Getting Ahead of the Curve For Plan Sponsors
More and more, people are considering the benefits of preventative medicine. An empowering tactic for many, preventative medicine may be the best option against potential disease and disability. The same principal can be applied in measures taken against potential litigation for plan sponsors and fiduciaries. Or at least, that’s what Michael Kane, founder, and Managing Director of Plan Sponsor Consultants, suggests.
Upon the conclusion of The Plan Sponsor University (TPSU) Fiduciary Education Program held in Alpharetta, Georgia, Founder and CEO Fred Barstein spoke with adjunct lecturer Michael Kane, about the proliferating lawsuits against plan sponsors. Interestingly, legal action is no longer just being aimed toward major plans, but regional personal injury attorneys are sure to copy the claims and filings against larger plans happy and willing to get smaller settlements as these organizations are less likely to fight.
There are many ways that plans can protect themselves, but one thing is for certain, plans can opt for preventative measures to get ahead of the curve. The most important decision a small to midsize defined contribution plan sponsor makes is selecting the right advisor.
You can read more about How 401(k) Plan Sponsors Can Avoid the Coming Onslaught of Lawsuits by reading Fred Barstein’s column on wealthmanagement.com.
Read the Full Transcript Here
Fred Barstein:
This is Fred Barstein, CEO and founder of TPSU in Alpharetta, Georgia, where we just completed a TPSU program, and I’m here with Mike Kane. Mike, okay if we ask you a few questions?
Mike Kane:
Sure Fred.
Fred Barstein:
Mike is a 30-plus year veteran of the DC world, famous retirement plan advisor. Plan Consultants. What’s the full name? Plan Consult-
Mike Kane:
Plan Sponsor Consultants.
Fred Barstein:
Plan Sponsor Consultants-
Mike Kane:
And we’re now division of HUB International.
Fred Barstein:
A division of HUB International, here in the Atlanta area. On that, so Mike, I know one of the things that came up and you talked about is how the lawsuits are proliferating. I’ve always thought they’re really just for the billion dollar and they haven’t come down market, but you think they’re going to or they already have come down market?
Mike Kane:
I think they have come down, I mean years ago, at one of the sessions, I think it was NAPA or one of the [inaudible 00:01:06], but I think it was NAPA. And they had representatives from Schlichter Bogard & Denton’s law firm.
Fred Barstein:
[inaudible 00:01:13].
Mike Kane:
And one of the guys, Tom Clark, that works for Marcia Wagner’s law firm, had worked there, for a year, so it was like inside baseball, about what they looked for. And Tom talked about what the numbers looked like for them in order to go after a lawsuit, and how to make it work.
Fred Barstein:
Right.
Mike Kane:
So at that time, my recollection was, if you didn’t have at least $5 billion in assets, it wasn’t worth their time. But in the meantime, there are other law firms that have started pursuing it, one out of Philadelphia.
Fred Barstein:
Right.
Mike Kane:
Capozzi and Adler. And so now they’ve moved down market.
Fred Barstein:
Right.
Mike Kane:
And there’s been others that copy the lawsuit that is filed in federal district court.
Fred Barstein:
Sure.
Mike Kane:
And it looks to me like, I hate to say it, that it is not only moved down market, it’s moved down into the $9 million range.
Fred Barstein:
Wow.
Mike Kane:
Okay, and so what that means is, everybody’s vulnerable.
Fred Barstein:
Right.
Mike Kane:
Okay, because they can file this lawsuit for $7,500, $150, whatever it costs. And throw it up against the wall and hope it makes it stick.
Fred Barstein:
Just like slip and fall cases.
Mike Kane:
Yeah. Yeah, and what I would say is, in doing lots of fiduciary assessments over the years, as a CEX analyst.
Fred Barstein:
Right.
Mike Kane:
We’ve never found a plan that didn’t have opportunity, fiduciary opportunities, for improvement.
Fred Barstein:
Sure.
Mike Kane:
Okay, not to mention some have non-conformities and that type of thing.
Fred Barstein:
Right.
Mike Kane:
So to me, if they get into your plan, they’re going to find things. And I read not too long ago with the average legal fees, for the plan sponsor are, are $5 million.
Fred Barstein:
Wow.
Mike Kane:
So what’s going on now is in the fiduciary insurance market, it’s becoming more difficult to acquire fiduciary insurance.
Fred Barstein:
Sure.
Mike Kane:
On your directors and officers insurance, and so are crime insurance policies, whatever they’re called, so it’s usually a rider. So the top’s coming down, so the overall coverages are coming down, and the deductible is going straight up.
Fred Barstein:
Right.
Mike Kane:
In the meantime, they’re requiring you to have some type of fiduciary assessment or provide them-
Fred Barstein:
Right.
Mike Kane:
Some type of data to determine A, if they’re going to take you for their coverage to provide you coverage, or B, keep you as a client. So anyway, that’s what we see going on.
Fred Barstein:
So you want to… The lesson is get ahead of the curve and-
Mike Kane:
Get ahead of the curve. Preventative medicine.
Fred Barstein:
Final question for you, is this your first TPSU? What was your observation, and why should people attend?
Mike Kane:
Well, first of all it was, it was well done. You’ve organized it very well over 500 of these. We’re proud to be a lecturer as part of it. And one of the observations was is that we had repeat people, I’ve been here before. They come back because they want knowledge, they want to be able to do a better job with the retirement plan. And those that it was their first time, it was the same comment. [inaudible 00:04:02] were here, and we want to gain knowledge, and we had a good combination of business owners, CFOs, and HR directors.
Fred Barstein:
Right. Great. Yeah, it seemed like everybody is also happy to be in-person again.
Mike Kane:
Right, I agree.
Fred Barstein:
Very good, well great job today Mike.
Mike Kane:
Thank you.
Fred Barstein:
As always. And thank you, for watching 401kTV, hope to see you at a TPSU program near you soon.
