At recent TPSU programs, two attorneys presented on compliance and litigation. One, Jodi Green, partner at Tatum, Hillman & Powell, LLP and a former Department of Labor examiner, reviewed the “Top 10 Compliance Traps” while Carl Engstrom, partner at Engstrom Lee, who has brought multiple lawsuits, shared their insights. The plan sponsors were riveted at both.
Compliance
Jodi shared a top 10 list of compliance traps which included:
Assuming that the DOL’s investigations are brought randomly (the biggest source is from the 5500 forms);
A high number of terminated participants with vested balances, which can lead to self-dealing if the plan sponsor moves these balances to the forfeiture account and uses the funds to pay plan expenses or employer contributions;
Not maintaining a complete and accurate participant census, which can result in missed employee notices and enrollments, and the inability to locate terminated participants for distributions;
Late and delinquent deposits of participant contributions;
Not understanding when attorney client privilege cannot be invoked (like when they advise the plan v. the plan sponsor or are paid by plan assets);
Thinking that the DOL and IRS are not in frequent communication;
Excessive fees found through the 5500 and fee disclosures; and
Thinking less is more—provide as much information as possible about the plan sponsor’s voluntary correction of errors (specifically for errors observable in the Form 5500 and audit)
Though many traps are obvious to industry professionals, they are not to plan sponsors who will appreciate not only being reminded of them but getting additional education and updates.
Litigation
Fred Reish, partner at Faegre Drinker Biddle & Reath LLP, reviewed litigation tips at the May TRAU C(k)P training on the UCLA campus, but is industry friendly mostly representing defendants in ERISA lawsuits. Over a month later at a TPSU program at UCLA, prolific plaintiff’s attorney Carl Engstrom shared his insights, which also had plan sponsors riveted:
Process
Plaintiffs have the advantage as they present the facts most favorable to them, which are assumed to be true when defendants file a motion to dismiss in order to avoid costly discovery;
Fee disclosure and 5500 forms are the biggest source of litigation
Common claims
Record keeping costs especially using revenue sharing
Share class optimization or lack thereof (Engstrom mentioned the failure to use CITs or SMAs though Reish said that a case could be made to pay more for mutual funds)
Underperformance of funds especially target date funds lately
Other
Managed account fees
Self-dealing—proprietary funds of the provider or consultant/advisor
Failure to use stable value vs. money market accounts
Beyond the obvious (do a good job), Engstrom recommended that plans go to market every three-to-five years with an RFP and be cautious about who is benchmarking the plan because it can be easily manipulated by the pool of plans used.
The demand by plan sponsors for high quality education on the basics of running a plan has never been higher and though ESG, PEPs and managed accounts are sexy right now, do not forget the basics. And those that are seen as educators, along with conflict-free fiduciaries, will be trusted more than salespeople.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.
Take a look at our comprehensive guide to the best and most popular information ebooks and products available today on Detoxing, Colon Cleansing, Weight Loss and Dating and Romance. They are all in one spot, easy to find and compere to make a quick selection for the product that best fits your needs or wants.
So browse through a category and make your preferred selection and come back here to read more choice articles and get a few more helpful tips on ways to help your enhancement.
As an Amazon Associate I earn from qualifying purchases. “saubiosaubiosuccess.com is a participant in third party affiliate and advertising programs; The Amazon Services LLC Associates Program, Awin network, and other affiliate advertising programs are designed to provide a means for sites to earn advertising fees and commissions by advertising and linking to products on other sites and on Amazon.com. Amazon and the Amazon logo are trademarks of Amazon.com, Inc, or its affiliates.”
We use anonymous cookies and various 3rd-party services to optimise and to offer you a better, more personalised, browsing experience with advanced accessibility enhancements.
Dismiss
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
