The Rosenbaum Law Firm P.C. Blog

ERISA requires disclosure of certain plan documents to participants including a summary plan description, statements, and notices. The problem is what do you do with people who aren’t participants such as potential employees?

If you’re scared about providing an SPD to a potential employee, maybe you should worry about what’s in your SPD. As for other information, you have to measure risk vs. offending the person requesting the information. You just don’t want to land in trouble by disclosing too much information and you also don’t want to offend those asking for information by just saying no especially if the goal is to hire them. There are certain things I wouldn’t disclose such as plan provider contracts and anything about plan governance.

I’ve been in the retirement plan business for 26 years and I’ve been through a few recessions in that time. There was the dot-bomb implosion, added by 9/11. Let us not forget when our entire financial system was on the verge of collapse in 2008.

While the market is going through a correction, participants and plan sponsors panic. Panicking is a mistake. When participants panic, they switch equities for fixed income and lock in their losses. Plan sponsors panic and decide they no longer want a 401(k) plan.

Markets are correct and that’s the nature of things. There are lows and highs, it’s not a consistent lineup. Whatever you do, don’t panic, and don’t let participants panic.

The U.S. District Court for the Northern District of California has decided not to dismiss a class action lawsuit against The Clorox Company and the employee benefits committee of The Clorox Company 401(k) Plan. The lawsuit claims that Clorox violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by using plan forfeitures to offset its employer non-elective contributions to the plan rather than reducing the administrative costs for plan participants.

Initially, the complaint was dismissed without prejudice; however, the district court later determined that the amended complaint adequately alleged breaches of ERISA’s duties of loyalty and prudence. In its decision, the court noted that the plaintiff’s arguments suggested Clorox was motivated solely by self-interest and failed to engage in a reasoned, impartial decision-making process, as there was no other justification for its actions. The court concluded that the plaintiff had sufficiently stated a claim regarding the duty of loyalty. The court also rejected Clorox’s argument that the language in the plan document permits the allocation of plan forfeitures to offset employer contributions. The court pointed out that Clorox’s argument assumes no fiduciary breach occurred, a matter that remains to be decided. If a breach is established, the court stated, adherence to the plan document would not absolve Clorox of liability.

The average Self-Directed Brokerage Account (SDBA) 401(k) balance at Charles Schwab finished the fourth quarter of 2024 at $352,605, up by 13.6% since 2023, according to Charles Schwab’s latest SDBA Indicators Report.

SDBAs at Schwab experienced a 1.5% increase from the third quarter of 2024 when the average balance was $347,437. It should be noted that the S&P 500’s gain was greater than 20%.

Advised accounts held higher average account balances than non-advised accounts, $537,037 vs $311,627.

Former Angels pitcher and current Angels broadcaster Mark Langston will be the guest for our event in Anaheim at Angels Stadium on Thursday, June 5th.

For just $100 or $50 each for multiple attendees from the same firm, you can attend and get 5 hours of content, lunch, a stadium tour, and meet Mark Langston.

Sign up at that401ksite.com.

The Senate approved President Trump’s nominee to be the next Secretary of Labor.

Lori Chavez-DeRemer was approved by a vote of 67-32. Chavez-DeRemer was formerly a Representative for Oregon’s 5th District.

One of my favorite Yiddish words is “schnorrer.” While it means beggar or sponger, it essentially refers to a cheapskate who tries to get something for nothing. There is nothing wrong with potential clients negotiating fees to get a bargain. I often offer discounts as long as clients ask and their requests are reasonable.

However, it’s important to draw the line somewhere because my work and effort deserve compensation. What distinguishes someone seeking a discount from a schnorrer is that a schnorrer often disregards how insulting their behavior may be. A perfect example is selling sponsorships for That 401(k) Conference. If people book multiple events and request a discount as new sponsors, I am generally open to reducing the $1,500 speaking fee per event. However, when a plan provider invited me for lunch at their private club and claimed they only had a budget of $250 for my $500 supporting sponsorship, I declined. Don’t invite me to your private club while claiming to be on a tight budget.

Dealing with chiselers is part of business, but you have to recognize when an offer is too insulting or low. In those cases, it’s better to walk away, as you know you might face difficulties with them every step of the way.

I believe that plan providers who promised they will make me wealthy have consistently failed in that promise. While it’s perfectly fine to dream of retirement plan profits, it’s important not to let those dreams turn into mere fantasies. The key difference between a dream and a fantasy is the effort involved. Dreams can become a reality through hard work, whereas fantasies require no effort at all.

Both can create a certain level of expectation, but only dreams can meet those expectations. Fantasies fall short because nothing is done to realize them. When managing expectations, it’s crucial to establish achievable goals for both your partners and clients, and to actually meet those goals. There’s nothing worse than facing a six-month period filled with excuses about why you can’t deliver on your initial promises.

A plan provider once asked me if I had written a comprehensive article on why trustee-directed 401(k) plans are superior to participant-directed plans. Although I believe in this argument, I haven’t actually written such an article. I don’t think it would attract much attention, as people have been conditioned over the last 25 years to favor participant-directed plans. Trustee-directed plans have several advantages over participant-directed plans, with the primary benefit being that trustees are generally better equipped to make investment decisions than participants. This is often the case.

However, the situation is reminiscent of how Betamax was a superior VCR compared to VHS. Ultimately, it didn’t matter because the public overwhelmingly chose VHS for various reasons, such as the fact that multiple manufacturers produced VHS, while only Sony made Betamax, and Betamax originally had a shorter recording time of just 60 minutes. To succeed in this industry, it is crucial to understand what the client wants. Don’t focus on multiple employer plans if the public is leaning toward pooled employer plans, or the other way around. Flexibility is key to success; stubbornness won’t help anyone.

When I was 13 and had my Bar Mitzvah, I spent around $2,000 (in 1985 money) on a state-of-the-art Apple IIe with a monochrome monitor. One of the first pieces of software I purchased was the top desktop publishing program known as Print Shop. I ordered it through mail order (yes, there was life before Amazon.com) for about $30. I remember my wealthy uncle bought the same program for my cousin at around $60. He didn’t mind paying double the price I paid. It seems that some people are willing to overpay.

I have a mantra: I dislike paying retail. I love a good sale. However, some people look down on those who pay less or shop at discount or outlet stores, thinking it’s somehow wrong to seek bargains. Unfortunately, plan fiduciaries, such as plan sponsors and trustees, don’t have that luxury. With their fiduciary duty at stake, plan sponsors must pay reasonable expenses for the services they utilize. They can only determine whether the fees they incur are reasonable by comparing their plan with those offered by other service providers. If they fail to shop around and end up overpaying, they could face liability from plan participants. It’s important to note that plan sponsors are not obligated to choose the cheapest providers, as lower prices can sometimes indicate a lack of quality. So, how can one determine if a plan sponsor is paying excessively? As Justice Potter Stewart famously stated, “I know it when I see it.” I have encountered information disclosed on Form 5500 that illustrates this issue. For example, I’ve seen a plan sponsor pay $54,000 to a Big 4 accounting firm for a limited scope audit or another sponsor pay a broker 60 basis points (0.60%) on a $14 million 401(k) plan. These examples show that some plan sponsors are significantly overpaying for services. Fee disclosure has made it easier to identify these cases, but again, plan sponsors can only determine this by surveying the 401(k) marketplace to see what their peers are paying.