The Current State of Multiple Employer Plans. Jim Kais SVP, Managing Director Transamerica Retirement Solutions

Transcription

1 The Current State of Multiple Employer Plans Jim Kais SVP, Managing Director Transamerica Retirement Solutions 1

2 MULTIPLE EMPLOYER PLAN BASICS

3 BACK TO BASICS A Multiple Employer Plan, also known as an MEP, is a retirement plan that covers employers that typically have a common interest, but that are not commonly owned Primary Sponsor is the lead plan and generally the Plan Administrator and Fiduciary These employers each become Adopting Employers when they elect to join the MEP These plans can be Defined Contribution (DC) or Defined Benefit (DB) plans 3

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5 PLAN TYPES

6 WHAT S YOUR TYPE? MEP MULTIPLE EMPLOYER PLANS Non-Controlled Groups PEOs Professional Employer Organizations Associations MSOs Management Service Organizations AGGREGATION PROGRAMS ( A) MEAP, Open MEP, Retirement Plan Exchange Master Trust/ Solo(k) Pools 6

7 REGULATORY ENVIRONMENT Coverage Pooling Mandates Auto-enrollment DOL versus Congress, Round 1 State Run Plans/Exchanges/IRAs DOL Fiduciary Rule and MEPs Closed MEP versus Open MEP 7

8 STATE RUN PLANS DIRTY POOL? DOL S MAGIC WAND No Title I ERISA for state-based IRA/plans (with payroll) States magically meet bona fide employer group requirements No supervision of state plans At odds with IOPS (Pension Supervisors) $1 billion AUM to run revenue neutral CT State Plan (tax and spend) WHY SHOULD YOU CARE? 8

9 FUTURE OF OPEN MEP S Open MEP bills Remove one bad apple poison pill Expands who can sponsor Likely includes additional reporting requirements Single plan for audit purposes Just missed getting through on tax extender bill Exchange likely to be better option why? DOL Fiduciary Duty Rule play large plan exemption 2020 Vision 9

10 If you don t have a competitive advantage, don t compete. Jack Welch, Legendary CEO 10

11 MEPs IT S ALL ABOUT LEVERAGE ADVANTAGES Economies of scale pricing Plan design flexibility Auto-enrollment defaults en masse Continuity of earned benefit credit Portability/tax advantages Administrative support: ease of use One 5500 filing and single audit Client or member retention 11

12 COVERAGE IS CRITICAL MANY FAIL TO RECOGNIZE THE NEGATIVE EFFECTS OF POOR RETIREMENT PLAN COVERAGE ON BUSINESS HEALTH Higher health care claims and renewals Higher workers compensation premiums, shock claims Brain drain succession planning Lower productivity and profitability 12

13 VIEW OF TODAY S MARKET Roughly $300 billion in assets in the DC market Forty-six plans with over $1 billion in AUM account for $208 billion of the $300 billion+ opportunity Approximately 3,500 additional MEPs below $1 billion Manufacturing, construction, and health care are the clear stand-outs PEOs and other outsourcing firms represent a small fraction of the AUM and plan count, but their organic growth proposition is tremendous Association MEPs continue to expand MEP plan sponsors with disparate or decentralized businesses have the most administrative pain 403(b) MEPs for higher education and 401(a) MEPs for municipalities 13

14 ASSOCIATIONS AND CO-OPS Bona fide employer group Like industry Employer members only (primary class of membership) Infrastructure (or lack thereof) Not an affinity or discount program arrangement an ERISA plan Top-line revenue versus retained revenue Pricing Service watch outs 14

15 HOW TO FISH

16 Q&As FROM ADVISERS How did you get started with MEPs? How did you start your first MEP? When you first approached a prospective board member, how did it go? Ultimately you learned how to get board members: how did you do it? You launched multiple MEPs: why? How did MEPs help you grow? 16

17 MEPs RETURN ON INVESTMENT (ROI) RECORD KEEPER ADVISER TPA SMALL BUSINESS Processing scale Highly leveraged distribution Lower acquisition cost Exclusivity with partners Cross-sell Weaken small market competitors Retirement readiness Efficient service model Gather more assets Keep focus on large market RIA revenue Wall off competition Simple story At Retirement solution DOL fiduciary regulations Expansion of services Grow top-line revenue Focus on consultative services Cross sell NQDC/DB/cash balance Ease of administration Delegate authority for fiduciary functions Pricing economies Flexible yet simple and scalable Total DC-RPO At Retirement solution/ transition services 17

18 MEPs ROLES AND RESPONSIBILITES 3(38)/FA 3(16) PLAN ADMINISTRATOR TPA RECORD KEEPER One fund menu Fund selections/deselection Due diligence adopters Sales support drive distribution; captive Approve loans/distributions Plan reporting/confirms 5500 sign-off Manage auditor Common payroll remitter Service adopters Engage certain providers Compliance testing/5500 Plan documents and amendments Year-end data collection/qc Plan design consultation Common payroll remitter Cash balance side care administration Record keeping Call center Advice center Outsourcing communications Sales/marketing support Service 3(16)/3(38)/TPA Education/retirement readiness 18

19 THANK YOU This material is being provided for informational purposes only. Information regarding retirement plans is general and is not intended as legal or tax advice. Retirement plans are complex, and the federal and state laws or regulations on which they are based vary for each type of plan and are subject to change. In addition, some products, investment vehicles, and services may not be available or appropriate in all workplace savings plans. Plan sponsors and plan administrators may wish to seek the advice of legal counsel or a tax professional to address their specific situations _MEPREPP Transamerica Retirement Solutions, LLC

20 Questions?