The Rosenbaum Law Firm P.C. Blog

While the issues concerning Pooled Employer Plans (PEPs) in pricing and audits are slowing its growth, another headache is that potential adopters of these plans are unaware of their existence.

According to a paper by the Center for Retirement Research, while 13 percent of employers don’t know what a 401(k) plan is, 79 percent are unaware of what a PEP and a multiple employer plan is.

I can say from a sales standpoint, that’s not good, especially in dealing in states where auto-IRA programs are offered and required for employers who don’t offer retirement coverage.

The Department of Labor (DOL) has created an online system for qualified plan termination administrators to submit abandoned account information for benefits, including 401(k) plans.

The Employee Benefits Security Administration (EBSA) announced the new system to allows administrators meet requirements under its Abandoned Plan Program. That program, which started in 2006, allows distributions to participants and beneficiaries of retirement plans that have been abandoned by sponsoring companies.

The new system creates more efficiency in administering abandoned plan benefits, which have previously only done by email and paper.

When I was in college in the early 1990s, I was heavily involved in student politics. I would go and buy things that made me look important even when I wasn’t. I got the beeper that no one called and I had one of those Day-Timer organizers.

People who grew up today have their iPads, but the Day Runner was the iPad of its day because it would include my contacts, notes, calendar of events, etc. I used to call my leather Day-Timer, the “football” in honor of the military briefcase that has all the nuclear weapon launch codes that a military attaché was attached to by handcuffs. I was again, sounding more important than I was.

Plan sponsors need their own “football”. They don’t need nuclear launch codes, but they do need to keep copies of their plan documents, fiduciary meeting minutes, investment policy statements, investment education materials handed out to participants, fiduciary bonds, liability insurance binder, enrollment meeting attendance sheets, and valuation reports. Thanks to technology, they don’t have to be in a Day Runner or a binder, they can be electronically saved after being scanned. Since the paper doesn’t too well to paper, fire, and trash, a plan sponsor should save all plan information to a USB flash drive and some sort of cloud. This “football” will make sure the plan sponsor has all the information they need to defend themselves in an audit and/or litigation.

The plan sponsor “football”. It’s just one thing that if they have, they can’t fumble away. Even my New York Giants can’t fumble that.

July Business Services, LLC purchased Sunwest Pensions, a retirement plan recordkeeper and Third Party Administrator based in Tempe, AZ. This strategic merger enables July to further enhance its services and expand its client base by adding over 500 plan clients.

July will now have a client base of over 7,500 clients, comprising 160,000 plan participants and $9.6 billion in plan assets.

In the old days, no one factored mutual fund fees when it came to 401(k) fees. Thankfully, fee disclosure changed that.

401(k) plan participants now incur far lower fees for holding mutual funds over, according to a study from the Investment Company Institute.

The research shows that from 2000 to 2023, the average equity mutual fund expense ratio paid by 401(k) investors dropped by 60%. The average bond mutual fund expense ratio has dropped by 63%. I’m sure much of the change is the increased use of low cost, index funds.

The expense ratios of target date mutual funds have fallen steadily since 2008. The average expense ratio of target date mutual funds dropped 55% from 2008 to 2023.

I’m not very popular, never have been, and never will be. 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 by 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. Even though 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 aren’t very good.

Long-term businesses in the retirement plan business don’t die overnight. It takes a very long time as we see with Sears, the goodbye takes a long time. A dying business can change course, but the problem is that there essentially has to be a change in culture to change.

The problem is that the hierarchy of a long-term business in the retirement plan space is that you have the very same leadership in charge that was at the helm when the business went into a slow, death spiral. Unless the leadership decides to change course, almost nothing will be done to avoid the catastrophe.

If your business has been suffering for some time, the best option is to change course and realize that whatever you’re doing is the same as what you’ve always been doing and that’s not helping out in trying to avoid the death of your business.

As long as I remember, any political discussion gets a little heated. Thanks to social media, any political discussion seems volatile.

Based on my writings and how I think, you might get an idea of my politics. While I may sprout my ideas, I try to be respectful to others. I don’t want to offend potential clients because they may disagree with my view on constitutional interpretation. In the end, Democrats and Republicans pay the same, when it comes to fees, and all their money is good if they’re hiring me.

I see people getting canceled for making stupid political comments, don’t be like that, and just be respectful.

As they once said in This is Spinal Tap, there is a fine line between stupid and clever. I can assure you that Michael McKeon who played David St. Hubbins in the movie and co-wrote it, was not in plan administration. Based on what I’ve seen when it comes to plan document drafting, the line fits just based on what I’ve seen.

The fine line between stupid and clever is plan provisions that are outside the box of normal administration. Complex provisions on eligibility, compensation, and vesting will lead to more errors than provisions that are in the normal realm of plan administration. For example, eliminating forms of compensation for purposes of an employer contribution or salary deferrals leads to many errors, as well as unique eligibility provisions and entry dates.

There are so many normal choices for plan provisions, yet being unique and creative when it comes to plan document preparation isn’t a great feature. As I always say: keep it simple, stupid. Unique plan parameters lead to more errors and some errors will cost you to fix. Creativity isn’t a great trait when it comes to planning provisions.

Congress always has proposed legislation that will never make it to law and this thrift savings plan idea is one that is just an awful idea.

Senator John Hickenlooper (D-Colo.), a sponsor of a controversial bill to create a Thrift Savings-like plan for private sector workers, said he’d reduce 401(k) savings to pay for the legislation.

Hickenlooper has proposed the Retirement Savings for Americans Act (RSAA) and he said that he would lower 401(k) tax incentives and contribution limits to pay for the program.

Supporters of RSAA say it would help low- and middle-income Americans build wealth and save for retirement. RSAA would require the federal government to pay matching contributions for workers, but only those who participate in the plan.

The proposed 5% match under RSAA would encourage plan sponsors to terminate their 401(k) in favor of the federal plan. Plus based on Social Security, the Federal government doesn’t have a great scorecard for retirement savings.