The Rosenbaum Law Firm P.C. Blog

In 1994. H. Wayne Huzienga sold Blockbuster Video to Viacom for $8.4 billion. At its peak, there were 9,000 stores. Dish Network who bought Blockbuster a few years ago for $320 million, just announced the closing of the last 300 stores in the United States.

Why did 9,000 stores and billions of equity go away. Blockbuster became a fat cat on video rentals and late fees, yet they never saw the future of DVD rentals by mail and no late fees (Netflix) or online streaming. Blockbuster could never adapt to a changing environment.

If you’re a retirement plan provider, don’t be like Blockbuster. Keep and eye on the present, but also an eye on the future. With the effects of fee disclosure regulation to take time to play out, I’m sure that there are quite a few retirement plan providers who weren’t so forward thinking with fee transparency that fee disclosure may be their death knell.

If you’re a broker and you never see your retirement plan sponsor clients in quite some time, your days are numbered. If you are a third party administrator and you live and die by revenue sharing, the jig is probably going to be up. If your bread and butter has been working on money purchase plans or paired plans, it’s been slim picking for the past 11 years.

Regardless of your place in the retirement plan business, whether you have a billion under assets or one plan to your name, you will always need to be behind the curve. Otherwise, you may be in the same position as Blockbuster.

My latest JDSupra.com article can be found here.

The one thing that I think most employers forget about in sponsoring a retirement plan is that an employer sponsored retirement plan is an employee benefit. Maybe not as important as health insurance, but certainly more important than gym discounts and free coffee and milk.

With January 1 quickly approaching, now is a perfect time for employers to take a look “underneath the hood” of their retirement plan to see what works and what needs improvement. It’s a great time to do the things they are supposed to do which is properly exercise their responsibility as plan fiduciaries.

If you are a plan sponsor, look at plan costs. Look at your plan investments, has your advisor seen you in the past six months and reviewed the plan investments and investment policy statement? Have you reviewed last year’s compliance test? Is your plan close to failing the discrimination tests? Do you need or can you afford a safe harbor 401(k) contribution? Do you have extra money that a new comparability allocation to benefit your highly compensated employees while offering a minimum gateway contribution to your rank and file makes sense? Is participation a problem and does automatic enrollment look like an option? Do you have allow Roth 401(k) after tax contributions?

These are just some of the questions you need to ask and right before the beginning of a new year makes a whole lot of sense.

My latest newsletter geared towards financial advisors and other plan providers can be found here.

My latest JDSupra.com article can be found here.

The IRS released the following today:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Below are details on both the unchanged and adjusted limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost‑of‑living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2014, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $205,000 to $210,000.  For a participant who separated from service before January 1, 2014, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2013, by 1.0155.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2014 from $51,000 to $52,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2014 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $17,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to $260,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $165,000 to $170,000.

My latest newsletter can be found here.

I have been an ERISA attorney for 15 years now and it’s gone by pretty quickly. I have worked for a few ERISA attorneys and have seen quite a few out there giving speeches around here and there.

Probably my greatest talent for helping my own practice and the worst talent in working in a law firm setting has been the ability to connect with my audience. My audience is going to be plan sponsors, third party administrators (TPAs), and financial advisors. My articles, newsletters, and speaking engagements meet the attention span and interest of my audience. When I was working at law firms, that wasn’t going to work because most law firm partners have a tendency to speak above the level of their clients and other attorneys and that’s because they feel the need to justify their fees and their experience by speaking legalese and jargon.

I bill on a flat fee, I have a low overhead, people hire me because the fees are reasonable, I don’t need to justify my fees. I’ve seen a lot in this industry (soon to be in a Kindle book) and some of it was pretty bizarre, so I don’t need to justify my experience.  As a retirement plan provider, don’t confuse your clients with jargon. Spit it out, tell your clients what you do for them and why your service is better than the one being offered across the street.

Throwing jargon and technical speak isn’t going to justify your fees, service, or experience, it’s only going to confuse your clients. Tell them what you do in simple terms, because no matter what, they aren’t going to do your job. Communication is any business is key and the lack of communication often dooms any relationship. Speaking above the level of your clients isn’t communication because there is going to very little comprehension.

No one is denying that the work you do isn’t important, but if you can’t communicate what you to do your client, often they will find another provider that will.

My latest JDSupra.com article can be found here.

Aside from the monthly tally of most read articles on JDSupra, I’m not very popular. It’s probably my personality or just not wanting to go with the flow, but I’m not a popular guy. Ask my family, ask my former bosses. While I won’t win popularity contests, I’ll make it up in doing quality work and doing my best in my relationships with my clients and my referral sources. But popularity isn’t everything.

You should never associate popularity with quality because many times, they are mutually exclusive. Despite the fact that Apple computers are far superior to Windows based PCs, look who sells a lot more. Some of the most popular food establishments, movies, products, and services may be popular, but not be the best of the best.

So when a plan sponsor chooses a mutual fund, a financial advisor, a third party administrator, or an ERISA attorney, avoid just picking a provider because they are popular or have so many plans or assets under management. Look for quality over quantity. Look for the best, not the most popular. A lot of things popular in this retirement plan business isn’t very good.