The Rosenbaum Law Firm P.C. Blog

Suppose someone you never met before comes up to you and asks whether they can stay at your house or someone you never heard of, all of a sudden wants to be your partner and best friend. Any business relationship and any personal relationship you have requires trust and trust is something that doesn’t develop over night.

When I started my own law practice over 5 years ago, I knew that I needed time to develop my business. Financial advisors and third party administrators weren’t going to recommend their clients to me based on a couple of articles I wrote or a quick meeting. It was going to take time in developing relationships by building my reputation and by developing trust.

Yet I’m always baffled by the broker who calls me up out of the blue and starts inquiring about my clients and whether my clients are happy with their current financial advisor, which is disconcerting to me when a good chunk of the time, a financial advisor has referred me this client. Even if a financial advisor didn’t refer me this client, I barely know this broker. I can recall how many times in my law practice where I met an insurance agent to network and all of a sudden, they are trying to sell me life insurance that I couldn’t afford and didn’t need.

When I talk to other retirement plan providers, I don’t ask them which ERISA attorney they work with. These people know what I do and if they like what they hear from me or see what I do, then maybe they will hire me or refer me when there is a need for an ERISA attorney.

Networking and developing relationships in this business is like dating. It’s a process, it takes time, and most of the time, you’ll come up short if you cut to the hoop too quickly.

Whether it’s working with clients or other retirement plan providers, you need to know that any worthwhile relationship will take time and requires trust.

My latest JDSupra.com article can be found here.

I once referred work to an accountant for a retirement plan audit. He did a terrible job and there were issues regarding his ability to do the work. Making a lousy referral is even worse than doing poor work of your own because at least you had control over your own work.

Of course, I was embarrassed and the accountant came up with so many embarrassing excuses and I looked like a moron in front of this plan sponsor. Yet, despite everything, all I wanted was an apology from the accountant.

Sometimes all you have to do is to say sorry if you mess up or if the client is disappointed in anyway even if it was something out of your control.  Saying sorry and not making any excuses is a good way for your clients to release tension because unhappy clients leave and just fighting over something just because you won’t simply say sorry is silly. Saying you are sorry isn’t the same as admitting guilt and sometimes, it’s better to give in even though apologizing is not giving in.

Clients needs to know you care and just being indignant in refusing to apologize for anything can go a long way in causing grief for your business that you do not need.

My latest JDSupra.com article can be found here.

The law firm I started a few years back is actually more than 15 years old as it was a shell where I could offer legal services on the side while I did my normal day job. It was an experiment on whether I could go out on my own and I learned during that time what worked and didn’t.  I can tell you that advertising in the local Pennysaver or advertising yourself as a low cost legal provider are likely misses.

So part of my practice was offering most services such as tax preparation and wills on a flat fee. For a time, wills were ridiculously low such as a will for $100. I had a tax client who wanted me to do a will and she knew about those fill in the blank forms that Staples offered.  I had software that produced wills in a Microsoft Word format. The clients asked me whether I would do their wills using those fill in the blank forms and whether I would cut my fee. I told them I wouldn’t because that was outside my comfort zone and my will fee was ridiculously low as it was.

A good part of my practice is working with financial advisors and TPAs. Some have me on a monthly retainer; most just call out of the blue with questions (feel free to call). Many advisors ask for my opinion on clients who request something outside the box, such as asking an ERISA §3(38) fiduciary who uses index funds to retain some of the actively managed funds that the previous advisor added to the fund lineup or a financial advisor being asked to assist a plan sponsor with an Internal Revenue Service (IRS). Being a retirement plan provider is hard enough without adding stuff to your plate that may put yourself out of your level of comfort. If you are a §3(38) fiduciary, the whole point was for the plan sponsor to offer discretionary control over plan investments and you don’t have control when the plan sponsors is asking you to retain their previously added investment options. Being a financial advisor doesn’t mean being an ERISA attorney in handling plan audits.

The road to hell is paved with good intentions and I am sure that there have been plan providers being sued for errors caused in favors these providers did for specific plan sponsor clients that the provider knew was out of their level of comfort.

It’s easier to say yes to every plan sponsor request, but it takes a better businessperson to turn down business that may increase your liability and get you out of that zone of comfort.

I didn’t have such a wonderful time at law school because I felt the administration and much of the faculty weren’t honest when it came to the study of law and more importantly, our job opportunities. There was one law professor who was a shining light because he told it like it was and was just up front and honest with people. His name is Bernie Corr. I don’t mind the C+ in Civil Procedure because he told us that some of us were getting that grade and I did better with him in two other classes.

History has shown that I love people who are upfront and honest about things and I show less love for those who hide the ball.

When it came time to a Bankruptcy seminar course, he told us that any changes in bankruptcy are a boon to bankruptcy law and was insisting that many of these changes might have to do with making money for bankruptcy attorneys.

Every 6-7 years every retirement plan has to be restated into a new plan document and every few years, there needs to be ancillary amendments. I admit that I steal professor Corr’s line that all these amendments and restatements are to keep ERISA attorneys like me employed.  Seriously, retirement plan laws change and plans have to be amended to reflect that.

For the past 10 years, there has been a host of plan restatements and ancillary amendments that have been required for all retirement plan sponsors. There have been so many ancillary amendments, that even I have to keep a full checklist of what was done. Plan sponsors are in worse shape because many don’t have all the ancillary amendments (whether they were done or nor and whether they were actually signed or not) and the Internal Revenue Service (IRS) knows that especially when it comes to plan audits. Not having all the required plan amendments and restatements is an excellent way for the IRS to make a few shekels on penalties when auditing a plan.

So it’s a good idea for a plan sponsor to take inventory of their plan documents and amendments to make sure they have a set that are up to date and correctly dated. If not, a submission to the IRS’ voluntary compliance program beats getting penalized on an audit because it costs a lot less.

My latest JDSupra.com article can be found here.

It was in “This is Spinal Tap” where I heard the line how there was such a fine line between stupid and clever.

When it comes to protecting retirement plans, I always say KISS, the acronym for “keep it simple stupid”. So many times I have seen plan sponsors try to be clever and there is always a high price to pay for being clever.

Intel is currently being sued by plan participants for allowing hedge fund investments in their 401(k) plans. Participants under the age of 50 were enrolled in a Global Diversified Fund with 37% exposure to hedge funds.

Hedge funds are an appropriate investment by plan sponsors for defined benefit plans where they exercise investment selection and since there are no accounts, it’s harder for plan participants to sue like under a 401(k) plan because they can eerily demonstrate harm by showing the losses in their personal account balance.

I think allowing hedge funds in any type of 410(k) plan whether participant directed or not, is a problem that has no solution. Intel as one of the top companies out there made themselves a target by allowing hedge funds because ERISA litigators are in the target business. Looks like they found a nice target and Intel should have known better. The problem is that these investment decisions were done in-house. Maybe hiring Alliance Bernstein and the litigation will shift their strategy.

When you get pulled over by the police while driving, the best way to handle is to be pleasant and not be argumentative. You listen to the officer as to why he pulled over. Being belligerent and non-cooperative will only lead you to a ticket.

When a plan sponsor is contacted by the Internal Revenue Service (IRS) or the Department of Labor for a questionnaire or a request for information, it’s best for them to be cooperative and immediately have them contact an ERISA attorney. Being unresponsive or curt with them may lead them to sniff further and look closer at the plan for potential ERISA or Internal Revenue Code violations.

I had a client that had committed a serious breach of fiduciary duty and their cooperation of the Department of Labor (DOL) agent investigating the matter went a long way into correcting the error and avoiding some serious penalties. The DOL agent was very diligent in her role and was actively finding solutions that the client could pursue in rectifying this matter. Stonewalling the DOL would have been a headache and possible litigation by the DOL. In the end, we came to an agreement and rank and file plan participants were made whole.

A few years back, a potential client who advised me that the DOL was seeking information as to why the defined benefit plan that his bankrupt company had sponsored failed to prepare audits and 5500 filings for the past several years contacted me. This potential client refused to answer the DOL’s request and informed me that he had bankrupted the plan to benefit his personal expenses. I had advised him that he should immediately cooperate and the criminal attorney at my old firm recommended to same to avoid certain jail time for embezzlement. This potential client ignored our advice and declined our representation. He was arrested a year or so later and was convicted and sent to jail for 18 months. Had he played ball with the DOL instead of hiding it, he might have avoided jail time.

Cooperation with the IRS and DOL can go along with defusing problems that threaten the qualification of the plan and increase the liability for the fiduciaries. So if a plan sponsor is targeted for an audit or a request for information, the best bet is to contact an ERISA attorney. I hate to say it, but IRS and DOL agents act differently when working with an ERISA attorney than a client with no retirement plan background. Regardless of the problem, it’s always best to cooperate. So if your client gets contacted by the IRS or DOL, pick up the phone and give an ERISA attorney like me, a call.

My latest newsletter for retirement plan professionals can be found here.