The Rosenbaum Law Firm P.C. Blog

Recently, an economist blamed 401(k) plans for the retirement crisis in this country and I’ve heard the arguments on how 401(k) plans killed defined benefit plans.

401(k) plans are merely a scapegoat. A scapegoat for employers who wanted to save money funding the retirement of their employees, who were just living a little too long. 401(k) plans were merely a mechanism for them to shift the funding of their employees’ retirement from the employer to the employees. With no 401(k) plans, they still would have made the cuts to save money. Let us not forget, so many companies never had pension plans.

That 401(k) Conference returns this year at Globe Life Field in Arlington, Texas, on May 3rd, and Yankee Stadium in Bronx, New York on June 7th. The events took a sabbatical in 2022 because of me.

I initially announced events for Oakland and Detroit. These were two cities I’ve never been to, and purposely, both connected games would be against my Mets. As my buddy Larry, said, “Go where the people are.” I learned that no one wants to go to Oakland or Detroit. I also had some issues in getting Yankee Stadium to accept my booking last year.

So hopefully, I’ve corrected my ways and we can resume the events with 2-3 a year. For 2025, hopefully, we can make it back to Anaheim, Chicago, and for the first time, D.C. It’s all dependent on attendees and plan provider sponsors, not where I want to go. Remember you need an audience and find where it is, and avoid where it isn’t.

There is a “nebbish” who has been on the local school board for 12 years. Both of his daughters are in college. Yet, he is running for re-election. More importantly, in his re-election announcement, he announced no accomplishments in 12 years. I can tell you, that as a parent in the district for the past 14 years, the district has gone down the toilet. He will have no opposition because people fear running (the school district is our biggest employer). Yet, he will not step aside because he doesn’t think he’s done a bad job. He thinks he’s great.

When dealing with plan sponsors and their plans, the poor decision-makers are still in their jobs, probably because they own the business. Some have it in, with their bosses, if they’re just the head of Human Resources. If these poor decision-makers made the decisions that landed their plan in trouble, they will go to great lengths to deny it, even rejecting some of your suggestions out of spite. When dealing with the egos of the incompetent, you have to walk on eggshells because something innocuous you say, may be too insulting.

The IRS announced that the amendment deadline for most qualified retirement plans, including 401(k) plans, for several recent pieces of federal legislation generally has been extended by up to one year. The Notice, generally applies to plan amendments that are required to be made in response to applicable provisions contained in the following new laws: Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”); Coronavirus Aid, Relief and Economic Security Act (“CARES”); Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act); and SECURE 2.0 Act (“SECURE 2.0”).

SECURE 2.0 had previously coordinated the amendment deadline for these laws, to December 31, 2025, for calendar year plans.

However, per the Notice, for most 401(k) plans, plan amendments must now be made by no later than December 31, 2026.

Timing is everything in life. When plan providers were trying to push Crypto in 401(k) plans, it took months for them to come to the market and the market crashed. I had Bitcoin at $69k with a $45k basis and saw it crash down to the teens. My basis is a lot lower now, and Bitcoin is rallying, many thanks for your support that the Securities and Exchange Commission will approve some Bitcoin and Ethereum-related exchange-traded funds.

If the ETFs get approved, I think the Department of Labor will have to rethink its opposition to crypto in 401(k) plans. There may be some concern left, but I think an exchange-traded fund will eliminate most of the hard opposition against offering it.

While there have been a few lawsuits over the use of forfeitures in retirement plans, it’s important to follow what the plan document says.

The Department of Labor (DOL) filed a complaint in the Federal District Court, Western District of Kentucky, stating that Sypris Solutions Inc. members of its retirement savings plan advisory committee failed to follow its own governing documents regarding the use of forfeiture funds for several of its 401(k) plans.

The DOL claims that from 2012 through 2015, the 401(k) plans’ plan documents required defendants to use forfeiture funds to pay plan expenses—but the plan sponsor used the forfeiture funds to reduce employer contributions to the plans.

The DOL argued that by doing so, the plan sponsor benefited by reducing its contributions to the plans, but plan participants who saw their plan account balances reduced by payments of plan expenses from plan assets and not from forfeitures.

Judge Benjamin Beaton issued a consent order and judgment ordering the plan sponsor to restore $575,000 to the plan participants who were harmed by the defendants’ use of the forfeiture funds.

Pooled Employer Plans (PEPs) are an attractive opportunity for small plans to mitigate the liability and hassle of a plan of their own.

Many PEPs, including some that I run, were budgeted as if there would be no required audit until the plan had 1,000 participants with account balances. The Department of Labor had other plans and no0w requires PEPs with 100 or more participants with an account balance to have an audit. That $10k to $20k cost of an unexpected audit will lead to some PEPs shutting down their doors.

Automatic enrollment is one of the best features of a 401(k) plan especially when it was finally codified into law in 2006. I think it helps participants save for retirement and helps increase participation, which can help with discrimination testing.

The problem with automatic enrollment is when a huge error is made, namely not using the feature that is mandated by the plan document. The problem with the error is that it’s usually not caught quickly, which might cost the employer a lot of money in corrections.

It’s not a matter of using it if you have it. When you have it, you have no choice but to use the provision.

You will hear about how certain retirement plan providers have won awards. Awards are impressive, but sometimes they’re not. You have to be wary as to who gave the award and what the award really means, You also shouldn’t just pick a provider because they won an award.

The best example is my local business newspaper which gave a lifetime achievement award to the former managing attorney for my law firm. The law firm is a big-time advertiser of that newspaper and under this managing attorney’s watch, two offices closed and the firm is down 50% in size. Is the award justified or is it simply a thank you to a long-term advertiser? Probably the latter.

I’ve seen plan providers tout awards that aren’t worth the paper the certificate is printed on. I’ve seen plan providers tout awards I never knew existed. Heck, I could mention that I won the Martin Buskin Award for Excellence in Student Journalism, but that was so 1994 and in college.

So many reasons are there to hire a plan provider, some type of award-winning isn’t one of them.

I have been doing government audits of retirement plans for over 25 years. The technology has changed, and you can fax or email what the agent has requested. The problem that I’ve found with that, is that they’re always losing what you sent.

I have clients forward me the information that I send to the client, and then have the clients print out a duplicate to hand out in an audit. I recently went through an audit where the IRS agent didn’t have the ADP/ACP report that I sent him 6 times, including the information on refunds for ADP failures. He wanted to sock my client with an unnecessary $100,000 Qualified Non-Elective Contribution.