Who’s Working for You?: The SPARK Institute

According to its website, the Society of Professional Asset-Managers and Recordkeepers (SPARK) is an inter-industry professional association servicing mutual fund companies, banks, insurance companies, investment advisers, third-party administration, recordkeepers and benefit consulting firms in the retirement plan industry. Its membership is comprised of a broad array of individuals and providers that service retirement plans and represent more than 250 companies. Its members represent most of the major service providers in the retirement plan industry, and collectively such companies serve more than 95% of the U.S. defined contribution plan participants.

According to Tim Rouse, executive director of The SPARK Institute in Simsbury, Connecticut, SPARK was started in the 1980s as a conference mechanism for recordkeepers. In the late 90s, the industry decided to start The SPARK Institute, which has a bigger scope of responsibility, including working on legislative and regulatory affairs, working on operational best practices, and doing proprietary research.

Rouse adds that SPARK and The SPARK Institute were Bob Wuelfing’s for-profit entities, but about seven years ago, Wuelfing retired and industry members came together and bought them from him and turned them into true non-profit associations.

The SPARK Institute is a member-driven, non-profit organization that is a voice in Washington for the retirement plan industry. It helps shape national retirement policy by developing and advancing positions on critical issues that affect plan sponsors, participants, service providers, and investment providers. Members include recordkeepers, mutual fund companies, brokerage firms, insurance companies, banks, consultants, trade clearing firms and investment managers. Collectively, members serve approximately 85 million participants in 401(k) and other defined contribution (DC) plans.

Plan Sponsor Interests

So, how can an institute made up of service providers work for retirement plan sponsors? “There’s a lot of overlap from serving recordkeepers and being an advocate for plan sponsors,” Rouse says. For example, he says, one of The SPARK Institute’s legislative initiatives is to increase coverage in retirement plans, in part by pushing for open multiple employer plans (MEPs). “This is of interest for plan sponsors because it creates an easier way to offer a DC plan.”

Rouse says The SPARK Institute works to make things easier to put things into place. For example, its work includes expanding fiduciary safe harbors specifically for plan sponsors, including choosing annuities, default investments and auto features like auto-portability. With auto-portability, small balances can be sent to a clearinghouse to be matched with an employee’s new plan rather than employers automatically rolling them into an individual retirement account (IRA). It takes some fiduciary responsibility off the new plan sponsors’ shoulders.

The SPARK Institute also promotes the adoption of more plans, and making things easier for plan sponsors as well as its members, by promoting e-delivery of participant and plan notices as well as guaranteed income solutions, Rouse adds.

How The SPARK Institute Advocates

“We respond to comment requests from regulatory agencies—we responded to at least 18 or 19 last year—and we work with law firm Davis & Harmon to meet with legislators and regulators in Washington,” Rouse says.

According to Rouse, The SPARK Institute recently responded to the American Institute of Certified Public Accountants (AICPA) which proposed new procedures about doing plan audits, specifically about the valuation of different asset classes and whether they were being reported correctly. “The proposals are not a problem for easily valued asset classes, but for commingled investment pools and separate accounts—usually used by large plan sponsors—the audit requirements would make those cheaper investment options less attractive for plan sponsors,” he explains. “In addition, some of the things proposed could raise audit fees. For smaller plan sponsors, if the plan gets more expensive to administer, they may be less likely to offer it.”

An advocacy effort the institute scores as a recent victory concerns the Department of Labor’s (DOL)’s fiduciary rule. “We met with the DOL in June about the fiduciary regulations,” Rouse states. “One of the things that came up is whether a plan provider or sponsor is a fiduciary if it encourages participation, increases in savings rates, or better diversification of investments.” The DOL recently released a FAQ document explaining that plan sponsors and providers and their call centers are not fiduciaries by engaging in some of these types of activities.

Resources The SPARK Institute Provides

The SPARK Institute offers resources for retirement plan providers and sponsors that Rouse says falls under best practices. For example, after new 403(b) plan regulations went into effect in 2008, the institute worked on a framework for data sharing between plan sponsors and vendors. This was helpful to plan sponsors as well as providers, and Rouse says the institute was successful in getting plan sponsors to use the framework.

The SPARK Institute also established a Data Security Oversight Board. “Plan sponsors have strong and legitimate concerns about how safe their data and participant data is with providers. Through their advisers or on their own they are asking providers about cybersecurity measures,” Rouse says. “The board is made up of heads of cybersecurity at recordkeepers and plan consultants. There are about 38 members that act as watchdogs to make sure the provider industry does what it needs to do.” He adds that there are plans to soon release a final version of framework for standard information that the public will be able to see.

A “Sample Glossary of Investment-Related Terms for Disclosures to Retirement Plan Participants” is also available from the institute.

The institute also offers informative research. “There are a couple of standard things we do each year; one simply sizes up the provider market, the other is an audit of recordkeepers, through Cerulli Associates,” Rouse notes. “The annual recordkeeper survey may be helpful to plan sponsors in so far as it looks at where recordkeepers are investing their time and energy. Plan sponsors can see if the industry is aligned with their needs.”

The institute also does one-off research. For example, according to Rouse, it recently performed a survey about proposed changes to tax reform and how participants would react to Rothification of Dc plans. In addition, it looked at some proposals for incenting small employers to offer plans.