The Rosenbaum Law Firm P.C. Blog

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

My latest JDSupra.com article can be found here.

When changes to the Internal Revenue Code in 2006 made automatic enrollment part of the Code and much more appetizing to plan sponsors in limiting their fiduciary liability, I told my bosses at a producing third party administration (TPA) that this was something to explore because it had two benefits, it could help plan sponsors out and grew plan assets which would grow our assets under management. The client would have a more effective plan and we’d make more money, it was a win-win. 6 years later, I’m still waiting to hear back from them.

As a financial advisor or a third party administrator, you grow when the plans you work on grow. So isn’t a mechanism that can grow a plan’s assets that can benefit a plan sponsor in compliance testing as well as pricing while helping your book of business as well, a great thing? I thought so.

So when I met Marc Robinson of SaverNation and heard about his program, I thought his program was actually better than sliced bread (bread, a knife, what’s the big deal?). It’s a program that can add money to a participant’s deferrals with no cost to the employer for stuff that a participant ordinarily does. It’s a win-win because it can help a plan sponsor grow plan assets and help with compliance testing.

Want to learn more? I will be hosting two webinars about SaverNation and how you as plan provider can help your clients grow their plans and help you offer a benefit that your competitors don’t know about. The webinars are on October 9^th and October 11^th. Please join me by clicking the respective links.

My latest newsletter can be found here.

My latest JDSupra.com article can be found here.

Chutzpah is a Yiddish word which means audacity, gall, nerve.  A perfect example of chutzpah is about the murderer who killed his parents, but is asking the Judge for mercy in sentencing because he’s an orphan. Over the past 14 years, I have seen some chutzpah from many retirement plan providers.

There was a producing TPA that to the chagrin of one of the insurance companies later, created a stable value product where the TPA would get more basis points in a fee. In return, a retirement plan client that decided to leave the TPA would have to suffer a market value adjustment (MVA) if they changed TPAs because the CUSIP on the stable value fund was tied to the TPA. I know this because thanks to the workings of a TPA that my client moved to, an in-kind transfer avoided the MVA.A stable value expert once called these stable value funds as “roach motel” stable value funds because you may check in, but it would cost you to check out. Thankfully, many of the stable value providers have decided not to offer these types of products.

Low and behold 5 years later, a broker tells me that he may have a potential client from the successor of this TPA and the TPA is claiming that if the potential client terminates the TPA’s service they would suffer an MVA. The only problem is that since the market value of this fund is over 105%, there would be no MVA. Trying to scare your clients into not leaving you, that’s chutzpah. Putting them into that product in the first place to get an extra 25 bps, that’s chutzpah too.

I was a fit at my old law firm sort of like how my son’s toddler clothes fit him at age 7.  I wasn’t a good fit because I didn’t take myself too seriously, I tried to push for flat fee billing, and I tried to break down difficult retirement plan concepts into Basic English for my clients and for the financial advisors that I was working with. The way I empathized fiduciary responsibility for plan sponsors then and now is that it isn’t brain surgery and clearly that’s a threat when you have to charge $300 an hour for that legal advice because when you charge a premium, you can’t make the advice that much basic.

The fact is that like keeping a healthy mouth, keeping a healthy retirement plan doesn’t take that much work. It takes dedication and time, but ultimately, a successful retirement plan always requires one constant: a plan sponsor that takes their fiduciary role seriously. So a plan can have the best providers out there and the best fund lineup out there, it’s still probe to problems if the plan sponsor is negligent in their duties. A plan sponsor committed to fiduciary responsibility is the one constant for having a great retirement plan.

My latest JDSupra.com article can be found here.

I was at a plan sponsor event regarding fee disclosure in one of my favorite places, Times Square (especially because I remember what a sewer it was 30 years ago as a kid).

To my amazement, one of the plan sponsors indicated that they had no financial advisors working on their plan and that the investment lineup hasn’t been changed since 1997. That’s 15 years ago and there has been a lot of change in the past 15 years. GM was considered a half decent investment back then, Washington Mutual was considered a must own bank stock, every company with .com at the end of their name was a winner. Heck, I was still in school.

It just shows that there is an ocean full of retirement plans out there that have huge fiduciary issues such as no investment policy statement, no change of investments, and no investment education to plan participants. The idea behind participant directed plans was to limit liability, but if a plan sponsor fails their duty under ERISA Section 404(c), then they will be more  liable for liability than if they would have selected the investments on their own with the help of a financial advisor.

The more I’m out there; the more amazed sometimes how many plan sponsors need our help.