Watch out for those gifts to Plan Sponsors

by Ary Rosenbaum
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I have been a New York Giants football since the days of Ray Perkins, Brad Van Pelt, and Joe Danelo and actually attended my first game where the G-Men beat the Packers.

It reminded me of a client my third party administrator (TPA)(which I worked for) was trying to smooth out a relationship with the new benefits manager of a law firm with $25-30 million of assets. Without any prodding by our firm, this benefits mangers said he was a Jets fan and he circled out from a schedule of games of the ones he would like to attend. That was the benefit manager’s message that he wanted my TPA to buy him Jets tickets and the TPA got the message by buying these tickets. Needless to say, that law firm was still a client for many years after.

Like Don Fanucci in Godfather Part II, there will always be plan sponsor representatives that would like their beak wet. This type of bribery is something that will always be available in the retirement plan marketplace, but it’s up to the plan sponsor and its providers to make sure that any gifts are de minimis to avoid any prohibited transactions and under the board conduct that could put the plan sponsor in danger.

As a plan sponsor, you need to make sure that there are checks and balances. Having one person making all the decisions is likelier to be prone to bribery and kickbacks than a situation where a committee makes the decisions. Any guidelines that restricts what gifts can be made and requirements of plan providers to report these transactions (just like labor unions and their providers must do annually) will go a long way to make sure that the selection and retention of plan providers is above board.

- See more at: http://therosenbaumlawfirm.com/blog/?p=1630#sthash.Z0Z4Dunn.dpuf

I have been a New York Giants football since the days of Ray Perkins, Brad Van Pelt, and Joe Danelo and actually attended my first game where the G-Men beat the Packers.

It reminded me of a client my third party administrator (TPA)(which I worked for) was trying to smooth out a relationship with the new benefits manager of a law firm with $25-30 million of assets. Without any prodding by our firm, this benefits mangers said he was a Jets fan and he circled out from a schedule of games of the ones he would like to attend. That was the benefit manager’s message that he wanted my TPA to buy him Jets tickets and the TPA got the message by buying these tickets. Needless to say, that law firm was still a client for many years after.

Like Don Fanucci in Godfather Part II, there will always be plan sponsor representatives that would like their beak wet. This type of bribery is something that will always be available in the retirement plan marketplace, but it’s up to the plan sponsor and its providers to make sure that any gifts are de minimis to avoid any prohibited transactions and under the board conduct that could put the plan sponsor in danger.

As a plan sponsor, you need to make sure that there are checks and balances. Having one person making all the decisions is likelier to be prone to bribery and kickbacks than a situation where a committee makes the decisions. Any guidelines that restricts what gifts can be made and requirements of plan providers to report these transactions (just like labor unions and their providers must do annually) will go a long way to make sure that the selection and retention of plan providers is above board.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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