The Rosenbaum Law Firm P.C. Blog

My latest JDSupra.com article can be found here.

I was proud to appear as a guest on this great program for 401(k) financial advisors. Click here for the program.

“In Vegas, everybody’s gotta watch everybody else. Since the players are looking to beat the casino, the dealers are watching the players. The box men are watching the dealers. The floor men are watching the box men. The pit bosses are watching the floor men. The shift bosses are watching the pit bosses. The casino manager is watching the shift bosses. I’m watching the casino manager. And the eye-in-the-sky is watching us all.” –Casino (1995)

Retirement plans don’t have that much oversight, but the fact is that what plan sponsors do with their plan is open to the public since the Form 5500 that every ERISA based retirement plan has to file is publicly available. Folks like Brighsctope.com will rate a plan sponsor’s plan based on that information.

There is a lot reported on a Form 5500 and potential plan providers can use that information to gauge whether the plan should be a target for recruitment. That information can also fall into other hands that a plan sponsor wouldn’t want for them to see, such as the government and ERISA litigators.

Much like a resume, a 5500 is littered with information that is certainly ripe for discussion, so that’s why plan sponsors should be vigilant about their retirement plan to make sure that damaging information can’t be divulged by making sure the bad stuff doesn’t take place.

A law professor from Yale sent 6,000 letters in a disjointed way to plan sponsors claiming that their fees were high and that information would be posted on Twitter. Plan sponsors and their advisors were outraged, but that’s what happens when a Form 5500 is publicly available.

So plan sponsors may not have an eye in the sky watching them, but a Form 5500 can be proof that something might be wrong with a plan sponsor’s plan.

I had the pleasure of speaking at a great, Great West Third Party Administrator (TPA) Council meeting in Colorado Springs.

I already enjoyed giving my presentation because of the constant banter among TPAs on how to best handle marketing and issues related to client recruitment and retention. While I threw out some good ideas, the TPAs in the crowd gave out better ideas to each other.

Good TPAs do a heck of a job in helping plan sponsors administer the plans. The only issues I see with these great TPAs is that as a group, their marketing isn’t good. That’s not such a slight because I feel other professional services firms (especially law firms) don’t do a job of marketing as a whole.

Nobody likes to be taken for granted, I know as I had a family who did that. I think TPAs are taken for granted because they don’t convey a message to their plan sponsors clients about their value and what they do to keep a plan sponsor’s plan in order. If you don’t let people know what you are doing, then they will probably have no idea what you are doing.  If plan sponsors know what a great job their TPA is doing, the less likely they will make a change even it means not saving a few measily shekels and pissing off the advisor who wants to make a change.

My newsletter geared towards financial advisors can be found here.

My latest JDSupra.com article can be found here.

A man who held himself out to be an “independent fiduciary” was just sentenced to 17 years in prison for stealing $5 million in assets from multiple employer plans he was running in a bid to buy a ski resort and make a name for himself as some sort of savior in Idaho.

I won’t mention that fellow’s name because I knew him and I bought into his “expertise” in the field, that we all know now was invented and inflated by himself.

I bought into his talk and his “prestige” that he invented. Unlike some of the plan participants he decided to steal from, I got off lucky. Being associated with him anyway is certainly the low point of my career.

Is it irony that someone who talked so much about fiduciary duty stole from the plans where he was a fiduciary?

Stealing from a plan that you are a fiduciary is far worse than donning a ski mask and robbing the local bank because unlike the bank depositors, the participants in a retirement plan entrusted you with their money. Betraying that trust is far worse than stealing the money from someone we don’t know.

The point is that a plan sponsor must always be vigilant in who they select as a financial advisor and a third party administrator and make sure they have no excuses as to where the money is. While this fellow was a flash in the pan who came into this business like a bolt of lightning, Bernie Madoff was around for a long time and he ran one of the biggest Ponzi schemes in history. So plan sponsors shouldn’t assume that someone in this business for a long time isn’t likely to be a crook.

It’s very hard to keep your eye on the ball, but plan sponsors that don’t, breach their fiduciary duty. It isn’t easy because I know.

Everyone has an opinion, but I think the independent opinion that is guided by beliefs and not by pay is far more important than the opinion that is greased by greed.

I had lunch with my local neighborhood third party administrator (TPA) and we were talking about the business of retirement plans.

He told me that a recent client bolted to a payroll provider TPA (not the big 2, but another smaller one. Yes there are others) to save $600 in administration fees.

The client was told to move to the payroll provider TPA by their accountant because of the $600 savings. What I forgot to mention is that the accountant is the new broker of record for the plan. The accountant is wearing two hats. I own lost of hats (I love fitted Major League Baseball hats), but I only have one hat to pay.

What the accountant and the new payroll provider TPA failed to mention is that they were each netting over $10,000 for this change. Of course, the client wasn’t thrilled when the old TPA told them the “good news”.

The lesson here is that if you’re a plan sponsor and you get a recommendation by one of your provider to change the advisor, make sure it’s for the right reason and not for the recommending provider to get some pecuniary gain. There are many good reasons why plan sponsors should make a plan provider change, a windfall for your financial advisor and new TPA isn’t one of them.

My latest newsletter can be found here.

My latest JDSupra article can be found here.