The Rosenbaum Law Firm P.C. Blog

My latest article on JDSupra.com can be found here.

My latest JDSupra.com article can be found here.

You must know about the shoemakers’ children and how they go barefoot and have no shoes. In the retirement plan industry, we have retirement plan providers and their employees’ retirement plan.

I know, I have been there. The third party administrator I worked for didn’t have a great plan, it was often alleged we switched platforms to salvage our premier  pricing with a certain insurance company. Don’t know if it was true, but that is what was alleged.

So for me, it’s no surprise that mutual fund companies are being sued by former employees over their own 401(k) plan. While I don’t know all the facts and it will be decided in the courts, one fact (if true) fascinates me.

I often waste time analyzing irrational behavior through rational eyes and I always ponder: “what were they thinking?” So when I hear that part of the complaints is that all of the mutual funds in a mutual fund company’s plan were funds from that fund family, I ask: “what were they thinking?”

When you have thousands of mutual funds out there and hundreds of mutual fund companies, it’s just amazing that any plan sponsor (whether it’s a mutual fund company or not) thinks it’s prudent that every fund on the plan’s lineup is from the same mutual fund company. It doesn’t look right and it doesn’t look prudent, especially when there is no mutual fund company that has superior success in every sector of the market. In addition, any plan that only has funds from the same mutual fund company are often being administered by bundled providers who are mutual fund companies (i.e, plan being administered by T. Rowe Price with only T. Rowe Price funds). How is a plan sponsor able to offer a rational explanation that it was prudent to select mutual funds from one company? I don’t think they can, especially when the mutual fund company is one of the plan providers.

Often in the retirement plan business, if it doesn’t look right, there is usually something wrong. Any plan using the mutual funds from only one mutual fund company is a plan with something wrong.

While the Supreme Court ruled in the monumental 401(k) case Tibble v. Edison that mostly dealt with statute of limitations issues, one could read something into it a little more.

Tibble was the case where the District Court held that a plan sponsor violated its duty of prudence as a plan fiduciary by not monitoring the plan’s investments. While the Court held that a plan’s selection of investments and failing to monitor is a continuing breach, what they said as part of their ruling should make any plan provider or plan sponsor to take pause:

“In short, under trust law, a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones. A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.”

My latest JDSupra.com article can be found here.

In an announcement that did not surprise me, The Department of Labor (DOL) has announced a brief extension of the comment period on its proposed fiduciary rule and set a date for a public hearing.

The comment period for what the DOL has been extended by 15 days — from 75 to 90 days — which the DOL  said means that the opportunity for public comments on this proposal may be over 140 days.

The dates of the public hearings will take place during the week of Aug. 10, 2015.

The comment period was extended because of the seismic shift that this proposal would have in the retirement plan and brokerage areas.

My latest JDSupra.com article can be found here.