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The Rich Laurita Rules for Plan Providers

Once upon a time in the 401(k) world, I knew a man named Richard Anthony Laurita. I worked with Rich (as his friends called him) for two different third-party administration (TPAs) firms for over 9 years and he had the most profound effect on my career than anyone I know. The lessons I learned from the way Rich conducted business continue to inspire me to this day. I believe that the way that Rich handled clients, advisors, brokers, and co-workers are lessons that any retirement plan provider can use to grow and maintain their business. Rich never lived to see 40 and he died more than 15 years ago, but I think understanding the way he conducted his business as to what I call “the Laurita rules” can certainly help your business as a retirement plan provider.

You can't afford to live on the edge

One of the reasons I’ve stayed out of trouble in the retirement plan space is that I haven’t strayed too close to the sun. I’ve avoided trouble by not pushing the boundaries of the rules and regulations promulgated by the Internal Revenue Service and the Department of Labor (DOL).

What Fidelity has done with trying to offer cryptocurrency in a 401(k) plan despite the DOL’s warning on it, is different from what you and I can do. Fidelity can afford to butt heads with the DOL and they have enough weight in the industry, that they can change the minds of the DOL’s decision-makers.

The problem with attendance

I was invited to speak at a statewide conference on pooled employer plans. It was the first time I wore a suit in more than two years. I would have worn my New Yor Rangers jersey if I could have.

I had an enjoyable time, being a part of that panel and despite the good time, I noticed that attendance there was still an issue. While attendance at my That 401(k) Conference has been on the low side, it was interesting to see that such a well renowned, statewide organization had similar issues. Despite a required vaccination policy for all attendees, it was still not enough to get rear ends in seats. I think as long as we have COVID and get emails on how an attendee discovered they had it, I think packing meetings and conferences with attendees is going to be a tough issue.

Timing is everything

Remember when there was the beanie baby craze and people would open stores that only sold beanie babies? Same when everyone but my parents opened up a video rental store before Blockbuster killed them all. Timing is everything.

So when the largest 401(k) plan provider announces the plan to sell Bitcoin through the plans they administer as a participant-directed investment, it hurts when Bitcoin is more than 50% off its all-time high.

Timing is everything. Don’t expect much interest in crypto as long as the Department of Labor won’t change their tune and Bitcoin is struggling.

LinkedIn isn't a dating site

When it comes to my law practice, I have an open phone call policy. I entertain phone calls from financial advisors and TPAs around the country and try to help them by answering questions regarding their current clients or potential clients. I don’t charge them for the phone calls because the retirement industry is a close-knit community and it’s all about building relationships.

A few weeks back, I got a phone call from an advisor I know and haven’t heard from for a long time. His client is a professional service practice and their new third-party administrator told them they were Top Heavy for 2018 because the old TPA screwed up.

The client is adamant about not paying the top-heavy minimum contribution and the advisor asked what the consequences would be. While not paying the required top-heavy minimum contribution could result in plan disqualification, the Internal Revenue Service is not going to take that action if they catch it on an audit. They will require the plan sponsor to make the top-heavy contribution with some interest and likely pay a penalty. Also, the new TPA will fire this client as a client because no competent third-party administrator will work on a plan where the sponsor refused to abide by the rules of qualified plans. Top-heavy contributions, minimum funding contributions, and any other mandatory contribution are like taxes, you don’t want to pay it, but you have to.

So next time your client tells you they don’t want to make a minimum contribution or make a withdrawal that is not allowed or make any action that contravenes the rules regarding retirement plans, tell them they have to play by the rules.

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Our national event is virtual again. Spread over 2 days in January, you can attend the event from the comfort of your office or home.

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VOLUME 13 ISSUE 9

September 2022

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