The Rosenbaum Law Firm P.C. Blog

My latest JDSupra.com article can be found here.

I remember when I was in law school and we moved into a new building a few blocks away from the main campus. The computer sync site at the new building had a number of Apple Macs and the former law school Dean didn’t understand why we would spend money on what he called the Betamax of computers and in 1995, Apple was on its last legs. Thanks to the return of Steve Jobs, Apple made one of the greatest comebacks. However, it took some time for Apple to get its mojo back and it probably could be traced to the Introduction of the ITunes Store in 2000 and the IPod in 2001. Apple didn’t become one of the most successful companies again, overnight.

When the proliferation of financial advisors that started offering §3(38), I heard a lot of their competitors claim that plan sponsors weren’t really asking for it. I heard the same thing when plan providers (including yours truly) started offering §3(16) administration services. Over time, I have heard more and more plan sponsors asking for these services.  I know firsthand because I have had a lot more opportunities and meetings with plan sponsors wanting to delegate their duty as plan administrator.

Cable TV, VCRs, Wi-Fi Internet, smart phones, and tablets. These are just some products out there that took time to get popular. Any new product or service needs time to develop and get enough traction that consumers become aware of it. It takes time and interest, but products and services that offer a value proposition will gain traction if people know about it.

So the lesson here is that plan sponsors will further educate themselves on these ERISA fiduciary solutions and they will start demanding them. It just takes time and information.

When I was a freshman at Stony Brook, there was a shooting on campus as a rap concert when this rapper Special Ed didn’t want to perform after arriving at 2 am for a show that was supposed to start at midnight. The problem was that Stony Brook University police officers weren’t armed. They would have to wait for Suffolk County police officers to show up at the campus entrance.

So the University President John Marburger decided that it was the time after this concert to figure out whether campus police officers should be final armed. It took Marburger two years to decide to arm the police.

For someone who was just involved in student politics, I didn’t understand what took so long. I wasn’t old enough to understand the political implications that required Marburger to finally make a decision and the reasons why it took him so long. There is such much back and forth on how decisions are made and a good chunk of the time, money talks.

The Department of Labor (DOL) just announced that they were delaying the implementation of a new fiduciary rule for retirement plans and individual retirement accounts. They claim it will be released in 2015.  How many years it will take to be finally implemented, they didn’t say.

What is taking so long? A lot of pressure and a lot of money. The pressure is coming from Congress and Wall Street groups that don’t want brokers to be treated as fiduciaries. The money is coming from Wall Street groups to the coffers of Congressmen who don’t want the DOL to implement a rule. Heck, Wall Street groups are even creating dubious reports that plan sponsors will ditch their retirement plans if the fiduciary rule is changed. They said the same thing about fee disclosure and we saw how that didn’t happen.

It’s politics and the DOL has to walk a tightrope between competing interests to develop a rule that will serve as a compromise that neither side will be happy about, but those folks don’t have the political pressure that the DOL has been weathering for years with the new fiduciary rule and fee disclosure regulations.

While reasonable people can easily make decisions, there is nothing reasonable when it comes to anything coming out of Washington D.C.

My latest newsletter geared towards financial advisors can be found here.

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

I am pleased and honored to announce that Diane DeSimone, Stony Brook Class of 2015 is the winner of the 2014 Rozalia and Emil Berla Scholarship Fund.

I started The Rozalia and Emil Berla Memorial Scholarship Fund at my alma mater, Stony Brook University.  This scholarship is named for the two greatest people I ever knew, my maternal grandparents who both survived the Holocaust.

Many of you in the retirement plan industry have contributed already and you have my thanks. If you can spare just a couple of bucks towards this worthwhile scholarship, I would greatly appreciate it.

$1,000 isn’t much, but for a student attending such a great school, it’s a substantial step in paying tuition.

You can donate online through this link. All you need to do to make sure the scholarship gets the money is to type “Berla” in the fund designation.

You can mail any contributions to

Send to Jane McArthur c/o College of Arts & Sciences, E3320 Melville Library, Stony Brook, New York  11794-3391.  The Berla Scholarship should be noted on the memo line of your donation.

All gifts will be noted with a tax receipt.

Again I appreciate any help in raising money for such a good cause.

I prepare my own income taxes because my tax LLM degree and years working on ProSeries gave me the experience to effectively do that. When it comes to treating my allergies, I delegate that role to the person with the medical background to handle that. I delegate the things that I can’t handle and keep the things I can handle in-house.

Yet it is amazing how many plan sponsors don’t understand the art of delegation and how delegating some or most of their duties to retirement plan providers who have the background and training to do a better job than the plan sponsor ever can. Whether that provider is a third party administrator, ERISA §3(16), ERISA §3(21), or ERISA §3(38) fiduciary, plan sponsors need to know that there are capable plan providers than can alleviate some of the liability risks that they run by handling some of these roles as a plan fiduciary themselves.

The reason that plan sponsors don’t understand the art of delegation is because they really don’t understand their role and liability as a plan sponsor. They don’t understand their duties and how they have to act prudently in paying reasonable fees and checking on the current plan providers they have in place.

They also may be surrounded by plan providers that thrive in business because their clients don’t know much about what these plan provider aren’t doing and should be doing. Heck, I’ll never forget the law firm I was a law clerk at during my LLM year in Boston. There was this paralegal who was told in her review how wonderful she was until she got fired a week later. Some plan providers laud the plan sponsor because they don’t want to tip them off that there aren’t doing their job very well.

This is not to say that plan sponsors should hired all these numbered ERISA fiduciaries because there are plan sponsors out there who understand their role and handle it effectively.

The issue here is that plan sponsors need to identify their role as plan sponsors and gauge themselves whether they can handle it all and delegate the duties that they can’t. It’s hard to be honest with yourself at times, but a plan sponsor has the fiduciary duty to be honest with themselves and identify what they can do as a plan sponsors and what a retirement plan professional needs to handle. It’s that simple.

My latest newsletter can be found here.

My latest JDSupra.com article can be found here.

I talk to a lot of advisors and I have many advisor clients around the country and one of the things that I keep on hearing is that even with fee disclosure regulations almost 2 years later, it is still difficult to get through to plan sponsors about their fiduciary responsibility as plan sponsors.

Having been a pessimist for a good chunk of my life, I see things now as the glass being half full. That means over the past several years, plan sponsors are more educated as a whole when it comes to plan expenses and fiduciary responsibility. Companies like Brightscope have done a good job of bringing fee benchmarking and disclosure to the forefront for plan sponsors to understand why they need to care about fees and their investment options. The proliferation in the hiring of outside ERISA fiduciaries also proves that point.

So while many plan sponsors now “get it” when it comes to fiduciary responsibility, there will always be that group that don’t. They say they cover all their bases and how they are in good hands with their current providers even though they made absolutely no fee benchmarking or due diligence. They say that big participant lawsuits like Tibble and Tussey don’t matter to them because their plans are small. I learned a long time ago that there are probably still folks out there that think the earth is flat and there is no use in getting aggravated because their time will come when they see that light. There is no guarantee they will see the light, but these plan sponsors will only understand it when they get sued by their plan participants or when the Department of Labor starts auditing them and figuring out what they did with their fee disclosure and whether they documented their fiduciary process. Some people will never get it until some type of plan litigation goes against them or someone they know.

Fee disclosure will have greater effect when the DOL starts auditing plans and service providers because fee disclosure regulation without any teeth is useless. Making plan sponsors suffer the consequences of a prohibited transaction for not complying with the fee disclosure regulations will awaken the stubborn plan sponsors who shrug off their fiduciary responsibility.

My great grandmother said it best, don’t run after the carriage if it’s not going to pick you up which means that if you are a plan provider, that don’t bother with the plan sponsors who listen to your proposition concerning fiduciary responsibility and shrug their soldiers and give the old Alfred E. Neuman :what me worry?” line. If there is any luck, they will get it when it’s too late.