The Rosenbaum Law Firm P.C. Blog

Perhaps it is as a result of the terrible economy for the last few years or perhaps more supervision by the Department of Labor, but I have seen a large uptick in owners of businesses stealing plan assets from retirement plans. I will never understand why people think they can get away with such a crime. With plan participants, third party recordkeeping firms,5500 filings, and plan custodians watching, eventually the culprits get caught.

A few years back, I met with a potential client who claimed he had some defined benefit plan issues. He claimed he was being contacted by the Department of Labor (DOL) about the defined benefit plan that he sponsored. Apparently there was no money left because he used the money for his own personal use. The DOL was contacting him because for the last few years, there were no 5500 filings, Schedule Bs, and PBGC premiums to be paid. I had him consult with our criminal attorney and our viewpoint that since the DOL was on to him, the jig was up and he should just come clean. It was our opinion that they would eventually get to him.

He took our free advice and decided not to retain us. A few years later I read the newspaper and saw that he was arrested and indicted for crimes resulting from embezzling his defined benefit plan, Just a dumb crime if you ask me.

I am proud to be a presenting sponsor at the 401(k) Rekon events in King of Prussia, PA this Thursday and the one in Bridgewater, NJ on Thursday, December 2, 2010.

If you are a financial advisor, I urge you to visit their website. 401(k) Rekon are free symposiums for financial advisors, who are interested in building a retirement plan practice where they could learn from experts in the industry on how to do that.

There is generally a lack of education in the retirement plan industry, whether it is for financial advisors, plan sponsors, administrators, and attorneys. I support 401(k) Rekon because they are committed to educating financial advisors on the retirement plan business, which will only improve the level of service that plan sponsors and participants ultimately receive.

If you do sign up for a symposium, tell them Ary Rosenbaum invited you.

An oldie, but goodie article can be found here.

Just read a press release that ING Sharebuilder’s 401(k)platform has added new comparability and age weighted profit sharing allocation capability to their 401(k) administrative services.

That’s great and 1998 says hello. Of course, that has been how long I have been working in the 401(k) business and I have been working with various third party administrators that have had the capability to this administrative work, at least since I started in the business.

As a kid, I loved game shows and always had a fantasy of being a game show host. I guess I have another calling in life. That being said, here is a snippet of my CE/CLE course on retirement plans, which is now on YouTube which can be found here.

My profile on Lawline.com’s blog which explains my practice and articles can be found here.

A few years back, I was at a law firm and helped draft an amendment to a multiemployer pension plan that cost over $30,000 to the client.

The amendment was to correct the pension plan by bringing the plan document up to how the plan was being administered, including adding provisions that should have been included when the Union merged with another Union 10 years earlier to protect previously accrued benefits. These errors were spotted by the pension plan’s actuary/TPA. The problem is that the Firm had drafted the most recent plan document. So effectively, we were charging the client $30,000 for an amendment for provisions that should have been included in the current plan document.

Since I started my career as an ERISA Attorney at a third party administration firm and not at the “hourly bill at all costs” mentality of law firms, I thought we should have charged the client nothing for the amendment because our Firm missed these provisions, which theoretically could have caused the Plan’s disqualification if ever audited by the IRS. Having worked at TPA firms, I never recall a client being charged to fix work that we screwed up. When you screw up, I think you have to eat (waive) the fee, regardless of the service you provide.

A couple of years back; I had a client who was audited for an incorrect allocation of profit sharing contributions. This was done because the TPA made an allocation that was inconsistent with the terms of the Plan document. The TPA insisted that this was the fault of the Plan document, which they drafted and they refused to correct the errors until the client paid an outstanding invoice.  The TPA made the errors, put the Plan at risk, and wouldn’t correct the error because the client owed them $750. The only reason that the client was adamant in not paying the fees was because those plan errors. I felt the TPA was off the rocker. Sure, their fees should have paid, but they should have waived the fee because their negligence in plan administration was worth more than $750.

Whether you are an attorney, financial advisor, TPA, or chiropractor, I think you have to eat crow and your fee if you made a mistake and put the client in harm’s way.

My continuing legal education course on 401(k) and other retirement plans is available for sale on Lawline.com here.

The latest issue of Retirement Plan Perspectives, can be found here.

Please join me for a free 1 credit course “Introduction to Retirement Plans and Hidden Liabilities for Plan Sponsors” that will be hosted by Chernoff Diamond at their Garden City offices on Friday, November 19, 2010 at 8 am at 990 Stewart Avenue, Suite 520, Garden City, New York 11530.

This free course will merit 1 hour CE for New York certified public accountants and 1 hour CLE for New York attorneys. Refreshments will be served. For reservations, please call me at 516-594-1557 or e-mail me at ary@therosenbaumlawfirm.com.