5 problems retirement advisors might get blamed for

By C.J. Marwitz | April 23, 2018 at 08:19 AM

5. Summer intern classification issues: Companies make mistakes classifying summer interns. And DOL auditors have gone after employers for that. Depending on hours worked and whether compensation is given, "If that intern is an employee, and your definition of eligibility is 'all employees,' you see how that intern might be allowed to contribute to the 401k plan," Esposito said. What some might do in that situation is to call interns a particular class of employee, she noted. If it were a reasonable definition, an employer could likely exclude that class from the plan. And even if you didn't know that, you might have brought in an ERISA attorney who could tell you so. (Photo: Getty)

1. Failed tests: Clients who think they have safe harbor plans say they don't need discrimination tests. So when they see testing come back with "Failed" on it, they think it doesn't apply to them. "April is a perfect time to reconnect with clients," Esposito said. "Ask them how the testing went, ask if you can take a look." (Photo: Getty)

4. Highly compensated employees: Your clients will get confused with this. What is a highly compensated employee? According to the IRS, a highly compensated employee owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned, or for the preceding year, received compensation from the business of more than $120,000 if it was 2015, 2016, 2017 or 2018, and, if the employer so chooses, was in the top 20% of employees when ranked by compensation. (Photo: Shutterstock)

Retirement advisors work hard to make a sale and get that wonderful employer as a client. "And then you find the dead bodies," said Colin Clark, Retirement Plan Specialist at Washington Financial Group. Enter the ERISA attorney. "I'll make you look good," said Jewell Lim Esposito, Esq. The two presented a session on compliance at the 2018 NAPA 401(k) Summit. Esposito is Clark's ERISA attorney. When things go wrong, when those skeletons come out of the employer's closet, your 401(k) and 403(b) clients will blame anyone they can find for compliance problems -- including the advisor. Even if it wasn't your fault. And even though there are fewer and fewer IRS and DOL auditors these days, Esposito said, "If your client is targeted, they want blood." Related: 5 areas of employment law to watch Two decades ago, advisors could make a sale and be done with it. Now advisors are consultants who are expected to have answers – or be able to help find others who have answers. The blame game? That could still happen. Here are five thorny issues advisors might be blamed for.

NOT FOR REPRINT

C.J. Marwitz is a writer and editor.

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