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The Worthlessness Of The 401(k) Fiduciary Warranty.
If it's worth anything, they wouldn't give it away for free.
I am a firm believer in the idea that what you see is what you should get. If you're promised the moon, anything short of that is wrong. Some of the biggest disappointments in my life is when I was sold a bill of goods that just didn't add up (still looking for those origination fees, Gilberg). That's why many of the large retirement plan providers out there have a thing against me because I'm going to burst their bubble by telling you that there is no such thing as a unicorn and that the fiduciary warranty they have been promoting is most likely worthless. This article is about the worthlessness of 401(k) Fiduciary Warranties and how plan sponsors should avoid relying them as a form of liability protection.
For the article, click here.
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There's a Cost For Those "Free" SEP and SIMPLE IRA Plans.
There is a trade-off.
There is no such thing as a free lunch. There is no such thing as free advice. The more years I spend in the retirement plan business; I know that there is no such thing as a free retirement plan. When I speak of "free" retirement plans, I'm not talking about those 401(k) plans that large insurance company providers swore was free before fee disclosure regulation made that "free" plan costly. I'm talking about those retirement plans that are geared for small businesses like a SEP-IRA or a SIMPLE-IRA. While these plans are great options for small businesses, there is a cost for them even though they are "free". This article is about the costs and caveats for these small business retirement plans.
To read the article, please click here.
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They should care.
If you had your eyes set on a car and one model gave you 25 miles to the gallon and the other model gave you 45 with no difference in features or price, what would you choose? If you can find a coupon for items you were buying, wouldn't you? If you enjoying wasting money, this article isn't for you. This article is about retirement plan design and why finding the right TPA who can offer plan design services can that maximize savings for all of your employees and save money on taxes.
To read the article, please click here.
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Leveraging Plan Sponsor Fear into Positive Action.
Better than calling Ghostbusters.
Many plan sponsors have a fear of liability and that's a good thing is they put that fear into use by putting good practices in place for their retirement plan. It means nothing if plan sponsors process that fear into something that isn't constructive for the plan. Plan sponsor liability is real. Whether a plan sponsor can get sued is dependent on a lot of things such as plan assets, plan costs, and processes in place. First off, big class action lawsuits on fees are going to be against larger plans. Smaller lawsuits by plan participants are a threat, but a low threat against most plans. If I was a small or medium size plan, I would be more fearful from the Department of Labor and/or the Internal Revenue Service taking a bite through an audit. FDR said the only thing you have to fear is fear itself, but what plan sponsors need to do is turn that fear into a process to minimize risk and liability by putting good plan processes in plan and that just starts by hiring good plan providers. Hiring a good third party administrator and financial advisor are two huge keys to getting a good plan in place. The threats to liability are always going to be there and litigation shows that anyone can sue anyone even if there is absolutely no liability and wrongdoing. A plan sponsor getting sued is like getting hit by a bus. No matter how care you use in handling it, crazy things can happen. Like looking both ways when you cross, good plan processes can go a long way in minimizing the plan sponsor's liability.
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An Army of One.
It just takes one.
A few years back, the Army unleashed a marketing campaign called "An Army of One." The Sopranos has an episode called "An Army of One" when Jackie Jr. was whacked by Vito Spatafore.
Around that time, I was working as an attorney for a third party administration firm (TPA). When I started there, there was another attorney and paralegal. The attorney was terminated because he was making too much money and I was making so much less. Then the paralegal was let go. Then everything fell on me including making copies, mailing, almost everything but binding. When I was asking for a raise one December, I claimed I was an Army of One and the head of the company suggested that he was doing some of my work. He knew the truth, but he wanted to limit my raise.
When it comes to being a responsible plan sponsor, you don't necessarily need an army of people on staff to review the retirement plan or have a committee that actually does nothing in their role. What you really need is an army of one, one person that is dedicated in their role in reviewing the retirement plan and that's it. A retirement plan committee is a great thing as long as you have one person who is actually competent and responsible in reviewing the plan. That is all you need.
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It's just a few bucks.
Being a plan sponsor is a tough job and the amount of paperwork that goes with it can be overwhelming. The paperwork includes plan documents, summary plan descriptions, amendment, valuations, trusts statements, and payroll.
The fact is that as a plan fiduciary, plan sponsors need to keep good records. It's important to have correct records when you need to pay former plan participants out, but they need to protect themselves. I have seen too many plan sponsors get into trouble with plan compliance or audits by the Internal Revenue Service or Labor Department because they no longer have copies of the documents they once had.
While spaces for document file cabinets are usually at a minimum, there is a friend out there than can help you avoid losing necessary plan documents and that's a scanner.
Saving all the necessary plan documents and valuation reports through scanning them as a pdf can help plan sponsors avoid losing documents and save on the need for space of filing cabinets. While plan sponsors should maintain original copies of all plan documents, they can scan the rest. A good scanner won't set you back and plan sponsors probably have that option with their copier.
Plan sponsors should scan all their plan files as they come in and label them in any easy to understood manner. Creating specific directories on the network for specific plan years is also a great way to keep these things organized.
Something as simple as a scanner can help a plan sponsor exercise their duty as plan fiduciaries.
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The Rosenbaum Law Firm Review, May
2015, Vol. 6 No. 5
734 Franklin Avenue, Suite 302
Garden City, New York 11530 Phone 516-594-1557 Fax 516-368-3780
Attorney Advertising. Prior results do not guarantee similar results.
Copyright 2015, The Rosenbaum Law Firm P.C. All rights reserved.
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