The Rosenbaum Law Firm P.C. Blog

Thanks to politics, I have advised plan sponsors not to pursue ESG investments for their plan as the rule is dependent on who is in the White House.

According to a PIMCO survey, more than 70% of retirement plan consultants and aggregators say that politics is a leading reason why their clients avoid funds that consider ESG factors.

Despite the rule from the Department of Labor that allows plan sponsors to include funds with ESG criteria, most consultants and retirement plan aggregator firms said they have not changed their stances. The survey shows that just over half (52%) of institutional consultants recommend ESG funds to retirement plan clients, with none saying they are more likely to do so because of the new rule. While 38% of aggregators said they had previously recommended those options, another 13% have started to because of the DOL’s stance, according to the report.

Cash isn’t king anymore, matching contributions are.

Workers value 401(k) matching contributions more than cash, so much so that a dollar in 401(k) contributions is twice as effective at luring employees as a dollar in wages, according to a National Bureau of Economic Research survey.

The benefit is preferred among higher-income, older workers, who value employer contributions as much as four times more than regular compensation, the research shows.

The survey showed that employees were willing to forgo 3.4% of wages just to have access to a 401(k), as well as an additional 1.6% in wages for each percentage point of an employer match.

My latest article on JDSupra.com can be found here.

The last real estate closing. I ever did the purchase of my home because of the unprofessionalism of the seller’s counsel. It soured on my closings and the real estate agent, who said nothing when she referred that attorney, to the business.

When dealing with an Internal Revenue Service or Department of Labor audit, I feel that being pleasant and cooperative goes a long way. Government auditors are doing their job of making sure that retirement plans voluntarily comply with retirement plan laws.

There is no point in being argumentative and. non-cooperative. There are times when you can certainly disagree, especially when the auditor gets the wrong conclusion, but that still must be within the limits of professionalism.

I know quite a few advisors that get upset when a plan provider is inching toward being a full competitor. It could be the third-party administrator getting into the RIA business or vice versa.

When you’re a bigger plan provider and you might be publicly traded, additional revenue streams are necessary. That’s why there is still opportunity for plan providers out there, that are smaller but will stick to what they know. As someone who worked for a producing TPA, there will always be wariness of an advisor bringing business to a potential competitor.

You’re at a sales meeting and the current plan provider is just doing a terrible job of working on that plan. You’ll be better, you’ll be less expensive, and you nailed it during the pitch. You don’t get the gig, the plan sponsor is allowing the status quo. You’re flabbergasted, it made complete sense that you’d be hired.

The problem is you thought rationally and you saw things from your only side of things. You didn’t see it from the plan sponsor’s perspective. Perhaps, the plan sponsor is terribly loyal and I mean terrible. Perhaps, the plan provider is someone’s friend or relative. Perhaps, behind the great sales pitch was a plan sponsor who didn’t see things as clearly as you did.

There are times when I was the right solution, but I wasn’t what they wanted. Whether it was personal or business, the best of me wasn’t good enough, because, for some reason, they wanted something else and something that wasn’t better. I scratched my head and moved on. I realized I wasn’t what they wanted. That’s all you could do.

One of SECURE 2.0’s interesting provisions was that people who are highly compensated employees (HCEs) will be forced to make the catch-up contributions they want on an after-tax basis. That provision was a revenue generator for the Federal government, which is a necessary evil for tax laws, that offer some sort of tax relief.

While employers and plan providers are begging for a delay for this provision, which is supposed to be effective January 1, 2024, my greater concern is that the elimination of having tax-deferred savings in catch-up will increase the chances that the Federal government, could one day, eliminate the tax-deferred aspect of participant 401(k) deferrals. Requiring Roth treatment of some or all salary deferral contributions will likely mean that people will defer less because upfronting the taxes is a huge burden these days. Just my two cents.

The Department of Labor (DOL) has filed a rule proposal that will make it easier to wind down retirement plans abandoned by employers and give plan participants access to their benefits.

The notice filed with the Office of Management and Budget will likely deal with the termination of and distribution of benefits from individual account retirement plans that have been abandoned by their sponsoring employers, as well as amendments to permit bankruptcy trustees to use the DOL’s Abandoned Plan Program to terminate and wind up the plans of sponsors in liquidation under Chapter 7.

My latest article for JDSupra.com can be found here.

Years ago, most financial advisors were not aware of their role as retirement plan advisors when it came to handling their plan sponsor clients. Most advisors were mailing it in, pocketing the quarterly fee without meeting with the client or not understanding what the fiduciary process is all about.

Thanks to the Internet and changes in the industry like fee disclosure, I believe that most financial advisors understand that they have a higher duty than their colleagues from their past. While they understand their obligation, many advisors don’t know how to fulfill it.

As part of my practice, I have been assisting advisors in pursuing a role as an ERISA §3(38) fiduciary or by developing a client service agreement that meets the section 408(b)(2) disclosure rules for a flat fee.

While many advisors around the country reached out to me, I am still amazed how some still don’t understand their role. I know a registered advisor practice when I worked for that certain third-party administration firm and became rather alarmed that they never helped their clients in developing an investment policy statement or assisting in participant education.

So while most financial advisors are educating themselves about many of the changes in the retirement industry, there are still so many financial advisors still unaware of that role. Since most 401(k) plans are participant-directed, picking top mutual funds for a fund lineup is overrated. It’s more about working with the plan sponsor and developing a fiduciary process that will help a plan sponsor minimize their liability under ERISA §404(c).

So while financial advisors are getting smarter about their role, there is still much for them to learn and do.