Final ARP Rule Opens Door for More Employers to Offer Retirement Plans

Industry sources discuss the positives from the final association retirement plan (ARP) rule, but the industry will still have to wait for progress on offering plans for employers without a common nexus.

Industry insiders believe that while the Department of Labor’s (DOL’s) new rule on association retirement plans (ARPs) is somewhat disappointing in that it did not pave the way for open multiple employer plans (MEPs) for employers without a common nexus, it is a positive step in the right direction of providing yet another cost-effective option for small businesses to offer retirement plans.

The rule, which will go into effect on September 30, will permit employers to connect with associations of employers in a city, county, state or multi-state metropolitan area. They will also have the option of banding together by industry. This is the first time that employers will have the opportunity to join a MEP based on geographic location, says Erin Turley, a partner with McDermott Will & Emery in Dallas.

For instance, a local chamber of commerce might sponsor an association retirement plan, says Drew Carrington, head of institutional defined contribution at Franklin Templeton in New York.

In fact, right after the final rule was issued by the DOL, the Las Vegas Metro Chamber of Commerce announced it would be the first in the nation to create an association retirement plan. The chamber says it is doing so because the pooled assets will give small business members a better deal from investment advisers as well as lower fees.

“The Las Vegas Metro Chamber is proud to work with the Department of Labor to be a national leader in marking the new association retirement plans available to small businesses in Nevada,” says Mary Beth Sewald, president and CEO of the chamber. “This is an innovative solution to help small businesses give their employees access to retirement plan choices often only available to large companies.”

“It is a step in the right direction of marking retirement plans available to more employers and enable the establishment of small plans [by employers that] may not have the expertise on plan design or investments to get the benefits of economies of scale,” Carrington says. This might appeal to those small businesses that currently do not offer a retirement plan, as well as prompt those that do have a plan to weigh whether this arrangement might be more cost effective, he says.

“The real benefit of the association retirement plan rule is to expand the availability of retirement plans,” Carrington says.

Kevin Murphy, head of defined contribution strategic accounts at Franklin Templeton adds: “We view this as very positive for small businesses and advisers focused on small businesses to offer plans with all of the bells and whistles found in large plans, that is, institutionally priced plans. In fact, we see this as a fantastic opportunity for advisers.”

In addition, the rule also allows retirement plans to be sponsored through professional employer organizations (PEOs), i.e. third-party human resources providers offering services to small and midsized plan sponsors. “The rule is likely going to be significant for PEOs because it clears up a grey area under which they have been operating,” Turley says. “Previously, they only had a safe harbor to operate under the IRS code. Now, they can operate under ERISA [the Employee Retirement Income Security Act]. This will give PEOs and their clients peace of mind.”

However, there is one downside to the association retirement plans, she adds. “One of the drawbacks is that the main fiduciary of an association MEP cannot be a financial institution, insurer or third-party administrator, which are the precise entities that typically provide these types of plans,” she says. “The DOL’s reason for doing this is to protect people from fraud. There has been bit of a checkered history with respect to MEPs because they don’t have as much oversight [as traditional retirement plans do] because of their disassociated governance structure.”

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Retirement Industry People Moves

Custodia adds former Pfizer HR chief to advisory council, and IRS names leader for Tax Exempt/Government Entities division.

Art by Subin Yang

Art by Subin Yang

Custodia Adds Former Pfizer HR Chief to Advisory Council

Custodia Financial has appointed Chuck Hill, former chief human resource officer of Pfizer Inc., to its Strategic Advisory Council (SAC). In his role on the SAC, Hill will support distribution efforts for Retirement Loan Eraser across his broad network of senior human resources (HR) executives and industry practitioners.

While at Pfizer, Hill was responsible for all enterprise human resource programs, including compensation and benefits.

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He joined Pfizer’s human resources (HR) team in 1987, supporting the Pharmaceutical Sales Force. After that, he held a number of roles including HR director of Pfizer’s Global Manufacturing facility in Groton, Connecticut; vice president of HR, Corporate Finance; and senior vice president HR, Worldwide Biopharmaceuticals Businesses. Prior to joining Pfizer, Hill served for eight years in the United States Air Force as an instructor fighter pilot and flight commander. He served as the executive sponsor of the Pfizer Colleague Council, Veterans in Pfizer, which works to maximize the unique role that veterans and active military personnel play in driving workplace and marketplace outcomes.

“Having a former CHRO and plan sponsor with Chuck’s experience, network, and values on the SAC is imperative for Custodia and for the employers we serve,” says Tod Ruble, CEO of Custodia Financial. “Chuck understands from years of experience the goals, challenges, and risks that large plan sponsors face, so his voice on the SAC—and advocacy in the marketplace—will be invaluable.”

“Upon learning about Custodia’s mission, I felt drawn to the critically important work that Tod and the team are doing. Preventing leakage caused by loan defaults is a challenge that should be on every large plan sponsor’s radar,” says Hill. “I’m thrilled to be working with the Custodia team to raise awareness among HR executives that Retirement Loan Eraser is an effective solution that automatically improves employees’ retirement outcomes, while minimizing fiduciary risk.”

IRS Names Leader for Tax Exempt/Government Entities Division

The Internal Revenue Service (IRS) has selected Tamera Ripperda to lead the Tax Exempt and Government Entities (TE/GE) division. 
 
In TE/GE, Ripperda will take over as commissioner for Sunita Lough, who will become the IRS deputy commissioner for Services and Enforcement on September 1. TE/GE oversees issues including exempt organizations, employee plans and government entities. 
 
“Tammy brings a variety of skills and expertise to the diverse set of programs overseen by TE/GE,” Rettig said. “She has a strong record of successfully handling critical programs and working closely with people inside and outside the IRS.”
 
Ripperda became SB/SE Deputy Commissioner in 2016. During this period, she spent 14 months as a director in the Tax Reform Implementation Office (TRIO) where she helped oversee the implementation of the Tax Cuts and Jobs Act (TCJA) of 2017. Prior to 2016, Tammy was the Director of TE/GE Exempt Organizations (EO), where she oversaw tax administration and policy for 1.6 million exempt organizations, and held other positions. 
 
“TE/GE plays a critical role serving key areas for the nation, ranging from tax-exempt groups and retirement plans to Indian tribal governments and tax-exempt bonds,” Ripperda said. “I look forward to working with our TE/GE employees and partner groups to continue finding ways to serve these important communities.”
 
Tammy began her IRS career in 1988 as a Revenue Agent in St. Louis. She has a bachelor’s degree in accountancy from Southern Illinois University.

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