The Rosenbaum Law Firm P.C. Blog

My latest newsletter can be found here.

My latest JDSupra.com article can be found here.

I was recently elected Vice President of my synagogue, Congregation B’nai Sholom-Beth David in Rockville Centre, Log Island. This isn’t a request for donations, yet. I was elected Vice President even though I have only been involved in my synagogue for 2 years.  I became the Managing Editor of my college newspaper about six weeks after I joined. I became the top attorney of a third party administration firms 7 weeks after joining.

This doesn’t mean I’m special because I’m not. The point here is that I’ve been very lucky in life in being there at the right time. I have learned that timing is everything and every time you sense opportunity, grab it because very rarely will you get something handed on a platter.

In the three instances I listed above, I knew what I wanted and I wasn’t shy to ask for it. Usually, I’m Mr. Passive-Aggressive, but over time, I’ve been trying to cure that. You have to take the brass ring, people can’t read your mind and just hand it to you.

Speaking of that third party administration attorney job, my predecessor was making hundreds of thousands of dollars because he got a percentage of the gross legal fees. The attorney I replaced wasn’t all that great and my bosses senses they could bump me up to head attorney and save quite a but of sum of money. When I got word that this change was going to happen and I expressed interest, I expect a huge pay increase for the promotion. When all I was offered was $5,000, I was in passive-aggressive mode and said nothing. Instead, I boiled over it for the next 4 ½ years when I was there and it changed how I felt about the place and it affected every performance review I had because I was always chasing that $25,000 pay increase I thought I was entitled to. 12 ½ years and I still think about it. I had the opportunity and I flubbed it.  Again, timing is everything.

So regardless of your role, either as an employer, plan sponsor, plan provider, or shepherd, take opportunity when it knocks and seize the moment because it can be gone the next moment and you wasted it.

Just like the thought of traveling to Dubai with a passport that says “Ary Rosenbaum”, I have a general uneasy feeling about the use of self directed brokerage accounts within 401(k) plans. While it’s still allowed, I have some liability concerns with plans offering them. Choice can be a good thing with a 401(k) Plan, but too many choices aren’t  a good thing. The problem I find with brokerage accounts is three fold.

1)   Plan sponsors actually need to vet brokerage account providers, as well as providing investment education and/or advice to those who partake in these accounts. I don’t think any hold harmless agreements by a plan participant who invests in these account will do any good because a plan sponsor has a fiduciary duty to all plan assets. It also doesn’t help that plan participants who use brokerage accounts do worse than participants who use the plan’s core fund lineup.

2)   While most of these firms who offer brokerage accounts are professional services organizations, many tend not to offer it to all participants (which can bring up plan discrimination as it pertains to benefits, rights, or discrimination). I once belonged to a 401(k) plan where the partners had brokerage accounts, but associates and staff weren’t given that option. Sorry, Pat.

3)   Whether it’s through litigation or regulation, I think there is a lot of unsettling fiduciary liability issues that may come up further down the pike where plan sponsors will regret offering brokerage accounts.

Just my two cents and my bias against participant directed brokerage accounts within 401(k) plans.

My latest JDSupra.com article can be found here.

So much of any industry is dedicated to marketing, because marketing can help a company sell a product or service just based on how it’s marketed. Whoever sold the pet rock is still probably laughing all the way to the bank.

In the retirement plan industry, there are quite a few marketers who can take a normal product or service that most providers offer, but make it sound more important than it really is. Sort of like Big Mac’s special sauce, which we all know to be Russian Dressing.

I remember a few years back of a third party administrator that I work with who developed this special professional services pension plan which was geared towards professional service companies that offered a pension with participant direction. All it really was, was a cash balance plan with participant direction (before PPA 2006 made participant direction in a cash balance plan impossible).

Look at the folks who offer fiduciary warranties where the provider neither serves as a fiduciary nor offers a warranty that will ever be used. As a friend of mine pointed out, the insurance providers who offers these warranties make money by insuring risk, so what does it say about those fiduciary warranties if they are free?

I can’t wait for the ERISA 3(16) or 3(38) fiduciary to call themselves a retirement plan concierge or butler to make what they do sound better for the masses.

The point is that as a retirement plan sponsor to make sure what you are getting in plan services, because a euphemism is a euphemism and that doesn’t protect you more than what contractually is being offered.

Retirement plan providers can never be arrogant when it comes to the gripes raised by their clients. If clients have an issue with your service, you can’t discount because anger festers and boils over into an irreversible cycle that gets you fired. If something goes wrong, you have to offer an explanation why and you just can’t come up with an excuse when it’s convenient for you. You need to be hands on and nip problems in the bud. Clients have a right to know why something goes wrong and you can’t just offer an explanation when it’s time for the client to renew their service agreement with you or pay your bill.

For every relationship that went sour in my life, the reason 100% of the time was a lack of communication. Whether it’s one side or both sides, the lack of communication festered into an anger that irreparably damaged the relationship. A retirement plan provider can’t afford to be arrogant because there are dozens of other competing providers ready to replace you.

Constant communication is one of the great tools that a retirement plan provider can have in preserving their relationship with their clients, so it’s key that you are in frequent communication and never take advantage of their business, their trust, and their goodwill. Otherwise, you may be out of a job.

My latest JDSupra.com article can be found here.

I had a friend of mine in college who was involved in student politics like I was and he once proclaimed to the school newspaper that he was “the stick in the wheels of corruption.” 20 years later, I have used that line many times. In law school, I was “the stick in the wheels of hypocrisy.” You get the gist.

In business and in life, one of my problems was having to deal with depending on others. Most people didn’t have the enthusiasm that I have may have for something or trying to get work done so I can get paid. When I was working for that law firm and I had this dream of building a national ERISA practice, there was nothing worse than depending on the law firm management to approve my articles and marketing materials in either a timely fashion or in the same structure I submitted as.

So many times I will hear from plan providers who lament that their work is held up by depending on other plan providers such as the advisor who has to work with a 3(38) advisor or an advisor who is dependent on a third party administrator to get back with on a proposal. Every retirement plan provider is busy, but if someone is consistently causing you to delay your work, then maybe it’s time to depend on someone else.

Time is money and you can’t afford retirement plan providers that are wasting your time.

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