The Rosenbaum Law Firm P.C. Blog

What is old is new again. Experts at an ERISA Advisory Council hearing recommended that annuities should be part of a defined contribution plan’s default The council is a 15-member body that advises the Department of Labor (DOL) and they had experts who testified in support of annuities.

Olivia Mitchell, a professor at the Wharton School of the University of Pennsylvania, testified in favor of a specific default annuity structure in defined contribution plans. She recommended that participants default into a product in which approximately 10% of their plan balance at age 65 is used to purchase a deferred annuity that does not begin to pay until they are about 80 or 85 years of age.

Michael Finke, a professor of wealth management at the American College of Financial Services, spoke more generally about the benefits of annuities as default options in Defined Contribution plans.

I understand the issues regarding lifetime income. My issues are the fees associated with annuities, and the burden of plan sponsors. Fully reviewing annuity options for cost.

Rhode Island is joining the list of states providing a state-run plan that affords private-sector employees retirement plan coverage if their employers do not.

Gov. Daniel McKee (D) signed the Rhode Island Secure Choice Retirement Savings Program Act into law.

Rhode Island Secure Choice will provide retirement plan coverage for eligible employees age 18 and over who work for an employer with five or more employees that does not offer a plan. Through Secure Choice, employees will contribute to a payroll-deduction IRA. They will be automatically enrolled but can opt-out.

The timetable by which employers who have no plan, will have to enroll employees in the program is as follows:

• Employers with more than 100 employees: within one year of the opening of the program

• Employers with more than 50 employees: within two years of the opening of the program

• All other employers: within three years of the opening of the program.

You will find stories of people getting fired for social media posts and I have zero sympathy for that. Probably because I almost bought it once, for trying to get a client.

As discussed over the past 14 years, I worked for two years at a law firm. It was so much dysfunction, that you would think I worked there for 10 years. When I started there, in the New York City office, the idea was that I would develop a national ERISA practice and I could use the existing clientele as a building block. Even though partners could net 50% of the fees I charged for their clients, there was not much interest. So I thought I could contact my former clients at the Third-Party Administrator (TPA) where I worked. Since I left that TPA, it took 3 people to replace me, and their fees were hiked by 50%. I sent an email to an advisor with multiple clients, offering my services on a required ancillary amendment for less money than what the TPA charged.

The TPA found out, and they weren’t happy. They sent a threatening letter to the most senior attorney of the New York City office and called him the Managing Attorney. I was supposed to attend the New York Comic Con that Friday and get some free, exclusive products as a Diamond Comics wholesale account holder. I had to cancel those plans when the firm’s Managing Attorney, Lois, demanded I show up the next day to see her at the Garden City office. She was mad.

Around that time, one of the partner’s sons became the Governor of New York at the time and since the partner of the firm was a big union lawyer, there were concerns over a conflict of interest.

So for about a half hour, I was berated by Lois. Lois had to name Governor David Paterson and the Nassau County Executive Tom Suozzi who both had fathers who were partners at the firm. What this had to do with an innocuous email to drum up business, I don’t understand. The stress of Paterson becoming Governor had gotten to her. Honestly, the large offices in Garden City couldn’t fit her ego because she was also miffed that the TPA’s attorney thought the attorney in the New York City office, a man, was the managing attorney, and not her.

By the way, Paterson was the most incompetent Governor of my lifetime and Suozzi lost re-election by 400 votes with millions in the bank. Lois just liked to name-drop.

As Henry Hill said in GoodFellas: “The way I see it, everybody takes a beating sometime.” With two toddlers at home and a mortgage to pay, I took that beating. No matter how absurd it was, no matter how much Lois disliked me from day one. Less than two years later, I knew my time there was up and I just decided that I could no longer work for someone like Lois. I don’t think my wife ever heard the story before, because I’d keep things from her, especially the abuse, and she can’t believe I’d get yelled at for trying to draw business.

Lois’ incompetence, eventually helped downsize the firm by 3 offices and 50% of their attorneys. I still go to the Garden City office because it’s the same building as my allergist. I never see anyone from the firm there, and I have never seen Lois. For the past 14 years, I have

talked about her and mocked her. I can say that from all the abuse, I was not going to be like her. I’m sure over the past 14 years, she has never thought about me and I certainly understand that, but I knew 14 years ago, how she was killing the firm and getting awards from the local publications for that.

In the normal world, we support and reward employees, who on their own, decide to try to draw business. In the Theater of the Absurd, we attack it, because we can’t handle stress or handle the job.

With a few exceptions, SECURE 2.0 requires that 401(k) and 403(b) plans established on or after December 29, 2022 begin to automatically enroll participants upon becoming eligible for such plan by the first plan year beginning after December 31, 2024 (“Effective Date”). For a plan with a calendar year plan year, this means that automatic enrollment must be effective by January 1, 2025.

I’m all for automatic enrollment, and getting more retirement plan coverage for employees. The problem is that I believe many plan sponsors and plan providers aren’t ready and we are less than 6 months ahead of the deadline. As with any change, some providers will do better than others. There are going to be many hiccups along the way, guaranteed, on the plan sponsor and plan provider sides.

As a kid, I wanted to be a constitutional lawyer. Taking Constitutional Law changed all that. I realized that for the most part, what is constitutional is what 5 Justices say is constitutional. It’s mostly, a play on words, and what your interpretation of the Constitution is.

The recent Supreme Court decision in Loper Bright Enterprises v. Raimondo has overturned the Chevron case, which served as a linchpin of administrative law over the past 40 years.

The Chevron doctrine required courts to give a lot of leeway to an agency’s construction of ambiguous statutes, even as to the scope of those agencies’ authorities, so long as the agency’s construction of the ambiguous statute was reasonable and thus a “permissible” one.

Loper Bright eliminates agencies of this presumptive deference, the power of interpreting these ambiguities will be with the judiciary. This will increase new litigation over interpretations of statutory language on the Federal level.

I believe Congress and the agencies will need to be more careful in the drafting of laws and regulations, to limit the chances of ambiguities and court challenges.

I finally sat down and watched the show everyone was talking about, The Bear on Hulu. Thanks to the fact that each season was about 10 episodes, I finished it in a week. As you may not know, The Bear is about a chef trying to take over his brother’s sandwich place and turn it into a Michelin-rated restaurant. The restaurant business is prone to failure, I think they say that 98 percent fail. They also run on thin margins. While plan providers don’t have such a rate of failure, they do run on thin margins.

Like Carm was doing wrong in The Bear, too many plan providers go bust over costs. Carm wanted a new menu every night, some plan providers want to have fancy offices to impress clients and potential employees. I could have gone broke as a solo ERISA attorney if I’d bought every sponsorship or service that people were selling. It’s a slow grind building a business, but if you have the dedication and time, you will succeed.

SageView Advisory Group is collaborating with Transamerica to launch Integrity Pooled Solutions, which will offer both a 401(k) Retirement Plan Exchange and a Choice Pooled Employer Plan(PEP).

SageView will serve as the 3(38) investment manager and financial advisor for plans to join the Exchange or the PEP, while Transamerica Retirement Solutions will serve as the recordkeeper. Transamerica Fiduciary Services will be the Pooled Plan Provider (PPP), and TAG Resources will be the 3(16) plan administrator.

The Retirement Plan Exchange is for plans with under 100 employees who want to offer a cost-effective 401(k) plan with leading service providers while reducing costs, complexity, and fiduciary liability. Meanwhile, the Choice PEP is a solution for plans of any size looking to load off their fiduciary liability.

According to Vanguard, hardship distributions are up and that’s not a good sign.

The number of hardship withdrawals per 1,000 savers soared about 40% in 20023 and has doubled since 2021.

The main reason people were raiding their retirement accounts was to avoid losing their homes.

Withdrawals totaled 72 for every 1,000 savers in 2023 or an average of six per month. Fewer than 4% of savers took a hardship withdrawal during the year.

PNC Financial Services Group Inc. won their lawsuit brought by their employees, that accused them of paying excessive recordkeeping fees for their 401(k) plan.

Federal Judge Christy Criswell Wiegand in the Western District of Pennsylvania said that expert witness, Ty Minnich, hired by employees to discuss 401(k) recordkeeping fees did not use “reliable methodology” in concluding that the plan fees were unreasonable.

In 2014, the plan’s base recordkeeping fee was $46.55 per participant, and it declined to $32 per participant by January 2022, according to the case documents.

PNC had argued that Minnich’s testimony was not reliable because his opinion was based solely on his experience without using any reproduceable or traceable process. The judge agreed.

The PNC Inventive Savings plan contains about $8.1 billion in assets and 80,335 participants, according to the most recent Form 5500 filing.

Fisher Investments announced that they will be spinning out an independent 401(k) solutions division.

Fisher Investment 401(k) Solutions will become an independent firm named Fisher Retirement Solutions to be run by CEO Nathan Fisher, son of Fisher Investments founder and CEO Ken Fisher.

The retirement group had $4.75 billion in assets under management for over 1,600 retirement plans.