The Rosenbaum Law Firm P.C. Blog

Life is a numbers game. Whether it’s business, family, or pleasure, numbers do matter. What the numbers say today, may not say tomorrow and you can often predict the future of the numbers because demographics are pointing the numbers to a certain direction.

For the first time ever, there were net outflows from 401(k) plans in 2013 to the tune of a net of $11.4 billion. Baby boomers are starting to retire and let’s face facts, a large chunk of 401(k) plan assets belong to baby boomers.

Net outflows aren’t good news if you are a retirement plan providers. While much of that 401(k) outflow will be converted to Individual Retirement Accounts (IRAs) that does little good for the third party administrator that will have no say in the matter and the financial advisor who may not have the right to solicit that flow to IRAs because of their rule as plan fiduciaries.

Life is a numbers game and it’s likely the net outflow will continue as long as the retirement plan industry does not do a better job in marketing their products and services to younger employees. There is enough time to turn the tide of net outflows, but the retirement plan industry needs to understand that the net outflow isn’t going to be a one-time thing.

More focus and attention is needed for participant education and better marketing to wring more assets from younger plan participants.

My latest JDSupra.com article can be found here.

My latest JDSupra.com article can be found here.

The snowball fect is term for a process that starts from something that is small and builds upon itself, becoming larger and also perhaps potentially dangerous or disastrous. The idea is that an avalanche can be started by a single, rolling snowball, hence the term.

When it comes to retirement plans, we have a snowball effect. The effect is usually when the plan sponsor has a plan problem and decides to either try to fix it on their own or lean on legal counsel with absolutely no training in ERISA.

I have seen too many plan sponsors pay tons of penalties and excise tax to correct problems that could have cost them a lot less if they were represented by ERISA counsel.

I remember being contacted a few years ago by a financial advisor whose client’s plan was disqualified by the Internal Revenue Service and was asked if I could possibly represent them in negotiating down any other Internal Revenue Service penalties. I told the advisor I should have been called a lot earlier because the transgression shouldn’t have led to the plan being disqualified if they had some decent ERISA counsel.

Too many plan sponsors think they can handle an audit or inquiry or investigation on their own and they’re wrong unless they are a third party administrator or ERISA counsel.

In the past, I have been able to negotiate penalties down for failures to file Form 5500 on time when plan sponsors not represented by counsel have paid through the nose in penalties. Too often plan sponsors are so more interested in saving on legal fees, that they end up cutting their nose to spite their face by paying more in penalties.

ERISA counsel have the experience to handle the government and I have found a deference by IRS and DOL auditors in dealing with professionals who understand the ramifications of the situation, which often leads to a better resolution.

Using counsel who have no ERISA experience is a mistake as well, like hiring a dentist to do a colonoscopy. ERISA is a different animal than what most attorneys handle and I have found there is no room for lawyers who want to dabble in ERISA because it’s not something you can dabble in.

Once a plan sponsor gets that initial inquiry, they need to contact ERISA counsel and their TPA to draft an action plan on how to handle because often the IRS and the DOL may use an audit to investigate a major complaint. Having a lack of experience in handling a governmental audit can make things so much worse.

– See more at: http://therosenbaumlawfirm.com/blog/?p=1472#sthash.ePqEEvMQ.dpuf

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

My latest article can be found here.

One of the biggest problems of being a company in any type of business is recognizing talent and rewarding talent. A company that fails to recognize and reward talent will eventually see a talent exodus that will be problematic because it will help the competition.

When I have worked for third party administrators (TPA), I saw the talent exodus first hand of people who either started their own TPA or became heavyweights in the TPA business.

I am reminded by it first hand of my two-year sentence/tenure at the New York City based office of a semi-prestigious Long Island law firm. There were four of us in that office that were associates and I’m sure that the hopes of each of us would be to make partner there. While I had the pie in the sky idea of starting a national ERISA practice that people laughed at, the other associates were excellent attorneys that were very personable. One associate was probably the friendliest person I ever met, he had a background in fundraising and I’m sure he could have been a rainmaker there. We both wanted to use social media to bring in business and we were thwarted. Another associate was very politically involved and also personable. The last associate was hardworking and has the personality to be successful. These were the law firm’s best and brightest, the firm had a backbench of future partner all-stars.

When I left after 2 short years because I didn’t bring in the business I expected to, I expected one of the remaining 3would make partner. I was wrong, they all left. The fundraiser went back into fundraising and doing a heck of a job working for one of the most prestigious civil rights organizations and the politically connected superstar just got a prestigious job in the administration of one of the most powerful politicians in the United States. I guess waiting 8 ½ years to get called up to become partner was too long.

The problem with the firm is that they have a graying population of partners with very little superstars to carry that firm into the next generation. I’m afraid when some of the heavy hitters leave or retire, the farm system of younger partners and associates will be so barren that the firm will die.

Talented people who work for you also are smart. They will know when their work is or is not appreciated and whether there is a future for them. Passover is a wonderful Jewish holiday that celebrates freedom; the job experience of getting passed-over is not.