in this incredibly competitive environment to attract and retain high-quality employees, offering a retirement plan is a critical part of a company’s benefits plan. That’s a challenge for your smaller business owner clients. They can be complicated and expensive. But a new type of plan may be the solution.
There has been a great deal of buzz around “pooled” arrangements, plans that can be shared across multiple companies, including MEPs, MEAPs, GOPs, and lots of other acronyms. But a new plan created under the SECURE Act, has some significant advantages.
The SECURE Act addressed the issue that we do not have enough American employees covered by an employer-sponsored retirement plan. It is a well-known fact that if an employer sponsors a retirement plan, an employee is more likely to save for retirement.
States across the country are creating retirement solutions requiring employers who have 5 to 25 or more employees (depending on the state) to have a retirement plan. Most of these plans are “boilerplate” solutions with no flexibility or customization. They simply check the box.
We have had MEPs for decades, but now we have a pooled arrangement where there no longer must be an affiliation between the adopting employers: the Pooled Employer Plan (PEP). The SECURE Act created PEPs to help address this issue. The PEP creates an easy way for employers … big or small … new or existing … to adopt or maintain a retirement plan. A one stop solution for adopting employers with many built-in benefits.
PEPs offer some significant advantages over other pooled plans, including:
- Full Fiduciary Outsourcing of Administration and Investments
- Tracking of participant eligibility, distributions, and loans
- Elimination of 5500 and related time and out-of-pocket expenses
- Elimination of annual plan audit and expenses associated with plan audit (if applicable)
- Elimination of ERISA Fidelity Bond and expense associated with it
- Low cost, institutionally managed active and index investment choices
- Full plan design flexibility
- Full advisor compensation flexibility
In my humble opinion, Pooled Employer Plans and similar arrangements are here to stay. No plan is perfect but this new option may be the best for thousands of small businesses. We are pursuing it enthusiastically. That’s why our plan, the TAG(k) PEP, was one of the first to be approved by the IRS and Department of Labor.
Beyond being one of the most flexible and least expensive multiple employer plans, it is also superior to an option too many advisors choose – managing a small plan themselves. The Department of Labor continues to be more aggressive about auditing plans. Advisors who “manage” just a few plans, sometimes as a favor to their business owner clients, rarely fulfill all the fiduciary requirements the law demands. They put their clients’ plans (and their clients) at serious risk. PEPs are a solution they can offer their clients safe in the confidence that all the fiduciary responsibilities are being addressed.
At the end of the day, employers want to run their businesses in an efficient manner. They want to provide a service or manufacture a product that will serve their clients. Whatever business they are in, their focus is their business, where it belongs! They do not want to worry about becoming an expert in the qualified plan arena. But they want and need to minimize their fiduciary responsibility and liability as much as possible. The PEP may be the solution they are looking for.
Dave Scheetz, AIF® is Managing Director, Retirement Plans, of TAG Advisors. In that role, he assists the financial professionals of TAG implement and manage qualified plans for their business owner clients. The retirement group manages over 1,000 plans with over $2 billion in assets.
Dave’s more than 40 years in the financial services industry has always been in qualified plans. His experience began at Fidelity Investments. He ran a third party administrator for 10 years and has worked in a range of retirement plan roles at other national institutions.
TAG Advisors is where independent, entrepreneurial financial professionals thrive. If you would like to explore what we can do for you, contact Cyndia Crafton at (877)676-0376 or firstname.lastname@example.org
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Investment Advisor Representatives of Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Each company is independently responsible for the products and services they provide. Representatives of Cambridge Investment Research, Inc. do not provide tax or legal advice in their roles as registered representatives. Cambridge and TAG Advisors and its subsidiaries are separate entities.