Administration September 27, 2022

Plan Progress Webinar: What to Expect From a Retirement Plan Adviser

As plan sponsors look to evaluate their relationship with their financial advisers, experts say it is critical that advisers understand more than just retirement.

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Many plan sponsors are evaluating their relationships with plan advisers as they look for more guidance on managing their benefits, according to retirement industry veterans who spoke during a recent edition of the 2022 PLANSPONSOR Plan Progress webinar series.

The Great Resignation has only complicated matters, said Jim Scheinberg, founder and managing partner at North Pier Fiduciary Management, as firms are seeing both high turnover and a reduction of staff across the board. While most human resources and finance teams used to comprise four to five team members, now there may be fewer people with the same volume of work spread among them, he said.

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“We’re also seeing that reflected on the service provider side, with recordkeepers or administrators, where their service teams are being stretched a lot thinner,” Scheinberg said. “You’re seeing that reflected in response times, hold times, getting resolution to various items that may be normal in the course of governing your plan, or maybe one-off items.”

As a result, many with such heightened responsibilities are looking for more help with understanding how they should proceed as they review certain tasks, Scheinberg said. As plan sponsors look to their adviser for help, many are beginning to see the difference, and it can become an issue when the adviser fails to deliver for their client.

Many plan sponsors are struggling to locate experienced talent and are seeking out advice from their adviser more often than ever, because they lack the in-house expertise in reviewing plan documents or plan audits, said Robert Massa, managing director at Qualified Plan Advisors. In his view, advisers must be able to understand more than just retirement—they also have to understand where and how retirement fits into the whole benefits scheme.

Scheinberg noted that, as plan sponsors look to reevaluate their relationships with their retirement plan adviser, they may simply be validating the original reason for working with an adviser, or they could be looking for a change. Mergers and acquisitions may also prompt reevaluation, as there has recently been a “tremendous” amount of consolidation in the adviser space and sponsors may want to vet the service structure or culture of the new organization, he said.

“Where we see the most of our search work is when the committee chair itself or a very senior staff person has a very heavy hand on the management of the plan,” Scheinberg said. “When that role has changed, the new person comes in and gets settled for the first six months or so, and then they want to start looking around and making sure that, ultimately, they like the team they’re with—or possibly want to consider something new.”

As plan sponsors evaluate their relationships, they should be prepared to ask “culturally uncomfortable” questions that are generally acceptable in the financial services industry, said David Morehead, vice president at OneDigital. Questions like “how much are you getting paid?” or “what is your compensation for this plan?” are straightforward, important questions to ask, because fiduciaries should be aware of an adviser’s or service provider’s pricing model, he said.

When vetting to fill an adviser role, plan sponsors should expect advisers to be able to answer their questions about most general retirement issues on the spot, Massa said.

“I think this is part of the interview process. Am I dealing with a competent professional or am I dealing with someone who doesn’t deal with this every day?” Massa said. “I would take some time to try to come up with a few of those questions. Some may affect your company, some may not … but it tells you a lot about their knowledge of ERISA [Employee Retirement Income Security Act], their knowledge of the IRS tax code and whether they are a professional in retirement or just an investment professional.”

It’s also important for advisers to explain exactly what they are going to do when it comes to how they handle things such as managed account investments, or how exactly they plan to give participants advice, Massa said.

“You want to make sure that they’re going to spend time with that employee, they’re going to actually educate them and they’re not just going to hand them off to a computer program … to me, that’s not advice,” Massa said. “You really need to ask a lot of questions about that adviser to ultimately get them to disclose whether they’re in this for you or for them—because they’re supposed to work for you. That’s their job.”

Ask the Experts September 27, 2022

Does a Plan’s Name Have to Change When a Plan Sponsor’s Name Changes?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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“Have you ever seen a plan sponsor go through a name change? I work with a 501(c) private tax-exempt health care client that is changing its name for branding purposes and has asked if there is anything it needs to do in terms of its 403(b) and 457(b); both plan names include the current organization name. I’m directing the client to its retirement plan counsel, of course, but was curious if the Experts had ever encountered this. Does the plan name typically change as well? The plan sponsor name is listed in the plan document, so I assume this requires an amendment at a minimum.”

Kimberly Boberg, Taylor Costanzo, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

Indeed, we have! It actually seems to be more common in the nonprofit world than it is in the corporate world, as not only are there name changes in the nonprofit world due to mergers and acquisition activity, but also name changes to better reflect a nonprofit’s mission and values, which can evolve over time. Although you are quite correct to refer the client to counsel, the good news that the Experts can pass along is that, outside of the amendment you specify (and yes, the plan name is often amended as well to reflect the employer’s new name), there may be little to do for retirement plan purposes, as the name is NOT what the IRS and the Department of Labor use to identify the plan sponsor—they use the tax ID number and the plan number on the 5500, which change more rarely. Just make certain the plan sponsor’s new name is listed on the 2022 Form 5500 filing. (Note that one area where the employer may separately need to notify the IRS of the name change is for purposes of its tax-exempt status, another topic for discussion with counsel.)

In the relatively rare event that a tax ID is changing, and the retirement plans are continuing to exist, contact counsel and the plan auditor for the proper Form 5500 filing procedure. The Experts suspect that the auditor would attach a special statement to the 5500 to reflect the change in the employer identification number so that the plan is not treated as a brand-new plan by the DOL.

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NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice. 

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

 


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