Author: SRP

Powerhouse Retirement Advisory Practice joins SRP

Strategic Retirement Partners (SRP), one of the leading retirement plan aggregators in the US, announced today that White Oak Advisors, LLC has joined its team. This closes out a banner year for growth, with SRP’s advisors in 17 offices consulting on over 750 plans totaling assets of $11 billion.

Jim Robison, Founder of White Oak Advisors, LLC and SRP’s new Managing Director, Great Lakes, states: “We are thrilled to be joining Strategic Retirement Partners! Ric Clouse and I have known many of the Managing Directors for a number of years and have noted the national depth and breadth of consulting capabilities, dedication to the ongoing improvement in participant and plan sponsor outcomes, the scope of operational support for our office and clients, a strong cultural alignment and, most importantly, the strength of character of our co-owners.”

The White Oak team adds eight new colleagues to SRP’s ranks, including Jim Robison and Ric Clouse who will be Managing Directors in the Great Lakes region.

“White Oak Advisors has grown from a true start-up in 2004 to a firm providing consulting and advisory services to Plan Sponsors who have in excess of 70,000 Employees and $3.5 billion assets in their respective Plans,” said Jim Robison, Managing Principal for White Oak Advisors, LLC. “We have enjoyed our client relationships and the fulfillment of the services provided yet have observed a need for greater bench depth in certain service areas. Being with SRP addresses the team-depth challenges and allows us to work within a collegial, Managing Director owned environment in-which collaboration is encouraged and occurs.”

SRP’s Managing Partner, Jeff Cullen, shared, “We are extremely fortunate to have Jim, Ric, and the entire White Oak team on board with SRP. They have evolved their decades of retirement plan experience into a repeatable process that uniquely equips their clients to take their plans from an additional corporate expense into an optimized asset that can help facilitate corporate strategy.”

SRP Shows Strong Presence at Excel

The Excel 401(k) conference took place in Las Vegas in October, bringing together some of the best and brightest retirement focused advisors across the country. SRP had a strong presence again this year at the conference.

Jeff Cullen, SRP’s Managing Partner conducted a session called, “Is your retirement practice designed to double in size?” where he discussed how achieving exponential growth in a consulting practice requires the proper allocation of resources in the form of human capital, intellectual capital, and time to the four pillars of a retirement practice: consulting, sales and marketing, technology, and operations. This session examined the allocation of these precious resources and insights into the four pillars of a successful practice.

Then Jeff Cullen, Jamie Worrell – Managing Director, Northeast, and Phil Senderowitz – Managing Director, Central Florida were part of a panel discussion called, “Why Advisors Need Their Own Investment Committee.” This session explored the trend with elite advisors that have established their own Investment Committee Charter as a competitive edge. Issues addressed during the session covered a proper investment selection and monitoring process, why the appointment of indexes for comparative purposes is critical, how the process should align with ERISA’s due diligence obligations, how judicial decisions impact the investment process, and what role technology plays in the delivery of better recommendations.

Linking Retirement Plans and Student Loan Repayments

In August, the Internal Revenue Service issued a private letter ruling (PLR) clarifying that employer contributions to retirement plans may be tied to student loan payments.

Since the great recession of 2008-09, student loan debt in the U.S. has significantly increased. It is estimated that Americans now hold approximately $1.5 trillion in student loans. As a result, many employers are looking for ways to assist their employees in paying off this debt.

Studies show, not surprisingly, that the burden of student loan debt hampers the ability to save for retirement. A recent study indicates that by age 30, employees with student loans have saved 50 percent less, on average, through their employer’s retirement plan, as compared to employees who do not have student loans.

Employers may make additional contributions to retirement plans for virtually any reason so long as these contributions do not favor highly compensated employees. The PLR clarifies that this includes profit sharing contributions that may be tied to student loan payments made outside of the retirement plan.
The plan sponsor requesting the ruling proposed making profit sharing contributions to its retirement plan based on student loan payments. In other words, an employee making loan payments, rather than electing to defer into the retirement plan, would receive a profit sharing contribution which would be the equivalent of a matching contribution if they had instead deferred into the retirement plan.

It should be noted that only the taxpayer who receives a letter ruling may explicitly rely on it. However, letter rulings simply reflect black letter law and are a good indicator of the IRS’s thinking with regard to the matter addressed.

Budget Act Changes Hardship Regulations

President Trump signed into law the Bipartisan Budget Act of 2018 (“Budget Act”) on February 9th of 2018. The Budget Act includes several provisions affecting hardship withdrawals that become effective for plan years beginning on or after January 1, 2019:

Elimination of Six-Month Contribution Suspension. Under current Internal Revenue Service (IRS) regulations, a plan participant is permitted to take a hardship distribution only if the distribution is necessary to satisfy an immediate and heavy financial need. The regulations include a “safe harbor” under which a distribution will automatically be treated as meeting this requirement if, among other things, the participant’s right to contribute to the plan is suspended for at least six months after the hardship withdrawal. The Budget Act directs the Secretary of the Treasury to modify the regulation to delete the six-month contribution prohibition from the safe harbor.

Expansion of Hardship Withdrawal Sources. The Budget Act expands the sources of contributions under a 401(k) plan that may be accessed for hardship withdrawals. The sources now include earnings on elective deferrals, safe harbor contributions, “qualified non-elective contributions” and “qualified matching contributions” (i.e., contributions plan sponsors can make to remedy a plan’s failure to pass nondiscrimination testing) and earnings on such contributions.

Elimination of Requirement to Take Loans. The Budget Act eliminates the requirement that a participant take all available loans under the plan as a condition to receiving a hardship distribution. Further guidance from the IRS is needed interpreting the Budget Act provisions and implementing the directive to remove the suspension provision from the safe harbor definition. There are several unanswered questions relating to the implementation of the revised regulations, not the least of which is what may apply to participants who are suspended when the new regulations take effect.

In the meantime, service providers are developing solutions to accommodate the revised regulations while awaiting further guidance and will notify our clients when such guidance is issued.

2019 Retirement Plan Limits

2019 Retirement Plan Limits

As published in IRS News Release IR-2018-211, November 1, 2018

Highlights of Changes for 2019

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.

The catch-up contribution limit for individuals age 50 or older remains at $6,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

Solving the Money Purchase / 403(b) Plan Conundrum

Do you have both a money purchase plan and a 403(b) plan? Unsure how you got here and where to go next? Are you challenged to administer both plans? Do you have multiple audits? Many of our clients have been in your shoes and after some background we share what they did to solve this problem.

It was common place many years ago to have both a money purchase plan and a 403(b) plan in place. One of the challenges with this legacy plan structure is that the plan sponsor is left to administer two separate retirement plans, which may demand two audits if the plans have more than 120 participants.

Why did this structure exist? Much has to do with the history of 403(b) plans.


A brief history of 403(b) plans

1958 – Congress adds section 403(b) to the Internal Revenue Code (IRC) to establish a tax-deferred retirement vehicle for non-profit entities.
1974 –403(b) plans are allowed to invest in both annuity products and mutual funds. 403(b) plans were commonly referred to as “Tax Deferred Annuities” prior to 1974. This term is a bit outdated today, as the investment options available have widened.
1986 – Several changes are made to modernize 403(b)s, similar to those applicable to other qualified plans, like 401(k) plans. These changes include a 10% penalty tax for pre-59½ withdrawals, required minimum distributions, annual contribution limits and non-discrimination rules.
1996 – Non-profit employers are eligible to sponsor 401(k) or SIMPLE IRA plans as well. Employers need to understand the advantages and disadvantages under each plan type.
2009 – 403(b) plans have come under many of the same rules and regulations that 401(k) plans have. For those that have come from the for-profit world, the 401(k) and 403(b) now look like close cousins. 403(b) plans are required to have a plan document. IRS applies other regulations to all 403(b) plans, effectively shifting more responsibility to employers. The real challenge is to adapt the previous 403(b) environment to fit the new regulatory environment.


What’s the difference between ERISA and non-ERISA 403(b) plans?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs the administration of retirement and health plans.

Generally speaking, churches and government entities are exempt from the requirements under ERISA. However, many non-ERISA plans have started to adopt best practices from their ERISA counterparts because more prudence and better process has driven better outcomes for the plan participants!

For any other non-profit entities sponsoring a 403(b) plan, to maintain non-ERISA status, the following requirements must be met:

  • The plan must be voluntary for participants.
  • There can be no employer contributions.
  • The plan sponsor must have minimal administrative involvement with the plan.


What to do now…

Many plan sponsors want to move toward a one-plan solution for several reasons:

  1. Reduced investment costs – Participants can benefit from lower cost investments under an institutional contract, rather than the individual contracts prevalent in the 403(b) marketplace.
  2. Ease of administration – Reporting contributions to just one contract.
  3. Reduced audit costs – If the plans require one audit, rather than two.
    Unfortunately, the IRS does NOT allow a 401(a) money purchase plan to merge with a 403(b) plan, as they are separate and distinct money types.

One solution for the money purchase plan / 403(b) scenario is to restate the money purchase plan as a 401(k) plan, allowing all future contributions (both employee and employer) to flow into the new 401(k) plan. This preserves the employer contributions, which were previously contributed under the money purchase plan. The plan sponsor then terminates the 403(b) plan, left with just one plan to administer. The impact to participants is reduced investment costs and simplified account management.


So, what’s the downside of moving to a 401(k)?

1. Non-discrimination testing
One non-discrimination test that 401(k) plans are subject to, but not 403(b) plans, is the Average Deferral Percentage test. This test is designed to ensure that the highly compensated employees do not benefit from the plan to a greater extent, relative to the non-highly compensated employees.

  • If a plan’s non-highly compensated group has low participation or low savings rates, the highly compensated employees may be limited in their ability to contribute to the plan.
  • At times, this is addressed by establishing a non-qualified plan to address the needs of the highly compensated group.

2. Distributable event for the 403(b) balances

  • A second concern is related to the termination of the 403(b) plan. Because the IRS does not allow for 403(b) plans to be merged into 401(a) or 401(k) plans, the plan termination becomes a distributable event for active employees, meaning they will have option to take a distribution or roll their balance into the new 401(k) plan (or an IRA).
  • This is an individual decision, with no way to force their hand. A thorough education plan can effectively educate participants about their options and many will likely elect to roll their balance into the new plan.


Where do you go from here?

Plan sponsors should regularly evaluate their current plan designs to confirm that they continue to meet the needs of the employer and their participants. Many plan sponsors have made plan design changes to simplify and streamline retirement plan administration. The most significant change is to consider moving to a one-plan solution and evaluating whether a 401(k) or 403(b) plan is a better fit. The most important consideration is understanding not only what plan design you have, but also why you have that particular plan design. If you would like to speak with a plan sponsor who has undergone this analysis, we would be happy to connect you.

Beware of the IRS and DOL

Four Red Flags They Seek on Form 5500

The Form 5500 is an ERISA requirement for retirement plans to report and disclose operating procedures. Advisors use this to confirm that plans are managed according to ERISA standards. The form also allows individuals access to information, protecting the rights and benefits of the plan participants and beneficiaries covered under the plan.

  1. Make sure you are compliant. Be aware of red flags that the IRS and DOL look for on Form 5500 filings:
    1. Not making participant deferral remittances “as soon as administratively possible” is considered a fiduciary breach and can make the plan subject to penalties and potentially disqualification. Delinquent remittances are considered to be loans of plan assets to the sponsoring company.
    2. An ERISA fidelity bond (not to be confused with fiduciary insurance) is a requirement. This bond protects participant assets from being mishandled, and every person who may handle plan assets or deferrals must be covered.
    3. Loans in default for participants that are not continuing loan repayments, or loans that are 90 days in arrears, are a fiduciary breach that can make the plan subject to penalties and disqualification.
    4. Corrective distributions, return of excess deferrals and excess contributions, along with any gains attributed must be distributed in a timely manner (typically two and a half months after the plan year ends). In some cases these fiduciary breaches can be self-corrected if done within the same plan year in which they occurred, and may be considered additional breaches if they extend beyond the current plan year.

This is a partial, non-exhaustive list of common Form 5500 red flags. If you’re concerned about ERISA compliance, contact your advisor sooner, rather than later.

For more background on the Form 5500, visit the Society for Human Resource Management online. See “Regulatory 5500: What is Form 5500, and where are instructions for completing it?

November 2018 Webinar

Join us for our next webinar, “Employee Financial Wellness Without Breaking the Benefits Bank.” Click here to register for Wednesday, November 14, 2018 at 10:00 AM Eastern/7:00 AM Pacific or here to register for Thursday, November 15, 2018 at 2:00 PM Eastern/11:00 AM Pacific.

Americans need to save for retirement and employer sponsored defined contribution plans are intended to make that task easier. BUT retirement is not the only financial burden that needs their attention. Proactive plan design can help your employees improve their financial wellness and get them on the road to retirement readiness.

With that in mind, we don’t live in a world of unlimited budgets. Join SRP Managing Director Phil Senderowitz, CFA, CFP® for a discussion of cutting edge plan design concepts that go beyond the traditional automatic enrollment and automatic escalation and stay within the bounds of limited benefits budgets.

October 2018 Webinar

Join us on Monday, October 22, 2018 at 1:00 PM CST for our webinar “DC and the States Set Their Sights on Retirement Plans: What Could It Mean For You?” Click here to register.

The Honorable Bradford P. Campbell will be presenting – DC and the States Set Their Sights on Retirement Plans: What Could It Mean For You?

Mr. Campbell is a nationally-recognized figure in employer-sponsored retirement plans. He served as Assistant Secretary of Labor for Employee Benefits and head of the Employee Benefits Security Administration from 2006-2009 (nominated by President George W. Bush). As ERISA’s former “top cop” and primary Federal regulator, he provides unique insight and knowledge across a broad range of ERISA issues, and also serves as an expert witness in ERISA litigation. Brad has been listed as one of the 100 Most Influential Persons in Defined Contribution by 401kWire and has been listed as one of the top 15 ERISA attorneys in the country by a poll of the National Association of Plan Advisors. Brad Campbell is sponsored by T. Rowe Price.

SRP will be offering 1 hr of SHRM CE for attending this webinar.

Focus on Participant Engagement

Back in 2016 when Sarah Krapac joined SRP as an education specialist, all she had in her toolbox was  a  few slides, a couple of hand outs, and her unwavering belief that we can make a difference for our clients’ employees. Fast forward to September of 2018 and Sarah is taking her gift for creating meaningful and actionable employee engagement campaigns nationwide as the Director of Education for SRP.

But what does this mean for our advisors and their practices?

  • Videos – Sarah and education team have developed a series of on demand videos deployed on our learning management system, SRPSmart.
  • Slide Library & Collateral – In addition to the typical presentations, SRP has created a pre-approved library of content and collateral at the fingertips of our advisors when they need it.
  • Financial Wellness Focus – Taking the participant experience a step further, Sarah spearheads SRP’s efforts, both internally and client facing, for Your Money Line powered by Pete the Planner.

To find out more about Sarah, check out her bio here on our website.