The Rosenbaum Law Firm P.C. Blog

If you restrict eligibility from your retirement plan to a certain group of employees outside of the statutory exclusions (such as union employees or non-resident aliens), it might make sense to determine whether that exclusion is still proper.

Any definitions that are connected in any way with part-time employees can be a problem, especially since the SECURE Act allows long-time, part-time employees to become eligible for the deferral component in the plan. Exclusions from eligibility have to be reasonable, the days where you could exclude employees just on part-time status or by name are over.

In communications with other plan providers, clients, and potential clients, you have to be clear. There isn’t much room for miscommunication. When dealing with clients, miscommunications can lead plan sponsors to some huge mistakes.

Everything you write or say must be clear, there can’t be room for misinterpretation because the stakes are pretty high. I’ve seen too many plan sponsors that were harmed because the third-party administrator wasn’t clear on the information needed for an end-of-year census.

If you tell people what you need and what they need to know in clear language, a lot of mistakes will be avoided.

“The Bears are what we thought they were. Th-they’re what we thought they were. We played them in preseason. I mean, who the hell takes the third game of the preseason like it’s bullshit? Bullshit! We played them in the third game, everybody played three quarters… the Bears are who we thought they were! That’s why we took the damn field!’ then Arizona Cardinals Head Coach Dennis Green.

The rules of controlled groups and affiliated service group rules have one simple rule, if they’re a member of either, companies of those groups have to be tested as one.

Controlled groups, either are members or not, based on the percentages of ownership and commonality. The same can’t be said about affiliated services, it’s all fact-sensitive. Companies that work together with each other or for third parties are likely affiliated services. If they are separate, they probably aren’t. You will only know if you ask the right questions, and that’s why you need an ERISA attorney to dig through the facts.

At home, I have Verizon FIOS for TV and the Internet after having my cable provider, Optimum for about 13 years. A few years ago, I was enticed to re-sign with Optimum and their new Altice converter box/router. When it came the day of installation, the Altice system failed during installation and the installer told me that the Altice system was buggy and wouldn’t be great for another 4 months, so I canceled the installation.

As a plan provider, you can’t afford something buggy that won’t work. Whether it’s your website, an app, or any type of system where plan sponsors have an interface, you can’t afford to look bad in front of clients and other providers. You only get one chance to get it right and that’s what beta testing is all about.

As January 20th approaches, people in this business will question what a second Trump administration means for 401(k) plans. I don’t know because Donald Trump works outside the lines compared to other people in politics.

He has some tax legislation to foster, and I imagine the fiduciary rule proposed by the Biden-led Department of Labor (DOL) might be withdrawn. I also think Bitcoin might get approval by the DOL to appear on fund lineups via a spot Bitcoin exchange-traded fund. What else might happen? Your guess is as good as mine.

For 2025, the ESG rule will be history for now.

Donald Trump as President will reverse the Department of Labor’s ESG rule that allows retirement plan fiduciaries to consider environmental, social, and governance (ESG) factors in retirement plan investment decisions.

There are no guarantees in life, but that reversal is a guarantee.

Assistant Secretary of Labor and Employee Benefits Security Administration head Lisa Gomez predicted major changes to retirement security regulations and financial fiduciary standards when Donald Trump returns to the White House on January 20th.

In a public conversation at the PLANADVISER 360 Conference in Scottsdale, AZ, Gomez admitted that the Department of Labor’s retirement security rule, the new fiduciary rule, will likely not align with the new administration’s priorities.

In identifying likely changes under Trump, Gomez also pointed to the DOL’s rule on prudence and loyalty in selecting plan investments, known as the ESG rule. This rule permits plan sponsors to consider sustainability factors when advising on retirement plan investments. The rule has faced criticism and legal challenges, which Gomez partially attributes to its ESG branding.

Gomez also said she plans to step down from her role on January 20th.

I hate moving. I’ve lived in the same house now for 19 years and I dread the idea of moving I haven’t put the house up for sale. That’s why I always loathe when there has to be a change of third-party administrators (TPAs).

Many times it has to be made, for the sake of the 401(k) plan. Yet, when any change is made, you have to make sure the transition is smooth. The idea that conversion will force a 401(k) plan to get mothballed for more than a few weeks isn’t ideal, I think it would be a terrible thing for a plan that gets mothballed for 3 months. I’ve seen situations where plans have had to seek counsel because they had to go through the trouble of opening bank accounts, just to keep the plan moving.

Changing plan providers need to buy like the trade of the baton in a relay race, it can’t afford to be dropped.

The Internal Revenue Service (IRS) doesn’t read the 5500s, but the Department of Labor (DOL) does.

The problem with asset purchases and existing plans is there will be a change in the plan sponsor and the employer identification number (EIN). The plan sponsor should note this on Form 5500. Yet, so often even if they do, the IRS will send a letter asking for the latest 5500 using the old plan name, employer, and EIN. They will say they don’t have a copy and want one. If you don’t answer the IRS, you might get a penalty for a 5500 you already filed. That’s why I’m convinced that the IRS doesn’t read the filed 5500 forms. From experience, DOL picks up much more information from these Forms as one avenue to audit the plans.

Yet it’s annoying to have to help plan sponsors answer the IRS when they already did on Form 5500.

Bonuses are nice, I wouldn’t know because in the 11 years I was an employee, I got $300 for the holidays after I started in September 1998 and never received one again. This article isn’t about my lack of bonuses, but it’s about bonus payments and 401(k) plans because if you pay one, you might have a problem that you didn’t realize.

401(k) plans are governed by their plan document and most plan documents use W-2 compensation (plus deferrals) as the point to measure salary deferrals and employer contributions. W-2 includes bonuses, so that means that salary deferrals and employer contributions should be made from bonuses (unless the plan document excludes it).

So I have found many plan sponsors having issues because they forget that, which means they owe corrective contributions for missed deferral opportunities and employer contributions that should have been made. The problem with those errors is that it’s usually discovered after years and years of failing to account for bonuses as compensation, which will require a lot of corrective contributions that will also have to be adjusted for earnings.

If you regularly hand out bonuses, make sure that your definition of compensation meets what you are currently doing.