The Rosenbaum Law Firm P.C. Blog

According to the latest Judy Diamond Report, certified public accountant firms have the best-performing 401(k) plans.

CPA firms ranked first among 27 industry groups that were evaluated on seven metrics of plan performance, including average account balances, participation rates, and even rates of return.

CPA 401(k) plans had the highest account balances, averaging $113,193. They also placed first in participation rate, second in employee contributions and plan score, fourth in both employer contributions and employee longevity, and fifth in rate of return. Out of a perfect overall score of 7, they scored 19.

The other industries ranked among the five with the best-performing 401(k) plans were physicians, lawyers and legal services, dentists, and banking with overall scores of 27, 28, 42, and 53. If the highest score is 7, these numbers aren’t great. As an aside, the plans that drive me the most nuts as an ERISA attorney are doctor plans. So surprised they’re on the list.

The CPA industry ranked first for the second year in a row and has been in the top five since the benchmark report started eight years ago.

A survey conducted by the 401(k)-platform, Guideline, found that while employers and employees both agree that retirement benefits are valuable, some companies underestimate their value in retaining and recruiting employees.

While 93% of participants in the survey note that a retirement benefit would influence their decision to join a company, only 36% would rank retirement benefits within their top three most valuable features.

When asked about their top five employer benefits, 81% of employees placed retirement as a leading feature. However, 62% of plan sponsors did the same.

A law firm partner sends an email to another partner that he’s in trouble, and that the other partner should go to Walgreens and buy gift cards and send over the information for the gift card number and pin. The people at Walgreens told him it was a scam and like many law firm partners, he was too arrogant to think he was being scammed. The best part is he was scammed and wanted the law firm to reimburse him for the $750.

While the Brooklyn in me, won’t allow me to fall for that or other Venmo/Zelle scams, not everyone is that street-smart. Plan participants and sponsors can be scammed and with 401(k) plans having transactions being done online, plan providers, as well as plan sponsors, will have to make sure that distributions are for the right people, at the right address. When we have seen lawsuits for cyber scams in 401(k) plans, it usually happens when the plan provider doesn’t see the scam coming, such as a participant claiming a new address and a new checking account for the ACH. Continued vigilance and security measures will curtail cyber thefts of plan distributions.

I got an urgent phone call on Friday at 5 pm from a plan sponsor with a unique situation. They talked about terminating their 401(k) plan to their third-party administrator (TPA) and the TPA canceled access to their plan. Reminds me of when they cut the heat and lights in a hostage situation.

I already feared the TPA was embezzling money but the plan sponsor located all the assets in their brokerage account.

That being said, I instructed that the plan sponsor would benefit more by contacting the local Department of Labor (DOL) Employee Benefits Security Administration (EBSA) office for free, rather than spending money on an ERISA attorney. They are also here to help plan sponsors when it comes to protecting the benefits of employees.

The U.S. District Court for the District of Maryland ordered engineering firm Bicallis LLC and its owner, Bryan Hill, to restore missing contributions to the Bicallis LLC 401(k) Plan.

The court order followed an investigation by the Department of Labor’s Employee Benefits Security Administration (EBSA).

EBSA found put that company matching and safe harbor contributions were owed but not made to the 401(k) plan from October 2017 through December 2019.

The court ordered Hill to “irrevocably forfeit” his share of $388,458 and directed the trustee to distribute the assets to an independent fiduciary to satisfy Hill’s obligations for damages.

AMI Benefit Plan Administrators Inc. has been appointed to serve as the independent fiduciary.

Labor economist and TikTok creator Kathryn Anne Edwards, in a recent webinar, claimed that 401(k) plans alone are failing to solve the retirement crisis in America and that the federal government needs to take a more active role in providing access to retirement savings.

Edwards argued the Federal government should stop subsidizing 401(k) accounts (by making contributions tax-deductible) because she says it uses about 1% of the country’s GDP (in potential, unrealized taxes) to benefit the retirement savings of the wealthiest 25% of Americans.

Instead, she supports a program similar to the Federal Retirement Thrift Savings Plan. The program would give workers access to portable, tax-advantaged retirement savings accounts, with federal matching contributions for certain low- and middle-income workers.

I think if we want to eliminate 401(k) plans, you can’t find a worse idea than having retirement accounts with the Federal government. As far as tax incentives benefiting the rich, the fact is that with a high tax burden and a high cost of living, many people can’t save for retirement if they are low or middle-class employees.

Too much blame is hoisted on an inanimate object (401(k) plans), and too little blame is placed on a government that failed to create a Social Security trust fund and failed to rein in reckless spending. In addition, Wall Street makes so much money off 401(k) plans, that their lobby won’t allow a public sector replacement.

Washington Governor Jay Inslee signed into law, Washington Saves, a state auto-IRA program, to provide coverage for private sector employees.

The program will launch by January 1, 2027.

Washington Saves will be an automatic-enrollment individual retirement account program. Covered participants will make retirement contributions to an IRA through payroll deduction from their pay, similar to a 401(k) plan.

The program will enroll workers at a default contribution rate of between 3% and 7% of wages. Covered Washington employers under this plan are businesses located in Washington for at least two years where employees work a combined minimum of 10,400 hours during the previous calendar year that do not already offer a retirement plan.

When it comes to 401(k) litigation, it seems that the flavor of the month is suing large 401(k) plans over their forfeiture provision. Mattel is the latest defendant.

The plaintiff in the Mattel case has accused plan executives of using forfeiture funds in the 401(k) plan to reduce company contributions to the plan rather than to reduce plan expenses.

This is the eighth such lawsuit and it should be interesting if a practice that has always been allowed is enough to trump concerns that reducing employer contributions through forfeitures causes plan participants to pay more in plan expenses.

14 years ago, I had enough. I was tired of working for other people because I wanted to bet on myself and not being told no, even by my wife (who didn’t think going on my own was smart). Before I went on my own, a buddy asked me to talk to a law firm partner, who said to justify a $150,000 salary for his firm, I needed to draw $400,000 in business. Like I’ve said many times before, if I could draw $400k in business, what did I need him for?

Consolidation in the retirement plan business is a sad concept to me because it means that people will lose their jobs. I worked for a third-party administrator and when we got purchased, I said that when there is a corporate transaction, change is inevitable. Of course, one of the employees ratted me out to the bosses and I was told I was running morale in a business with the worst morale. The problem with why there is consolidation is that bigger companies need to generate revenue and profits, lines of businesses that don’t generate enough revenue and profit are unloaded. It’s why Proctor and Gamble gave up Folgers and Pringles.

I will be here until it’s time to go play golf full-time in Florida. I keep my expenses low, so the margins are still fine. Larger businesses have to have offices office staff, and overhead. It’s why that law firm is less than half the size it was in 2010. They eliminated law firm partners that had union clients when some unions were only getting charged $85 an hour. Every business with multiple lines will see what generates revenues and profits and what doesn’t. If your sole business is the retirement plan business, you don’t have that problem.

I always say that picking a plan provider just on price is a bad idea and I will say that picking a provider just on your years of experience is another folly.

I have 25 years of experience and when I had a couple of years of experience, I noticed that there were some plan administrators and actuaries that had 20 plus experience, who had no idea what they were doing. Time doesn’t make someone any good, perhaps when they started, they didn’t get the proper training or they didn’t partake in any continuing education., Whatever it is, there are many people out there with lots of experience who don’t know what they do. Years of experience don’t matter, it’s the quality of the experience that does.

Years ago, I knew a young attorney who was a real estate and tax attorney. A potential client for a real estate sale didn’t hire him because she thought he was too young. She hired an older attorney, who then embezzled from the sale of her home.

There are so many criteria you should consider in hiring a plan provider and harping on one criterion is a mistake.