Source: http://therosenbaumlawfirm.com/blog/
Timestamp: 2019-04-25 22:18:43+00:00

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It’s an odd mistake, but this is the third time I’ve had to handle it in the last 10 years: representing an employer that was sold a retirement plan that they weren’t supposed to have. Weird? You bet, but it happens and it happens because you have retirement plan providers who made a mistake.
A union can’t sponsor a 403(b) plan. A government unit can’t start a new 401(k) plan since the 80s. A city housing authority can’t have a 403(b) plan. Yet each time, they had a retirement plan provider that had them sponsor a plan they shouldn’t have had. Mistakes happen, but these are big mistakes. A mistake that requires submission of the plan to the Internal Revenue Service’s Voluntary Compliance Program and the odd outcome is that these plans end up being mothballed and not terminated.
If you’re a non-government employer, you could have a 401(k) plan. 403(b) plans are for not for profits, schools, and universities. Just make sure your provider knows when you are an ineligible employer.
I think LinkedIn is one of the greatest tools out there that can be used to effectively grow your plan provider book of business. Starting conversations in the newsgroups and providing free content has gone a long way to developing my national ERISA practice. It’s been a great way to meet other plan providers around the country.
My biggest complaint on LinkedIn is how certain people use it. I think there are a few providers that while connecting with people on LinkedIn either don’t pick up on social cues, don’t pick up on what people do, and don’t understand that any relationship requires time to build trust.
A few weeks back, a private investigator in my area connected with me on LinkedIn. If you read my profile, you can tell that I don’t do any litigation. Yet, that hasn’t stopped this investigator to contact me 4-5 times about arranging a phone call to learn more about his services. That brings to my point, I think anyone who tries to connect with you and tries to see you right off the boat isn’t interested in building a two-way relationship, they just want to sell you something. That doesn’t stop from the occasional advisor to contact me about their services and how I should refer clients to them. If you know anything about my practice, most of it is referred by advisors or third-party administrators. Plus if I got the client directly and they need an advisor, I’m going to recommend an advisor where I’ve had a long term relationship so I can vouch for them. I’m not going to recommend an advisor I just met last week on LinkedIn.
There is nothing wrong with trying to tout your business, but do it in a way where it’s so blatant that this is all you care about.
My newsletter for retirement plan providers can be found here.
People have asked me about the possibility of new laws pertaining to multiple employer plans (MEPs) and other changes to 401(k) plans. Quite honestly, I’m not one to pay attention to any legislation unless it actually becomes law. My practice is retirement plan law, not retirement plan politics.
For over 6 years, there has been one piece of legislation or another that was supposed to overturn the Department of Labor’s 2012 advisory opinion requiring commonality among participating employers for a MEP to be considered a single plan for ERISA.
A committee approving retirement plan legislation isn’t law and who can forget how fee disclosure legislation never took off, it required the Department of Labor to implement it.
Heck, I remember when Roth 401(k) provisions were proposed, a few years before it ever became part of the Internal Revenue Code. The point here is that while it’s nice to see what’s being proposed, it doesn’t mean much to me until it’s signed into law.
For 9 years working for third-party administrators (TPAs), I never worked a day without Richard Laurita being the salesman for the TPA. Richard is going to be gone 12 years in March and the most important lesson that he ever taught me is that the retirement plan business is a relationship-driven business.
What does it mean? It means a lot of things, but how you deal with other providers and even competing providers can go a long way in helping develop your business. Cultivating long term and beneficial/reciprocal relationships can really help augment your business. The first person who decided to sponsor That 401(k) Conference is someone I met through Richard. My friend who books all player appearances at That 401(k) Conference is again, someone I met through Richard. There are so many people that I met through Richard and so many have been beneficial to my practice by helping me out through referrals and speaking opportunities, as well as support for my conferences. It isn’t a one-way street and I’ve certainly tried to give a hand out to these providers as well as those that I’ve met beyond Richard’s circle in the last 9 years.
There are certain relationships that may benefit you more or vice versa, benefiting other providers more. As long as you understand that building relationships is a give and take and there are many times when it seems that it’s all give. I’ve never had a relationship where it was 50-50, but it’s not something I care to keep score of.
In addition, relationships are also how you deal with the competition. Be respectful and don’t deride the competition. It is both unprofessional and makes you look bad in front of other providers and your clients/potential clients. Plus Richard always showed that the competitor today maybe the partner/employee/employer one day. How you deal with the competition and how you deal with clients is something important because treating people badly will travel fast. If you don’t do the right thing by other providers or clients, people in the industry will find out about it.
Understand that relationships in this industry are one of the most important measuring sticks on whether you succeed or fail in this business.
One of the best developments in the retirement plan business over the last ten years is the proliferation of advisors serving as an ERISA §3(38) fiduciary. The idea that a plan sponsor can shift almost all of their liability in the fiduciary process to an ERISA defined investment manager is attractive in a litigious happy environment. Sort of like having the folks at Stew Leonard’s to cook my annual Thanksgiving dinner, it allows the plan sponsor to delegate almost all of the headaches of being a fiduciary to the experts.
While I support the work of ERISA §3(38) fiduciaries, I have two concerns. They are two minor concerns that should not overshadow the good work of ERISA §3(38) fiduciaries.
First, I can’t put a sign on my front lawn that I am a lawyer unless I have been admitted to the state bar. The same can be said of advertising being a registered investment advisor (RIA) without the proper licensing and registration. However, I can claim to be an ERISA attorney without any experience and an RIA can claim to be an ERISA §3(38) fiduciary without any experience. While any RIA can learn to be an ERISA §3(38) fiduciary, it’s not something you can wake up one morning and can become one. So plan sponsors should be wary of people advertising themselves as an ERISA §3(38) fiduciary because not all ERISA §3(38) fiduciaries are created equally. The proliferation of ERISA §3(38) fiduciaries will create a herd mentality where I think so RIAs will tout their ERISA §3(38) services without understanding what that job entails.
So with the marketplace expanding with people claiming to be ERISA §3(38) fiduciaries, there will be some incompetent ERISA §3(38) fiduciaries out there who will make some mistakes that will lead to litigation and the issue is that ERISA §3(38) was drafted in 1974, years before there were ever 401(k) plans and daily valued, participant-directed plans. While ERISA §3(38) fiduciaries assume the liability of being an investment manager in the contract (if drafted correctly), will courts decide that what the ERISA §3(38) fiduciaries really are who they say they are? Are their function covered under a definition that was drafted before there was a 401(k) industry? I don’t know, I’m not a litigator. I am also not stating that hiring an ERISA §3(38) fiduciaries are a mistake nor do I want to spread any innuendoes (like what happened with multiple employer plans), I just think that plan sponsors should hire competent fiduciaries and if RIAs want to be in the §3(38) game, they need to learn the rules. Of course, any advisor interested in that side of the business should give me a call.

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