Tag Archives: 401k Outsourcing

Retirement plan

A Plan for Retirement

What is a qualified retirement plan?

A qualified retirement plan is a popular savings tool that millions of Americans use to help prepare for retirement.

An example of this is a 401(k) plan. Employees in this type of plan make pre-tax contributions to their retirement plan accounts through automatic deductions from their paychecks. Over time, savings may grow, helping you prepare for retirement. Your qualified retirement plan can provide you with a number of savings advantages, such as the potential for reduced taxes, the ability to take advantage of compound earnings and more.

Retirement plan

And why is it important?

This plan has been set up by your employer. By participating in your company’s retirement plan, you’ll be able to take greater control of your financial future. You’ll also be able to take advantage of some attractive benefits the plan offers.

The potential to pay less in taxes

The more you contribute to your plan, the larger your retirement savings (and tax savings) may be.

Each 401(k) dollar you contribute to your retirement plan is taken from your paycheck before taxes are applied. This may lower your taxable income. It might even put you in a lower tax bracket.

The earnings on contributions to your plan grow tax-deferred until withdrawn. And since you may be in a lower tax bracket in retirement, you might pay less tax when the money is withdrawn than if you were taxed today.

Retirement plan

What Makes Us So Unique? There Are a Lot of Reasons

The decision to outsource your retirement plan to experienced industry professionals should be pretty straightforward. Either you want to retain total flexibility and responsibility (and liability) for plan oversight, or you’ve decided you would rather hand off almost all of the fiduciary duties and liability to a third party. Once that decision has been made, the next decision – who best to take over these duties – is equally important. We think this is where we have a huge advantage over the rest of the industry.

Multiple_Employer_Plan

The Platinum 401K is unique in its ability to have brought the first multi-provider solution to the 401k Outsourcing marketplace. Our annual recurring plan revenue – which is fully disclosed in the personalized proposal we generate for your plan – is identical regardless of which provider is selected. We also rebate back all recurring “revenue sharing” as a credit against our annual asset based compensation fees. This strategy lowers your costs and increases your plan returns. Where it’s contractually possible, we will simply carve out” all revenue sharing fees completely. Your custom plan proposals will provide complete details and additional information that you should read carefully.

We were also the first program of our type in the country to utilize a CEFEX-Certified 3(38) Investment Manager on a multiple employer plan of this type. The Centre for Fiduciary Excellence (CEFEX) is an independent global assessment and certification organization. They work closely with investment fiduciaries and industry experts to provide comprehensive assessment programs to improve risk management for institutional and retail investors. CEFEX certification helps determine the trustworthiness of investment fiduciaries. This is an important point of differentiation that you and your employees need to fully appreciate. The annual CEFEX audit of fiduciary practices of the Investment Manager provides a high level of confidence and protection for the plan and the participants.

Center for Fiduciary Excellence

Finally, we are industry leaders in terms of both experience and expertise in these types of programs. When the U.S. Department of Labor’s ERISA Advisory Council sought input on Outsourcing Employee Benefit Plan Services in 2014, The Platinum 401k CEO Terrance Power was asked to provide expert testimony before the group in Washington, D.C.

The findings of the Council have already led to several bipartisan legislative proposals in Congress that are expected to greatly expand the availability and benefits of these types of programs across the country.

We look forward to continuing to work with our supporters and friends in Washington to help broaden retirement plan coverage for working Americans. Read More

The Platinum 401k Open Multiple Employer Plan

Happy Business People In Meeting

The Platinum 401kAmerica’s Multiple Employer Plan and 401k Outsourcing experts! With over 35 years of industry experience, we help employers focus on running their businesses instead of their 401k plan!

Learn more about us at http://www.theplatinum401k.com/.

We assist retirement plan trustees in reducing their fiduciary responsibilities and liability by outsourcing many of the duties to experienced independent ERISA fiduciaries. We also work with retirement plan advisers all across the country to provide them with an outstanding multi-provider fiduciary solution for their clients.

If you are responsible for overseeing a corporate retirement plan and would like to lessen your liability, responsibilities, workload, and expenses, we probably need to talk.

Contact Terrance Power, at 813.774.3366 or tpower@theplatinum401k.com for more information about our multiple employer plan solutions!

What Should Be Done When Selecting a 401k Investment Manager?

The process of choosing a 401K investment manager depends on the plan so as the services to be given. Choosing the best retirement plan may result to either retiring happy or working longer than you should be. Selecting the best 401K administrator is a very important aspect in this process. Typically, a 401K plan is being governed by the employer.401k-to-gold

In majority of cases, the employers assign a certain 401K plan administrator who will take care of the entire plan, looking over all employees or plan members who invested with the available retirement plan. Most of the 401K plan administrator contracts have expiration dates. Thus, if the retirement plan is not meeting the expectations, the employer has the right to look for a replacement firm, which of course, should perform much better.

Majority of the investment management firms have a section of the business devoted to 401K plan administration. One excellent method of searching for an appropriate 401K plan manager is looking in the region where the company or business is based. Nowadays, there are a lot of firms that offer 401K investment management service.

The internet is an explicit source for searching such firms just is entering certain keywords, like money manager, investment manager, or 401K plan provider. Another great trick to find the soundest 401K manager is to see the company or companies that majority of successful 401K plans are utilizing as their 401 plan provider for example http://www.theplatinum401k.com/.

Most of the private and public retirement plans divulge the portfolio of their plan at someplace. Typically, a public plan will showcase the investment managers who are engaged by the plan on their site, specifically through a yearly reported which is posted on the website. Aside from that, usually, the investment performance is outlined in these reports.

Therefore, by scrutinizing the returns and the company that is managing the plan, business owners can have a better view of what they should look for a 401K manager. The private retirement plans normally do not show their investment manager relationships on their site. However, in some locations, private retirement plans are mandated to file with the regulatory authority on a yearly basis; they should give some disclosures regarding the investment of the offered plan.

When choosing 401K managers, the fees must be considered. Depending on the retirement plan’s size, fee structures may vary from one 401K plan manager to another. There are times whereby the fees serve as the deciding factor, but it is typically a combination of costs and investment performance, and these are what lead the selection process.

There are as well times whereby the 401K manager or provider will negotiate fees to capture the interest of the business. Before making a final decision and finalize the selection process, business owners should allot time in interviewing prospect candidates, as well as gather historical information, especially about fees and performances. These will help company and business owners in selecting the soundest 401K investment manager.

401(K) Outsourcing: The next Big Thing

Outsourcing is the hiring of a consultant from outside the company to complete a task or provide a service that they are better suited to do then your own employees. Many small to midsized plans are beginning to outsource 401(k) fiduciaries. Companies outsource many services, including payroll, auditing, marketing, legal defense, building maintenance, HR services and advertising, to name but a few. The reasons for outsourcing generally include:401k

  • Cost savings
  • Better outcome
  • Cost savings
  • Increased productivity
  • Allows employees to do the things that they do best

Numerous business experts and consultants tout the benefits of outsourcing. “Do what you do best and outsource the rest,” says Tom Peters, management consultant extraordinaire. Former HUD Secretary Alphonso Jackson once stated, “When work can be done outside better than it can be done inside, we should do it.”

There is now a growing trend for 401k outsourcing services for many of the same reasons, but also because there are additional benefits in so doing, such as:

  • Reduced liability
  • Increased objectivity
  • Fewer conflicts of interest
  • Increased service level …. Read More

Exclusive Interview with Terrance Power: 401k MEPs Reduce Downside Risk for Company Execs

Terrance Power

For some time now, readers have seen Terry Power quoted frequently in many a FiduciaryNews.com article. Ever since we first met him at the 2012 fi360 Annual Conference, we’ve considered Terry one of our pre-eminent “go-to” guys when it comes to all things MEP. He is the Founder and President of The Platinum 401k, Inc., the independent marketing organization of American Pension Services, LLC located in Clearwater, Florida. Terry has been in the retirement plan industry since 1981 serving as an adviser, a retirement plan wholesaler, and a fee-for-service third party administrator. He is a frequent speaker at industry functions and has provided testimony before the United States Department of Labor ERISA Advisory Council on the subject of Outsourcing Employee Benefit Plan Services.

FN: Terry, we always like to give our readers a chance to discover how past experiences have led our interview subjects to where they are today. What are some of the highlights of your fascinating journey?

Power: Thanks for the opportunity to discuss my background, Chris. Like yourself, I’m a native of Western New York. I fled the cold weather and a lackluster economy back in 1985 where I had worked for several years as an investment broker with Dean Witter Reynolds and relocated to the Tampa Bay area. In 1990 I joined Manulife Financial (now John Hancock in the U.S.) as a retirement plan wholesaler working with brokers and advisers both locally and in southeast Florida. I left Manulife in 2000 to establish American Pension Services in Clearwater as an independent, fee-based third party retirement plan administration and consulting firm. I am the President of American Pension Services, LLC and also The Platinum 401k, Inc., the multiple employer plan marketing arm of our firm.

Our location in the Tampa Bay area helped to develop our expertise with multiple employer plans. I often note that we became “experts by proximity,” as much of the initial development of the Professional Employer Organization (PEO) industry – which were originally referred to as Employee Leasing Companies – began here in the Tampa Bay area. In 2002, the Internal Revenue Service issued Revenue Procedure 2002-21 which required PEO’s to utilize multiple employer plans as their retirement plan solution for their client organizations (adopting employers). By working closely with PEO’s, we gained years of experience with multiple employer plans, both regarding the legal framework as well as the operational details that are so critical in practice.  We continue to provide third party administration services to PEO’s across the country to this day.

FN: Just to make sure everyone is up to speed on the subject matter, can you describe in simple terms what a 401k MEP is and what makes it an attractive option for companies?

Power: A 413(c) multiple employer plan is a defined contribution plan which, by its very definition, is composed of companies who are not directly related. A 401k MEP – not to be confused with a “multi-employer defined benefit plan” – functions fairly similarly to a traditional 401k plan, except most of the duties and responsibilities of running the plan falls to a third party. This allows the employer to effectively “outsource” many of the fiduciary duties associated with sponsoring a traditional retirement plan. These duties can include investment selection and monitoring, plan document amendment and restatements, approvals of hardship withdrawal/QDRO/beneficiary payments, filing of annual IRS forms, plan trustee and Plan Administrator duties, and much more.

FN: That sounds like a fairly attractive proposition. Does the 401k MEPs have a downside? Who is best served in a 401k format? What might be an example of an alternative?

Power: The main issues with MEPs are that they’re pre-packaged in terms of how they operate. The 3(38) Investment Manager has been named, the investment lineup has been set, and the various service providers have been contracted. A well-structured MEP can still allow for significant flexibility in plan design, and also allow a choice of investment providers. However, if the client is insisting on using a certain product or service provider, they’re probably going to be better served outside of a MEP arrangement. We view the MEP as the “value meal” option to feed your retirement plan hunger. It’s prepackaged, and as such there are minimal decisions to be made, and there are usually some pricing concessions. The “a la carte” or “off the menu” option would be a 3(16) Plan Administrator format outside of a MEP. In this type of structure, the client has more options available to them. We provide both services to clients. It’s really up to them as to which makes the most sense.

FN: What are the differences between a closed MEP and an open MEP?

Power: A “closed MEP” is a multiple employer plan where there is some “commonality” or “nexus” between the companies who adopt onto the multiple employer plan. A few examples of this would include a plan sponsored by an association for their members, or a Professional Employer Organization (PEO) plan. These plans only need to file one global Form 5500 and have one annual plan audit regardless of the number of adopters in their plan.

An “open MEP” simply means that the “commonality” or “nexus” isn’t there between the adopters. Under a Department of Labor advisory opinion that came out in 2012, open MEP adopters are treated as individual plans in terms of reporting and other requirements. This means that each adopter is required to file an individual Form 5500 on an annual basis, and if necessary, an annual audit must be performed at the adopter-level. The Form 5500’s are typically filed by the MEP’s 3(16) Plan Administrator on behalf of the adopter, by the way.

In either situation, the worksite employer eliminates their trustee-level liability (since they’re not a trustee) as well as investment fund selection and monitoring duties. Many MEPs will use an unaffiliated ERISA 3(38) Investment Manager to provide an additional layer of protection for both the MEP and the plan participants. Many programs also incorporate a 3(16) Plan Administrator who has a fiduciary obligation to oversee many of the operational aspects of the plan. This eliminates the need for the employer to become skilled on evaluating QDROs, approving hardship withdrawals, maintaining and amending plan documents, approving beneficiary payouts, creating annual notices to participants, and much more.

A MEP – whether open or closed – can help the employer run their retirement plan in much the same manner as they handle all of their other employee benefit programs: they choose a provider, the provider assumes responsibility for the operation of the program, and the employer evaluates the program on an annual or more frequent basis. This is how most Worker’s Compensation, Group Health, Group Life, Dental, Vision, etc. plans all work. 401k Plans will eventually work in much the same manner once pending legislation fully embraces these programs in an effort to help close the “retirement gap” in our country.

FN: How did the 2012 DOL Advisory Opinion letter change the landscape of MEPs?

Power: The Department of Labor Advisory Opinion 2012-04A clarified the U.S. Department of Labor’s position that they treat each individual adopter in an open MEP as a separate plan for reporting purposes. This meant that we, as the third party administrator for the MEP, would need to prepare and file an annual Form 5500 for each adopter. Also, any adopter who had a sufficient number of employees to qualify for an annual plan audit would now have to have their own annual audit (as they would if they had a stand-alone plan).

It was interesting to notice after this advisory opinion came out that less than 20% of our adopters were “audit clients.” Our average adopter size at that time was around 80 employees. That meant that 80% of our clients came to us not because they were trying to “dodge the audit costs,” but because they just wanted someone to run their 401k plan for them. Just like they do all of their other employee benefit programs.

FN: Other than compliance, what are some of the operational challenges facing the creation and maintenance of MEPs?

Power: It’s a very complicated and narrow part of the ERISA landscape. If you’ve got 26 years of dealing with multiple employer clients like we do, they’re not extremely hard to deal with. When we hit the marketplace with our Platinum 401k program over five years ago, we seemed to give birth to a number of competitors very quickly. It became very obvious that most of these folks had zero experience with these types of plans. I expect the same problems to arise once Congress approves the pending legislation (which the President’s proposed 2017 budget has already allocated $100 million towards). My best advice is that if you don’t have the background in working with these types of programs, it’s not something that lends itself to on-the-job training.

FN: You’ve been heavily involved in Congressional Hearings on the subject of MEPs. Share with us some of the insights you’ve picked up from these activities. How long has Congress been interested in this subject and who are the key players involved? Where does the proposed MEP legislation rank in terms of priority?

Power: There have been several hearings on Capitol Hill on the subject. I was invited to make a formal presentation before the U.S. Department of Labor’s ERISA Advisory Council in August 2014 on the subject. The findings of the Council appear to reflect that they appreciate the many benefits associated with the expansion of multiple employer plan solutions in the marketplace.

There has been a bill of one sort or another in Congress for at least the past four years. Senate Finance Chairman Orrin Hatch is one of the leading proponents of expanding open multiple employer plans. His committee has a bi-partisan recommendation to move forward to expand these types of plans. Senators Collins and Nelson also have a bipartisan bill that offers some terrific benefits.

At this point, it’s really not a matter of “”are they going to do anything?” but more of “when will the bill get through and be signed into law?” The wheels turn painfully slow in Congress, but it would not be unreasonable to think that we could see a bill on the new President’s desk as early as this time next year.

FN: You’ve earlier outlined some of the concerns with the current state of MEPs. How does it appear Congress intends to address these?

Power: The proposed legislation should take away the “commonality” requirement in open MEPs, meaning that the individual Form 5500 filings and individual annual audits will become a thing of the past. I also believe that – depending on which political party controls the legislature – multiple employer plans as a solution for the upcoming state-sponsored retirement plans for private sector employees will be eliminated. The resources and expertise for running retirement plans for private sector employers exists just fine under ERISA, and in my opinion, that’s exactly where these plans need to remain.

FN: Turning to the subject of the DOL’s new Conflict-of-Interest Rule, there are some who suggest complying with this Rule may increase fiduciary liability on the part of plan sponsors (who must monitor the integrity of the now mandatory disclosures from service providers). In what ways does the DOL’s new Rule impact MEPs both in terms of the individuals running the MEP and the relative attractiveness of the MEP alternative to current 401k plan sponsors?

Power: I’m not an attorney, so these are just my own thoughts: I think the “Best Interests Contract” exemption is a plaintiff’s attorney’s dream. Reading between the lines, it just looks to me that the Department of Labor wants everybody who is involved with helping Americans save for a secure retirement to have an acknowledged fiduciary status so they’re on the same side of the table as their client. Some advisers or brokers don’t have the knowledge or experience (or ability) to become a fiduciary. That’s where a well-structured multiple employer plan can be a great solution.

In our program, there are three separate and unrelated plan fiduciaries who oversee the investments, plan operations and administration, and the service providers. I think the separation of the three entities is critically important as a way to protect the plan and the plan participants for a variety of reasons. Some of the industry’s top ERISA attorneys have opined on this very subject in great detail over the past few years. I’d encourage anyone interested in learning more about this to spend a little time researching the subject. Separation of fiduciary duties is a critical component of retirement plan success.

FN: Let’s end with a couple of predictions. First, policy makers have complained about the lack of availability of corporate retirement plans. This has prompted many states to consider offering the alternative of sponsoring their own private employee retirement plans. How might broader use of MEPs both address the “lack of availability” problem head-on and obviate the need for state-sponsored private employee retirement plans?

Power: I think Congress will take care of the state-sponsored plans through a legislation solution at the same time they expand the availability of open multiple employer plans across the country. I don’t see them being implemented.

FN: Second, picture the retirement world of the next generation. Why might MEPs become the new standard for delivering retirement plan to private companies? Under what special circumstances would you see an individual company justify continuing their own plan rather than joining in with an MEP?

Power: MEPs bring the employer’s retirement plan right in line with all of their other employee benefit programs. The employer selects a provider, and the provider handles the details. There is no upside for an employer doing everything perfectly with their retirement plan. The downside risk, however, can be huge. It’s a risk that just isn’t worth the employer taking.

The only companies in the smaller end of the market (under 5,000 employees) who wouldn’t want to at least consider a multiple employer plan solution years from now are likely those who have a very demanding need for specialized investment options that just wouldn’t be typically found in a MEP portfolio. I think it will be very unusual for a plan sponsor not to at least consider a multiple employer plan solution after all the dust settles in Congress on these programs.

FN: Are there any other thoughts on the new Rule you’d like to add?

Power: My only thoughts really deal with observing the legislative and lawsuit challenges that are certain to come on the Fiduciary Rule. It will be fascinating to read the arguments that will be made by opponents of the rule as to their reluctance and outrage of being placed on the “same side of the table” as the investing public.

FN: Terry, you’ve been very enlightening and we appreciate you taking the time to share with our readers some of the fruits of your unique experience in the 401k MEP world. We look forward to continue this ongoing discussion and can’t wait to see the future unfold for 401k MEPs.

NYC Proposes Their Own Private-sector Retirement Plan, Making a Bad Idea Even Worse

PUaRYiqNew York City’s mayor Bill de Blasio called for a city-run retirement system for private sector employees in his annual keynote “State of the City” address last week, following the lead of more than a dozen states across the country.

De Blasio revealed that he wants the city to become the first city in the country to offer a retirement system to private employees. Reuters reported last week that “some states have already started looking at introducing plans for private sector workers, leveraging the extensive infrastructure, know-how, and cost benefits they have acquired in running plans for public employees.”

I’m not sure how many states and cities could make such a statement and keep a straight face given their miserable history in “running plans for public employees”.

Apart from the clear track record that having municipality oversight of private sector employee retirement funds opens the door for corruption and abuse, the entire structure of such a program flies directly in the face of the very reasons why the Employee Retirement Income Security Act (ERISA) was signed into law over 40 years ago. ERISA exists to protect workers and provide a federal preemption in order to insure uniformity in retirement plan structure across the country.

The New York Times reported in August 2014 that the New York City overseen pension plan for general works was only 63 percent funded as of the end of 2012. This is a dramatic decrease from being in an “overfunded” situation back in 1999 of over 135 percent. In other words, this New York City Pension Fund doesn’t have anywhere near the amount of money that will be needed to cover retiree pension obligations with only a dangerously low 63% funding level.

The Times also reported that in 2013 Morningstar, the investment research firm, evaluated for the first time the strength of state and local pension systems across the country and rated New York City’s as “Poor”. Only a few major cities’ pension systems garnered such a low rating, said Rachel Barkley, a municipal credit analyst who wrote the report for Morningstar. And despite state laws calling for regular audits of the city pension system, the Times found that there has not been an audit performed on the New York City plans since 2003.

New York City might be the poster child for municipal pension plan mismanagement, Illinois and the City of Chicago notwithstanding.

Is this the “extensive infrastructure, know-how, and cost benefits” that the City has gained that should now be leveraged for private sector employees?

I don’t think so.

Recently, New Jersey Governor Chris Christie vetoed a proposed state-run private sector retirement plan citing his reluctance to create even more government bureaucracy when the resources to provide retirement plan coverage already exist in the private sector.

“I share the sponsors’ concerns for the financial future of the residents of New Jersey, but I believe that the approach taken by the Legislature — mandating participation under a threat of fines for not participating — is unnecessarily burdensome on small businesses in New Jersey,” Christie said in his veto statement. “The bill also requires the state to bear the initial cost of creating the program, subject only to reimbursement when funds become available.

“Finally, the bill creates yet another government bureaucracy to oversee and implement the program, while there are plenty of private-sector entities with particular expertise that can perform this function instead.”

Governor Christie is correct in his analysis and for issuing the provisional veto.

In late 2015, the U.S. Department of Labor issued guidance to the various states who were looking for an “ERISA solution” to oversee retirement plans for private sector employees. The DOL brought forth a recommendation that, among other options, a 413(c) Multiple Employer Plan structure be used.

AAEAAQAAAAAAAAbVAAAAJDM2ODNkMmZjLTY5OTUtNDY0Mi1iMWYyLThkOTNjYjY5OTQ2YQWe agree that open multiple employer plans, or “Open MEP’s” as they are known, are an efficient type of program to broaden retirement plan coverage for private sector employees who work for unrelated employers.

We strongly disagree with allowing individual states – or now, apparently, cities – to serve as the plan sponsor and run their own statewide multiple employer plan program for private sector employers. This will end up leading to a patchwork of different plan types across the country and create havoc for employers who have employees scattered or relocating between several different states.

In late January 2016, the White House finally brought forth a recommendation that existing ERISA multiple employer plans be expanded so as to eliminate the “commonality” or “nexus” requirement among employers. This was most welcome news and falls right in line with the bipartisan recommendations of the U.S. Senate Finance Committee under Chairman Orrin Hatch and Ranking Member Ron Wyden.

The Senate Finance Committee’s proposed legislation would eliminate much of the confusion created by an Advisory Opinion from the Department of Labor in 2012, which increased some of the barriers and eliminated some of the benefits associated with Open MEP’s.

Under the proposed legislative changes, unrelated employers within an Open MEP would finally be able to band together not only for operational efficiencies, but also for some dramatic cost savings. Individual adopters would no longer have to file individual Form 5500’s, nor be subject to an individual plan audit. There will still be ERISA safeguards in place to protect employees, and, as I recommended to the Department of Labor’s ERISA Advisory Council in 2014 in my testimony addressing Outsourcing Employee Benefit Plan Services, formal guidelines for establishing and operating an Open MEP should be put forth by the Department of Labor to help prevent abuses and to insure protection for plan participants.

The Senate Finance Committee, now with the approval of the White House, should advance their proposed legislation in a timely manner. The Department of Labor should take action and modify their position under Advisory Opinion 2012-04(a) given the broad bipartisan support for encouraging a private sector multiple employer plan solution for unaffiliated employers.

Depositphotos_8968157_original-940x446They also need to include in their bill language to eliminate the ability for state and local governments to intrude into the retirement plan management of America’s private sector workers with anything other than a voluntary payroll-deduct IRA or the new myRA program.

Given the self-interests of Mayor de Blasio and others who are certain to follow his lead into the cookie jar, time is of the essence. America’s workers need not only broader coverage, they also need competent, experienced professionals and the protection offered under federal law to insure the safety of their retirement nest eggs.

It’s time for Congress and the White House to take action on this important issue.