 in 10 retirement plan sponsors surveyed say they consider a track record of three years or less when selecting managers.

Is that really a surprise? Most people in life think short term and no one thinks shorter term than retirement plan sponsors. Retirement plan sponsors don’t have the time or the patience to think longer term when it comes to their retirement plan and the investment options offered under the Plan.  The study also suggested that plan sponsors fail to focus too much on performance and too little on allocation.

So it’s up to the financial advisors for the plan to help the plan sponsors identify the bigger picture.

The problem today in my mind is the many retirement plan sponsors out there that still don’t have a financial advisor or have an advisor that rarely meets and services the client.

Just another thing to think about if you’re a retirement plan financial advisor

How many times as a retirement plan provider that you contact a retirement plan that is paying too much money and getting too little back in plan services?

If you’re a registered investment advisor offering 3(38) service and you’re charging 20 basis points, you’re perplexed that you get the brush back when the potential client has a broker charging 60 basis points.  If you’re a great third party administrator (TPA) you maybe shocked that a plan sponsor still wants to use the TPA who’s charging double and not even doing a great thing.

If you spoke to 100 rational plan sponsor, 99 of them would probably sign up for your services that helps limit a plan sponsor’s liability at a better price. However, as you know, relationships aren’t about rationality, there are just ties that bind for one reason or another.

When I was at that semi-prestigious law firm on Long Island, I was approached by a union client that wanted to go with me because I was going out on my own. They were unhappy about me leaving and were not taken with my replacement. They even goaded me into drafting a retainer agreement and I was wary because it is questionable whether signing that client was an ethics violation because they had counsel. Ultimately, they didn’t pull the trigger just because they were afraid of the repercussions of firing a law firm that was a firm that used to hold weight in city politics. When my replacement didn’t last long, they thought about hiring me again, but didn’t. They would rather be unhappy with the attorney and law firm they had, just because they were afraid of the heat they would get by ditching that law firm. Again, it’s irrational, but it’s the ties that bind. That client chained itself to that law firm.

I had an advisor trying to work with a potential union client where the 401(k) plan was extremely high in fees and the plan providers were not offering plan participants any investment education. Plan participation was poor and the advisor showed he could shave costs by 2/3. The union client didn’t hire him and was offended when he tried soliciting them. Years later, they hired an investment advisor who was heavily linked with unions. Again, the ties that bind.

When a potential client rejects you where it was so clear that they should have hired, don’t be offended. Most of the time the incumbent plan provider is juiced in, maybe the plan provider is related to a decision maker. Maybe the broker is kicking back money to the new chief financial officer (I saw that happen) or maybe the plan provider and the decision maker go to the same house of worship or golf club, While you may claim that the plan sponsor has blind loyalty to their plan provider, sometimes that the loyalty is just based on a tie that binds and that is nearly impossible to break.

As Michael Corleone said: “it’s business, not personal.”

My newsletter geared towards retirement plan providers can be found here.

My latest JDSupra.com article can be found here.