Category: Blog

Deferred Compensation Agreements Put to the Test …and Holding Strong

Just when everyone thought there was nothing more to be said about the bailout issues of the subprime mortgage crisis (2007-2010), it’s back in the headlines. Some 23 former American International Group Inc (AIG) Financial Products (AIGFP) employees[i] have taken their old employer to court. At stake is more than $100 Million in deferred compensation the employees said was contractually owed and verbally promised. This past Tuesday, British court Judge Andrew Baker added support to their battle, ruling that AIG couldn’t use what the Judge described as “abusive arguments” to block the payments.

Bloomberg Business quoted AIG Financial Products Chief William Dooley as having said in a court filing, “the insurance giant would have ‘been under extreme pressure’ from the U.S., especially from an angry Federal Reserve Chairman Ben Bernanke, to stop the payouts and pursue bankruptcy instead.”

Back when governments, both U.S. and European, were bailing out banks and insurers, the Federal Reserve loaned $85 Billion to AIG, with a stipulation that no funds would be distributed out of AIGFP’s bonus pools as those funds should not be “used to reward executives ahead of taxpayers.”

Aside from an obvious but unaddressed argument that the executives involved were taxpayers themselves, the money owed had been set aside as deferred compensation to the former traders and managers to provide them “a sharing of the risks and rewards of the business.”

According to the, “Even as AIGFP realized losses totaling $40 billion in late 2008, ‘the language (of the deferred comp agreements) required for the restoration of payments.’”

AIG is expected to file an appeal with a higher court, arguing that while the company was still losing money, it didn’t have to pay the Financial Products employees their bonuses.[ii]

The courts, it seems, are not being swayed by AIG’s arguments, but are instead siding with the employees, recognizing that contracts are in place to be honored, even when a company would rather not. Earlier this year, a French court ordered AIG[iii] to pay bonuses of more than $2.3 Million to a former managing director at AIG Management France SA, and last year awarded roughly $7.6 Million to another managing director in France.

Thank you to Fulcrum Partners for this great article, which you can also view here on their website.





Self-Directed Brokerage Accounts within a 401(k) Plan? Issues Plan Sponsors Should Address

The typical 401(k) plan sponsor offers a mutual fund lineup of around 20 funds to invest personal and company contributions, and, even with that level of flexibility, hands-on investors are likely asking for more options. The Profit Sharing Council of America reports that the percentage of 401(k) plans with self-directed brokerage accounts (SDBAs) is growing, now above 20%.

401(k) plans with SDBAs offer a significant benefit to their participants, greater flexibility in investment options: more types of investments to choose from, more asset classes available including alternative asset classes such as real estate and commodities, and with certain plans, access to lower-cost investments. This greater flexibility in investment options offers plan participants more diversification and more refined investment strategies across all of their personal investment accounts. It also allows participants to hold relatively tax-inefficient investments in their 401(k) plan account, reducing their current annual tax bill.

The typical hands-on investor among your participants usually earns more, works with a personal financial planner and has more personal wealth, and that is often a good description of the company’s leaders. In addition, these hands-on investors might also be part of your plan’s retirement committee. But, SDBAs within a 401(k) plan are not for everyone. What issues should a plan sponsor consider if they are looking to add or expand the SDBA accounts available in their 401(k) plan?

Fiduciary Considerations and Participant Impact

If the plan sponsor has not implemented SDBAs to date as an investment option for participants, then the first issue to address or questions to answer are:

  • Is adding an SDBA feature really necessary.
  • Should the plan sponsor consider their participant group first, then their fund lineup?
  • How big is the group of hands-on investing participants and are they asking for more flexibility?
  • Are there asset classes that can be added to the current fund lineup to accomplish the objective?

A conversation with your investment advisor and current recordkeeper may result in enhancements to your investment lineup that satisfy the needs of your participants while maintaining a relatively simple and fully automated investment lineup for your plan.

The flip side of your hands-on investor group is the general makeup of your eligible participant population.  Recognize that the Department of Labor requires that all participants must be given the right to invest their 401(k) account through a self-directed brokerage account if the plan offers this feature. As a result, all eligible participants must be notified of the SDBA option, including related fees and account charges.

We know that many participants should stay away from self-directing their retirement accounts; they lack the time, discipline or willingness to do it themselves through ongoing research and actions to effectively manage their SDBA. They may be unwilling to hire an advisor due to cost, they may have an incomplete understanding of risk and return in asset classes, and they may engage in emotional investing, all leading to poor investment outcomes. The latest Charles Schwab SDBA Indicators Report bears this out:  it showed that participants who work with an advisor have higher balances, a more diversified asset mix, and less exposure to individual stocks than non-advised participants.

Also, the Department of Labor has expressed concerns regarding the range of investments that should be made available due to risk and return, reasonableness of fees charged by an advisor, and using investments through the brokerage window. ERISA Section 404(c) has a specific exclusion for investments where the risk of loss exceeds the participant’s account balance.

Carefully evaluating the participant group may cause some plan sponsors to limit investments in SDBAs to only a percentage of the total account, and restrict or prohibit investments in limited or general partnerships, options, futures and other derivatives, margin trading and other forms of investments with potential risk.

Finally, choosing the broker and negotiating the broker’s fees and other charges may be a fiduciary act, particularly if the fiduciary is limiting the number of advisors and brokerage firms available to one or a select few.

Plan sponsors and named fiduciaries may be under the impression that implementing self-directed brokerage accounts minimizes fiduciary risk, but there can still be fiduciary obligations that if not met, can trigger liability.  Beyond ongoing fiduciary risks, there can be significant operational issues that are unique to 401(k) plans with SDBAs.

Operational Issues

Historically, self-directed brokerage accounts have been a feature of 401(k) plans sponsored by law firms and medical practices, but these plans have now become much more prevalent across US employers, although with restrictions on the brokerage firm and advisors available.

As the recent Charles Schwab survey indicates, plan participants with larger account balances prefer to work with a professional advisor, specifically a personal investment advisor who knows their full financial picture and participates in their lifetime financial planning. If plan participants can select their own investment advisor for their accounts, maintaining the plan becomes more complex and more expensive to administer.

More Complexity 

Many recordkeepers and administrators have developed their own automated and proprietary solution for self-directed brokerage accounts, catering to larger employers who represent the majority of plan sponsors offering a self-directed brokerage account option in their plan. A single brokerage firm approach for self-directed brokerage accounts significantly limits the investment advisors available to the participant, so this approach is unlikely to work for participants with larger balances, who also often are the key leaders within the organization.

Allowing those key leaders to work with their personal investment advisor forces the benefits team or administrative staff to manually maintain these separate accounts, involving a number of additional steps, many or all of them manual:

  • Excluding participants with outside brokerage firms from the payroll feed and deposits to the recordkeeper for the rest of the plan,
  • Separate checks or electronic transfers to each individual brokerage firm,
  • Logging all transactions and verifying receipt with each individual brokerage firm,
  • Resolving any issues that arise with the individual brokerage firm,
  • Providing separate, aggregate reporting of all plan participants for compliance testing, and
  • Even taking on the role of the plan’s recordkeeper in developing personal plan statements for each participant with a separate self-directed brokerage account, summarizing annual activity in the plan account.

In this manual environment, those participants who self-direct through a separate brokerage firm are ‘off-line’:

  • They do not have access to an online 401(k) participant portal
  • Participant service and support is provided by the employer’s internal staff
  • May not receive a participant summary statement (an ERISA requirement) unless it’s provided by the plan sponsor.

More Expensive

The manual processes involved in working with multiple brokerage firms creates additional internal expense and additional compliance and fiduciary risk for the organization that chooses to work around their recordkeeper’s limitations. The plan sponsor may also incur additional hard dollar expense by hiring its accountant or another third party administrator to consolidate and summarize the assets held across all accounts for the plan in total and reconcile to participant accounts, a necessary step for completing the plan’s Form 5500 annual disclosure filing. Also, if the plan sponsor’s 401(k) plan has more than 100 participants, this expense becomes an annual, necessary expense for a full scope audit as required by ERISA when there is no certified trust statement covering all assets held by the plan.

At Last – Resolving Issues with a Single Solution

When choosing to add or expand the availability of SDBAs in a 401(k) plan, it can feel like, “No good deed goes unpunished”. But, solutions are available that offer greater flexibility to participants at reasonable cost and reduced fiduciary risk. Solutions such as Professionals Choice Retirement PlanTM simplify the multi-vendor approach, allocate plan fees judiciously, and offer participants complete investment freedom to utilize their personal financial advisors. This open architecture personal advisor solution enables fiduciary management with fully- transparent and outsourced professional 401(k) plan administration. Plan sponsors should have a conversation with their investment advisor, their recordkeeper and other advisors to understand what solutions are available that best meet both plan sponsor and participant objectives.*


*Investment advisory services provided via Professionals Choice Retirement Plan are offered through Strategic Retirement Partners (SRP), an SEC registered investment advisor. Findley provides administrative and recordkeeping services, is not a broker/dealer or an investment advisor and is a separate entity from SRP. SRP and Findley are separate entities from LPL Financial.

August 2019 Participant Webinar

Will you please share the following announcement within your organization by copying and pasting this to your participants?

Attention all Retirement Plan Participants and Eligible Employees! Register now for the next event in the 2019 SRP Participant Education Webinar Series!

One Dollar. One Percent. One Future You.
Can “ONE” really make a difference?
Whether you’re new to the 401(k) or simply want to review the benefits of saving within your workplace retirement plan, we invite you to join SRP’s Ann-Marie Sepuka (Managing Director – Houston) to discuss what makes these plans so valuable and break it down into the actual dollars and cents everyone can relate to. She’ll also explore the immense power of visualization, and help you get to know the person you’re saving for…the future you!

Plan Participants and Eligible Employees: Join us via webinar on Tuesday, August 6 @ 1:00 EST / 12:00 CST / 11:00 MST / 10:00 PST.
Register in advance:
Even if you cannot attend the meeting live, a recording will be made available to all registrants.



Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an
SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL

Global Retirement Partners employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment
adviser representatives of Global Retirement Partners; or (2) solely investment adviser representatives of Global Retirement Partners. Although
all personnel operate their businesses under the name Strategic Retirement Partners (SRP), they are each possibly subject to differing
obligations and limitations and may be able to provide differing products or services.

Summer Homework for Fiduciaries

As you bask in the glory of summer over the next couple of months, don’t forget the three Fs that define this cherished season — fun, Fourth of July, and fiduciary! While you’re enjoying the fruits of summer, don’t forget your fiduciary responsibilities! Ask yourself the following questions to make sure you are on top of your responsibilities and liabilities.

  1. Are you practicing procedural prudence when making plan management decisions?
  2. Do you clearly understand the DOL’s TIPS on selecting and monitoring your QDIA in order to manage fiduciary risk?
  3. Are you documenting each plan management decision and its support?
  4. Are you familiar with current trends in fiduciary litigation?
  5. Are you certain that your plan is being administered in accordance with your plan document provisions?
  6. What fiduciary liability mitigation strategies are you following? (Fiduciaries are personally financially responsible for any fiduciary breaches that disadvantage participants.)
  7. Are you kept abreast of regulatory changes?
  8. Are you appropriately determining reasonableness of plan fees, services and investment opportunities?
  9. How do you define “success” for your plan and what metrics do you use to track progress?
  10. Is your current plan design communicating the appropriate messaging to encourage success for your participants and plan fiduciaries?
  11. Is your menu efficiently designed for benefit of participants and plan fiduciaries?
  12. Are you certain you are providing all required communications and distributions to plan participants (including former participants with account balances)?
  13. Are you handling missing participants appropriately?
  14. Are you appropriately monitoring and documenting your fiduciary activities and those of your service providers?
  15. Are you maintaining plan records appropriately?

Many fiduciaries are unaware of their fiduciary responsibilities or do not understand them. As you contemplate these important questions while staying cool this summer, if you need help uncovering the answers to any of these important questions, do not hesitate to reach out to SRP Managing Director.


July 2019 Webinar

Join us for our Webinar
2019 HR Landscape:
What Every HR Professional Should Be Aware of For the Year Ahead

Register here – Tuesday, July16th
at 2:00 PM ET / 1:00 PM CT / 12:00 PM MT / 11:00 AM PT

Businesses are facing a complicated regulatory environment at both the federal and state level that puts them at risk for fines, penalties and lawsuits. Please join us for an informative and timely session covering the latest updates out of Washington and the state houses. The session will be followed by a Q&A.

Topics covered will include:

  • New Federal & State laws taking effect in 2019
  • An update on employment law trends and the government’s areas of focus in the new year
  • Potential legislation to be discussed
  • How your payroll provider can help with these changes

Our contributor for this webinar, MassPay, is SRP’s preferred HR services partner, focused on solving the most critical HR and payroll related problems for their clients so that they can focus on growing their business. This update will be lead by Paul Carelis, PHR, SHRM-CP, HR Division Leader at MassPay.



SRP does not provide legal or tax advice and we recommend that our clients consult an attorney or tax professional. We believe the information is accurate, however, we make no warranty or guarantee regarding the accuracy or reliability of the content. This information and the examples are provided general information and for illustrative purposes only. This is not intended to provide specific investment advice or recommendations for any individual.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL Financial.

Global Retirement Partners employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment adviser representatives of Global Retirement Partners; or (2) solely investment adviser representatives of Global Retirement Partners. Although all personnel operate their businesses under the name Strategic Retirement Partners (SRP), they are each possibly subject to differing obligations and
limitations and may be able to provide differing products or services.

Powerhouse LA Team Joins Strategic Retirement Partners

Doug Bermudez and Erin Hall have joined Strategic Retirement Partners (SRP), a leading national retirement plan aggregator. Through their retirement plan consulting practice in the Los Angeles area, Bermudez and Hall work with organizations to drive overall retirement plan health with a focus on three pillars of service; fiduciary process, plan design and administration efficiency, and participant outcomes.

When asked why their team is making a move to SRP, Erin Hall states, “SRP has a passion and commitment to the retirement plan industry that perfectly aligns with what Doug and I have built with the Bermudez/Hall Retirement Group.”

Doug Bermudez added, “We’ve known the SRP team for a number of years. When the time came for us to make a move, we knew that SRP would provide the collaborative environment, back office operations, technology, and human capital we need to continue to deliver exceptional service to our clients.”

This partnership expands SRP’s footprint into the key market of Los Angeles and brings their offices to 19 nationwide. Additionally, as part of joining SRP, the Los Angeles based team will have the resources and strength of Global Retirement Partners (GRP) at their fingertips. Global Retirement Partners is a nationally recognized leader in the retirement plan consulting space, surpassing $38B in plan assets with over 4,200 plan clients.

Doug has over 25 years of tenure in the financial services industry and was with Wells Fargo Advisors since 2007. Erin joined Doug in 2012 after over a decade of working with corporate retirement plans. The team is leaving Wells Fargo Advisors, where they had been providing high-level service to both corporations and individuals through comprehensive financial advice.

“The commitment that Doug and Erin have shown to their clients and our industry is what initially caught SRP’s attention,” shared SRP’s Managing Partner, Jeff Cullen. “But what excites us more is their alignment with our culture and core values.”


About Strategic Retirement Partners
Strategic Retirement Partners is a nationwide independent retirement plan consulting services firm dedicated to providing guidance in decision-making and problem solving to employers and sponsors of retirement plans. With offices from coast to coast, Strategic Retirement Partners currently consults on over 720 corporate and non-profit plans and $10 billion in assets as of April 1, 2019.



Doug Bermudez, Erin Hall, and Jeff Cullen are registered representatives with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL Financial.

Global Retirement Partners employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment adviser representatives of Global Retirement Partners; or (2) solely investment adviser representatives of Global Retirement Partners. Although all personnel operate their businesses under the name Strategic Retirement Partners (SRP), they are each possibly subject to differing obligations and limitations and may be able to provide differing products or services.

Student Debt and Your Retirement Plan

For many employers student debt assistance is the next frontier in employee benefit design. And with over $1.4 trillion in student debt, second only to mortgage debt for Americans, it’s easy to see why.*

In August of 2018 a private letter ruling from the IRS that stated, under certain circumstances, an employer can link 401(k) match to student loan repayments outside the plan. You may be thinking, what does one have to do with the other. Considering that  college graduates with student debt accumulate 50% less retirement wealth in their 401(k) by age 30 than those without**, this type of program could be key in boosting this groups retirement savings.

One interesting factor is that adding student debt program like Flexmatch would likely not increase employer costs, instead just shifting them from one bucket to another, while offering an attractive option to those who may be dealing with conflicting financial priorities.

For more information on student debt matching program, contact your SRP Managing Director.

*Federal Reserve Bank of New York

** Center for Retirement Research at Boston College

How Many Investment Options Should You Offer?

Many plan sponsors struggle with deciding how many investment options to offer in their retirement plans. While people generally like to have lots of options when making other decisions, having too many plan options can potentially lead to poor investment decisions by plan participants. In addition, increasing plan options can also increase plan costs, as well as the administrative paperwork associated with the plan.

In a study on retirement plan options, researchers concluded that it is possible to present plan participants with too many options.1  The researchers began by offering people selections of jams and chocolates. Some were offered a wide variety, while others received less choices. The wide variety of jams attracted more attention from people, but more people purchased jams when offered limited choices. When sampling chocolates, people enjoyed choosing from the larger selection more, but also were more dissatisfied with the choices. Those who sampled from a smaller selection were more satisfied and more likely to buy chocolates again. In other words, as the number of options increased, people became more concerned by the possibility of making the “wrong” choice–they became uncertain that they had made the best choice possible.

Chocolates and jams aren’t very big decisions, but the researchers found that these same behaviors carried over to retirement plans. They examined participation rates for 647 plans offered by the Vanguard Group, a large investment management company, covering more than 900,000 participants. They found that as plans increased the number of options they offered, employee participation decreased. In fact, for every 10 options added to the plan, participation dropped by 1.5-2 percent. Plans offering fewer than 10 options had significantly higher employee participation rates.

In addition, more plan options can increase costs both for participants, in the form of fees, and for plan sponsors, who may face additional administrative charges from third party administrators for additional options. Further, auditing and other costs may increase, since the number of options could increase the time necessary to conduct audits.

It’s important to balance choice overload against the requirements of ERISA Section 404(c) which requires plan sponsors to have at least three diversified investment options with different risk and return characteristics.



Washington Update

A number of bills are moving rapidly through the House and the Senate that would (if passed and signed) enhance the retirement plans of many Americans. While these bills continue to morph, below is a general description of provisions as of early April 2019.

Retirement Security & Savings Act
Senators Rob Portman (R-Ohio) and Ben Cardin (D-Maryland) introduced the Retirement Security & Savings Act in December 2018 and have reintroduced it in 2019. The Act is considered to be as sweeping as prior legislation, specifically the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and Pension Protection Act (PPA) of 2006. Proposals that would impact governmental plans include:

  • Eliminate the 457(b) “first day of the month” rule
  • Permit 457(b) plans to allow in-service distributions at age 59½ rather than 70½
  • Eliminate the Required Minimum Distributions (RMD) from Roth 457(b)
  • Allow rollovers from Roth IRAs to Roth 457 plans
  • Allowing non-spousal beneficiaries to roll assets into their employer-based plans\
  • Updating the mortality tables used when calculating RMD at age 70½
  • Exempting small accounts (less than $100,000) from the RMD calculation
  • Creating an additional catch-up option for participants over age 60
  • Simplifying auto-enrollment participant notices
  • Allowing employer matching to retirement plans for student loan payments

Retirement Enhancement and Savings Act
Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) introduced the Retirement Enhancement and Savings Act (RESA) in February. While RESA is primarily aimed at private sector plans, it does include a provision that would allow more time for terminating participants to repay outstanding plan loans.

Secure Act
The Setting Every Community Up for Retirement Enhancement Act of 2019 sponsored by Richard Neal (D-MA) and Kevin Brady (R-TX) has passed unanimously out of the House Ways and Means Committee as of early April and will go to the full House. This bill includes the core provisions of RESA making smaller employers able to join multiple employer plans and includes a safe harbor for selecting lifetime income providers in defined contribution plans. The latest provision of Lifetime Income Disclosure Act (LIDA) has been challenged by plan sponsors as being inflexible. More on both RESA and Secure Act as they move through the House and Senate, but they appear to be supported by both parties and will likely go to Conference Committee and head to the White House.

NAGDCA Legislative Priorities
Each spring, the NAGDCA Executive Board visits congressional representatives in Washington DC to advocate for governmental retirement savings plans and participants. In addition to some of the above proposals, the Board is advocating for:

  • Eliminating the “First Day of the Month” rule for 457(b) plans
  • Allowing participants to roll Roth IRAs into their plan accounts
  • Exempting Roth contributions from the RMD calculation
  • Preserving important unique plan features, including allowing both pre-tax and Roth options; maintaining the 10% early withdrawal penalty exclusion in 457(b) plans; and maintaining both traditional and over-50 catch-up provisions.

Please consult with your SRP Managing Director for more information on the status of pension proposals and how they may affect your plan.

Spring Cleaning for Your Retirement Plan

Spring is in the air and now could be a great time to do a little spring cleaning for your retirement plan. Here’s a few quick things you can do help ensure your plan is in tip top shape:

Fiduciaries and Investments
1. Review your plan governance documents to make sure none of your plan fiduciaries need to be updated.
2. Make sure that your ERISA bond and fiduciary insurance is up to date and reflects the correct amounts for your plan.
3. Confirm that you have all copies of your plan investment reviews and any minutes. In addition, check to be sure any action items from the minutes are completed.

Operations and Procedures
1. Take a look at your current procedures for things like loans, QDRO’s, distributions, and enrollment to be sure they don’t need updating.
2. If you’ve had any changes in your HR or benefits staff that handles the plan, be sure that the procedures they are following match your plan document and operational procedures.
3. Make sure you have copies in your files of any notices or communications to participants along with the date and method they were distributed.
4. If you have any terminated participants with balances, make sure you are following a process to contact them and for small balances completing the force out process.

For any questions on spring cleaning for your plan or more information, please contact your SRP Managing Director.