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Why Retirement Plan Sponsors are Always on the Hook for Liability.
Plan sponsors can never fully eliminate their liability as plan sponsor and fiduciary.
 Scapegoating is the practice of singling out any party for unwarranted negative treatment or blame. It can be traced to the Bible where the Israelites cast away goats during the Day of Atonement after having "transferred" the sins of the people to the goats. When it comes to retirement plans, the retirement plan sponsors and the individual trustees as plan fiduciaries are always to blame if something goes wrong with the plan. However, the fiduciaries are no scapegoats because the nature of that position makes that blame warranted.
For the article, click here. |
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How a Plan Sponsor Can Avoid Turning Their Retirement Plan Turn into a H.R. Disaster.
What Plan Sponsors can do to avoid liability.
 When it comes to recruiting and retaining employees, salary isn't enough. Employees also seek benefits, which can be treated as tax-free compensation such as employer-provided health insurance and tuition assistance. One important employee benefit that is often used as a recruiting and retaining tool is an employer-sponsored retirement plan. Too often plan sponsors forget that the purpose of a retirement plan is to help an employee achieve tax-deferred savings for retirement. While a retirement plan is an important employee benefit, the flip side is that a poorly run retirement plan can expose the plan sponsor to liability and become a human resources disaster. This article is intended to provide advice for plan sponsors on how to avoid having their retirement plans become human relations disasters.
To read the article, please click here. |
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| Another 10 Major Misconceptions Plan Sponsors Have About Their Retirement Plans.
More stuff that plan sponsors don't know about.
 Throughout history, there have been misconceptions that people believe in (even until this day)despite the evidence to the contrary. Mrs. O'Leary's cow didn't start the Great Chicago Fire of 1871 and Benito Mussolini didn't make the trains run on time. Abner Doubleday didn't invent baseball and John F. Kennedy didn't say he was a jelly donut when he proclaimed "Ich bin ein Berliner". Like everyone else, many retirement plan sponsors have misconceptions regarding their role, the role of their plans, and the role of the providers they select. Unlike being mistaken about Henry Ford inventing the automobile and the assembly line, the misconceptions held by retirement plan sponsors can cause them money if they breach their duty as fiduciaries. Just like my previous article on the subject; this article will debunk another 10 major misconceptions that retirement plan sponsors have about their retirement plans.
For the article, please click here. |
10 Basic Retirement Plan Concepts That Every Plan Sponsor Should Understand. Stuff every plan sponsor should know about.
 Unless a company sponsoring a retirement plan is involved in the retirement plan industry, it is in the role of delegating much of their duties to retirement plan providers that may include third party administrators (TPAs), financial advisors, and ERISA attorneys. Despite the fact that retirement plan sponsors delegate much of their role, they are still ultimately responsible for what happens to the plan in their role as plan fiduciaries. This is why it is important that retirement plan sponsors know basic concepts about retirement plans, so they can understand their role and their liability.
To read the article, please click here.
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When it comes to MEPs, act on fact and not rumor.
Don't act on false innuendo in whether to join a multiple employer plan.
 I remember being involved in student politics and finding out that with any student leader, there were bound to be rumors about that individual whether the rumor resembled the truth or not.
So while I was with a client this week, who is in the recordkeeping business, we were trading notes on how overblown the rumors have surrounded the use of open multiple employer plans (MEPs).
A registered investment advisor client of mine introduced me to a potential sponsor of an open MEP, who advised me that they heard that MEPs were illegal. Where did that rumor come from? Perhaps, where all the rumors concerning MEPs surfaced from.
This recordkeeping client of mine advised me one of the premier ERISA law firms out there have contacted the certain Department of Labor official who supposedly made some offhanded remark about his concerns about MEPs and will issue a white paper concerning MEPs. Again, that is rumor too.
As an ERISA attorney and a former student journalist, I like facts, pure and simple. Rumors and false innuendo get a lot of people in trouble and have tarred quite a few people as well. I believe that open MEPs are legal and sound as long as they are structured properly (you can always ask for details, there is no special sauce except Russian Dressing) until the Internal Revenue Service tells me otherwise. And again, as my recordkeeping client pointed out, most of the decision making on what makes a MEP or not is the IRS and not the DOL.
I will keep helping people put open MEPs together until the government tells me otherwise. To succumb to rumors and possible false innuendo would do my clients and the followers of my writings harm. |
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ERISA 3(38) Fiduciaries and 2 Minor Concerns.
While it's a booming business, there are a few issues.
 One of the most positive developments in the retirement plan business is the 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 Fairway Market cook my 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 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. |
The Rosenbaum Law Firm Review, January 2012, Vol. 3, No. 1 734 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 2011, The Rosenbaum Law Firm P.C. All rights reserved. |
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