DOL’s Conflict of Interest Rule: Where Do We Go …...20 SWOT Analysis for the Retirement Industry...

A n o f f i c i a l p u b l i c a t i o n o f A S P P A

FALL 2015

Sharing Plan Assets in a Divorce

Retirement Industry SWOT Analysis

Think the proposed rule won’t affect TPAs and recordkeepers? Think again.

DOL’s Conflict of Interest Rule:

Where Do We Go From Here?


Where Do We Go From Here?

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DOL’s Conflict of Interest Rule: Where Do We Go From Here?

Think the proposed rule won’t affect TPAs and recordkeepers? Think again.

BY DAVID N. LEVINE AND GEORGE M. SEPSAKOS

COVER STORY

26

FALL 2015

Cover Illustration: Robert Meganck

Contents

20 SWOT Analysis for the Retirement Industry

A WBC session featuring three thought leaders takes a freewheeling look at the state of the industry today.

JOHN ORTMAN

FEATURE STORIES

6 From the President KYLA M. KECK

36 Upcoming Conferences

37 New and Recently Credentialed Members

46 Government Affairs Update CRAIG P. HOFFMAN

ASPPA IN ACTION

32 Retirement Plan Asset Sharing in a Divorce

Mistakes that can be costly.

HOWARD M. PHILLIPS

2 PLAN CONSULTANT | FALL 2015

COLUMNS

38 Elevator Pitches — and Retaining a Client’s Loyalty MARKETING

JOHN IEKEL

42 Professionals Behaving Badly ETHICS

LAUREN BLOOM

44 Work Smarter by Leveraging Cheap Technology TECHNOLOGY YANNIS P. KOUMANTAROS AND ADAM C. POZEK

04 Letter from the Editor

08 Death of a Salesman REGULATORY/LEGISLATIVE

BRIAN H. GRAFF

10 A Key Beneficiary Provision in PPA Plan Documents ADMINISTRATIVE

PAUL CARMICHAEL

12 DB Plan Takeovers DB PLANS

LAUREN OKUM

14 ERISA Litigation Round Up LEGAL

THOMAS E. CLARK, JR.

16 Navigating the IRS.gov Maze REGULATORY

MIKE BUSHNELL

18 Focus on Teaching First, Then Finance RECORD KEEPING

BRIAN KALLBACK

443816

Published by

Editor in ChiefBrian H. Graff, Esq., APM

Plan Consultant CommitteeMary L. Patch, QKA, QPFC, Co-chair

David J. Witz, Co-chairGary D. Blachman

John D. Blossom, Jr., MSPA, QPFCJason D. Brown

Kelton Collopy, QKAKimberly A. Corona, MSPAJohn A. Feldt, CPC, QPAJohn Frisvold, QPA, QKA

Catherine J. Gianotto, QPA, QKAPhillip J. Long, APM

Kelsey H. MayoRobert E. Meyer, Jr, QKAMichelle C. Miller, QKARobert G. Miller, QPFC

Mark S. Nicholas, CPC, QPA, QKARobert J. Seidel, III, QKA, QPFC

Eric W. Smith

EditorJohn Ortman

Associate EditorTroy L. Cornett

Senior WriterJohn Iekel

Graphic DesignerIan Bakar

Technical Review BoardMichael Cohen-Greenberg

Sheri Fitts Drew Forgrave, MSPA

Grant Halvorsen, CPC, QPA, QKA Jennifer Lancello, CPC, QPA, QKA

Robert Richter, APM

Advertising SalesErik Vanderkolk

[email protected]

ASPPA Officers

PresidentKyla M. Keck, CPC, QPA, QKA

President-ElectJoseph A. Nichols, MSPA

Vice PresidentRichard A. Hochman, APM

Immediate Past PresidentDavid M. Lipkin, MSPA

Plan Consultant is published quarterly by the American Society of Pension Professionals & Actuaries, 4245 North

Fairfax Drive, Suite 750, Arlington, VA 22203. For subscription information, advertising, and customer service contact ASPPA

at the address above or 800.308.6714, [email protected]. Copyright 2015. All rights reserved.

This magazine may not be reproduced in whole or in part without written permission of the publisher. Opinions

expressed in signed articles are those of the authors and do not necessarily reflect the official policy of ASPPA.

Postmaster: Please send change-of-address notices for Plan Consultant to ASPPA, 4245 North Fairfax Drive, Suite 750,

Arlington, VA 22203.


Visit the PC Online Archive!

We’ve just created a new page on ASPPA Net to house past and present

articles published in Plan Consultant. More than 100 articles are now online, in 18 topic categories. And we’ll be adding new content from the magazine on a regular basis in the future. Coming soon: a cumulative index of PC articles back to 2012.

The new online PC archive is part of our effort to amp up ASPPA Net’s “Resources” tab. The goal: to provide the industry’s most robust library of business intel, compliance and legal content. Check out the new PC Online archive — just go to asppa-net.org and click on the “Resources” tab in the top nav bar, then on “PC Online.”

L E T T E R F R O M T H E E D I T O RPC

year’s 50th anniversary celebration. If you’re going, don’t be late for the annual Business Meeting on Sunday afternoon. I’m just saying.

people talk.” “We learn a lot at ASPPA’s conferences, but people are also willing to just have a little bit of fun.”

• Advocacy: “The weakness that the government has is understanding how these rules relate and how they impact plans. I mean, they can write policy well, they understand policy, but I think ASPPA’s input has been to help the government have rules that really work.” “ASPPA is really the one who’s in there saying let’s think about this, let’s put some numbers to it, let’s look at what’s actually happening out in the real world.”

• The ASPPA Community: “ASPPA is just loaded with unsung heroes. It’s just amazing the number of people that dedicate their time and enthusiasm to make it all work. They firmly believe what they’re doing is right and correct and dedicated to the industry.” “This organization does things the right way. It looks to enhance the system for everybody rather than enhance the pockets of its members.” “It is truly a community of people, with all the differences in the world, all the like-mindedness of the world.” “Every aspect of ASPPA works to drive and support every other aspect of ASPPA. And it’s kind of like a Swiss watch with a million moving pieces but all moving perfectly in sync to have ASPPA run as smoothly as it does.”

Pretty cool, if you ask me. BTW, attendees at this month’s ASPPA Annual Conference will get a peek at the first video — a “teaser” for next

ver the course of the last few months I’ve been laying the groundwork for a series of videos documenting various aspects of ASPPA’s rich history. (Part of the ASPPA history book project, the

videos will be posted online as part of the 50th anniversary celebrations throughout 2016.) The initial step in my project plan includes reviewing more than 30 hours of videotaped interviews from 2010-2013 with ASPPA leadership and other industry movers and shakers, including past presidents.

As often happens, while working on a piece for the magazine I was struck by a connection to another realm entirely. In this case, the “SWOT Analysis for the Retirement Industry” feature on page 20 of this issue got me thinking about ASPPA’s strengths — and led me back to those 30 hours of videotape.

Let me show you what I mean. Here’s a small sample of comments from interviewees about ASPPA and its strengths in four key areas. (I’m omitting the speakers’ names, but trust me, you would recognize each and every one of them.)• Education and Credentialing:

“ASPPA offers high quality education and credentialing, high standards, and commitment to our principles of helping Americans and employees.”

• Conferences: “The rules are always changing, so there’s always new things to learn and always new things to talk about and new sessions to go to and hear other

JOHN ORTMAN

EDITOR-IN-CHIEF

Synchronicity

O

Assessments performed by CefeX, Centre for fiduCiAry eXCellenCe, llC.

For more information on the certification program, please call 416.693.9733.

*As of September 5, 2014

AsppA retirement plan service provider

The following firms are certified* within the prestigious

ASPPA Service Provider Certification program. They have

been independently assessed to the ASPPA Standard of

Practice. These firms demonstrate adherence to the industry’s

best practices, are committed to continuous improvement and

are well-prepared to serve the needs of investment fiduciaries.

Actuarial Consultants, Inc.

Alliance Benefit Group North Central States, Inc.

Alliance Benefit Group of Illinois

Alliant Employee Benefits, a division of

Alliant Insurance Services, Inc.

American Benefits Systems, Inc. d.b.a.

Simpkins & Associates

American Pensions

Aspire Financial Services, LLC

Associated Benefit Planners, Ltd.

Atessa Benefits, Inc.

Atlantic Pension Services, Inc.

Benefit Management Inc. dba United

Retirement Plan Consultants

Benefit Planning Consultants, Inc.

Benefit Plans Plus, LLC

Benefit Plans, Inc.

Benefits Administrators, LLC

Blue Ridge ESOP Associates

BlueStar Retirement Services, Inc.

Creative Plan Designs Ltd.

Creative Retirement Systems, Inc.

DailyAccess Corporation

DWC ERISA Consultants, LLC

First Allied Retirement Services /

Associates in Excellence

Great Lakes Pension Associates, Inc.

Ingham Retirement Group

Intac Actuarial Services, Inc.

July Business Services, Inc.

Kidder Benefits Consultants, Inc.

Moran Knobel

National Benefit Services, LLC

North American KTRADE Alliance, LLC.

Pension Associates International

Pension Financial Services, Inc.

Pension Planning Consultants, Inc

Pension Solutions, Inc.

Pentegra Retirement Services

Pinnacle Financial Services Inc.

Preferred Pension Planning Corporation

Professional Capital Services, LLC

QRPS, Inc.

Qualified Plan Solutions, LC

Retirement Planning Services, Inc.

Retirement Strategies, Inc.

Rogers Wealth Group, Inc.

RPG Consultants

Securian Retirement

SI Group Certified Pension Consultants

SLAVIC401K.COM

Summit Benefit & Actuarial Services, Inc.

TPS Group

Trinity Pension Group, LLC

*as of August 24, 2015


F R O M T H E P R E S I D E N TPC

of us in ASPPA’s leadership can’t say enough times how important it is to have member support of the ASPPA PAC on whatever level you can afford. The more members in the PAC and the more funds available to distribute through the PAC helps ensure ASPPA’s seat at the table when legislation is being formed.

As I close my last “From the President” column, I reflect on my years as an ASPPA member, my amazement at how fulfilling and rewarding volunteering for ASPPA is and how many friends I’ve made through ASPPA. One of my favorite quotes is from a longtime church secretary who said she liked people until she started working for a church. After seeing what’s behind the curtain at ASPPA I can tell you that I have never been more proud of being a member. The dedication, brilliance and high standards of our professional staff and volunteer leaders past, present and future is without equal. I have been humbled to serve in this way and I am looking forward to a great celebration of ASPPA’s 50th year. See you at the 2016 Gala! I’ll be the one eating birthday cake.

Kyla M. Keck, CPC, QPA, QKA, ERPA, is ASPPA’s 2015 President. She is a principal of SageView Retirement Plan Consultants and SageView Advisory Group, in Knoxville, Tenn. and has more than 30 years of experience in the pension and benefits industry.

our plan sponsor clients and their participants with the level of expertise they need and deserve. Opportunities through Retirement Plan Academy credentialing and certificates, webcasts (current and archived) and now our new virtual conference are great ways to enhance your skills while sitting at your own desk.

Education became one of ASPPA’s main pillars soon after the organization was formed in 1966. ASPA (with one ‘P’) was formed for industry recognition, and so credentialing and professional standards were required. The very survival of pension actuaries depended on quickly becoming expert in all forms of advocacy, so our Government Affairs work has always been vital to our continued survival. However, it has been education, through conferences, exams, Plan Consultant magazine (and its forbearers), ASAPs and now ASPPA Net and ASPPA Connect, that touches members daily.

Of course our lives would change drastically if ASPPA did not have its ear to the ground on all things retirement in Washington, D.C. and in state houses around the country. As I write this article, our advocacy specialists on the Government Affairs Committee, aided by our professional staff, are working with the DOL on its proposed fiduciary rule, trying to keep a level playing field as states begin to form their own retirement plan models, and keeping a constant eye on the less sweeping but equally important items such as midyear amendments for safe harbor 401(k) plans. Those

ne of the privileges I’ve had as ASPPA’s president is to attend many of ASPPA’s conferences and to experience the workshops, the networking and the

interaction with ASPPA members in the same way as any other attendee. I did not leave any conference without learning a lot — a new way of communicating with a client, a new wrinkle on a testing method, a new interpretation by the IRS of what I thought was a settled regulation. It amazes me that after 34 years in the industry I still find more to learn.

Some of the ways I learned were traditional — spoken and written words from a subject matter expert. But many others were from conversations with attendees in and out of group sessions. While everyone is not able to attend a conference in person every year, I strongly encourage you to include as part of your continuing education next year some form of interaction with other professionals outside your office and at a getaway location, even if it’s just on the other side of the city. Our volunteer and professional leadership understands that not all learning occurs in a lecture setting, so ASPPA conferences and ABC meetings are planned to provide for other learning opportunities.

While the networking and interaction is lost — a very big loss — when a member doesn’t have the opportunity to attend a conference in person, there are many other ways to get the unique education we all need to excel in our jobs and serve

Education Past, Present and FutureMake an ASPPA conference, and networking, part of your CE plan in 2016.

O

Celebrating excellence in 401(k) plan administration

John Hancock has declared October 16th National TPA Day™

We understand the value and expertise that you bring to the retirement industry by:

• designing customized plan solutions to improve outcomes;

• staying on top of legislative and legal changes;

• offering compliance expertise and ensuring ongoing plan obligations are met;

• delivering best-in-class service for a plan and boosting retention;

• providing local market insights and referral opportunities to financial representatives.

National TPA Day™ is a trademark of John Hancock Life Insurance Company (U.S.A.), used under license by John Hancock Life Insurance Company of New York. John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York are collectively referred to as “John Hancock”. John Hancock Retirement Plan Services, LLC, Boston, MA 02210. NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT INSURED BY ANY GOVERNMENT AGENCY © 2015 All rights reserved. G-I27670-GE 09/15

Thank you to all the dedicated plan

consultant professionals for all you do to make

401(k) plans work the way they should.

10.16.15


it is highly questionable how you could ever legally defend compliance with the standard as a captive insurance agent representing only proprietary products. Ultimately, one can suspect that given the fear of potential liability, compliance departments and the companies they represent will move away from this distribution model, instead working through either an entirely independent distribution channel or perhaps by allowing captive agents to offer multiple insurance company products, with protections built in to protect the agent from potential conflicts.

By the way, this is not just an insurance agent/insurance company issue. Any investment manufacturer (e.g., a mutual fund company) using their own employees to direct sell investments can face the same issue.

The implications for the IRA industry are enormous. While many IRA providers do make available other non-proprietary investments, does it mean that employees of the investment manufacturers will not be able to “recommend” proprietary products? (It is also relevant for SEP and SIMPLE plans, which are often direct sold with a menu of solely or substantially all proprietary investment products.)

Many of you (especially those who are not captive insurance agents) may simply ask, “So what? Aren’t these the folks that DOL is going

the agent takes the form of a potted plant, any suggestion regarding one of the insurance company’s products will be considered a “recommendation,” making the agent a fiduciary.

According to the DOL, this means that the agent must “act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person would exercise based on the investment objectives, risk tolerance, financial circumstances, and needs of the Retirement Investor, without regard to the financial or other interests of the Adviser [or] Financial Institution.”

The fundamental question is: How is an agent supposed to satisfy that standard when the agent only represents one insurance company’s products? Arguably, that is a theoretical impossibility. Practically speaking

here were four days of hearings on the Department of Labor’s proposed fiduciary rule and I kept on waiting… and watching… and waiting. But it never came up. And that surprised me.

You see, I was fully expecting someone to ask these two questions: “What about individuals who actually want to be salespeople?” and “How are they supposed to function in a world where everyone is a fiduciary?”

Here’s the problem. Under the proposed rule, if I make an individualized recommendation to an investor client with respect to an investment held in an IRA or 401(k) plan, that will be considered “investment advice” subjecting me to a fiduciary standard. There is no meaningful distinction between “selling” and “recommending.” In other words, if I “suggest” or “sell” one of the products I represent, that will be considered a “recommendation” subjecting me to the rule.

But what if I only represent one investment product or one company’s investment products? How is that going to work?

For example, assume you are a captive insurance agent. As such, your job is to “sell” the investments of the insurance company you represent. When people with money in an IRA come through your door, your job is to suggest that they purchase one of the annuities offered by the insurance company whose name is on your door. Under the proposed rule, unless

Will the fiduciary rule make ‘selling’ impossible?

T

Death of a Salesman

REGULATORY/LEGISLATIVEUPDATE

BY BRIAN H. GRAFF

Many Americans still hold the perspective, both legally and politically, that in this country you should be able to sell your own stuff, whether it’s cars or annuities.”

Continued on page 47 »

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ADMINISTRATIVE

rior to reading many of the current PPA plan documents, most of my education on spousal beneficiary rules on divorced and deceased participants was either through seminars,

enrollment meetings and articles in the newspaper or pension/IRA periodicals. I did not spend the time to dig through the hundreds of pages in the basic plan document, nor would I probably have found what I was looking for — at least up until the PPA plan documents were released.

I was in the process of fully reviewing a PPA plan document for

a takeover client when I noticed the following language:

In the event the Participant is divorced, the ex-spouse shall be treated as having predeceased the Participant and benefits will go to the secondary Designated Beneficiaries or if none survive the Participant, to his surviving children, equally, or if none such other heirs, or the executor or administrator of his estate, as the Plan Administrator shall select. In the event the Participant intends that that his ex-spouse remain his Beneficiary, a post-divorce Beneficiary designation must be completed naming the ex-spouse as a Designated Beneficiary.

Wow. After reviewing this provision I was wondering what genius had the insight to implement and submit these ideas in their plan document. I then realized it was a prototype basic plan document and not a custom one. I went back to the office to share my findings. To my surprise, the same language was in our updated PPA plan documents. Our office was preparing to leave for ASPPA’s annual Philadelphia regional conference, and we were excited about sharing this with our ASPPA colleagues.

My impression on this topic was always completely different,

One example of how plan document evolution protects and clarifies basic values.

P

A Key Beneficiary Provision in PPA Plan DocumentsBY PAUL CARMICHAEL

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mainly due to my education having come from enrollment meetings with “enlightened” stories to add excitement, interest and advice on the basic provisions of historical prototype plan documents.

Nearly all pre-PPA plan documents lacked a provision about reverting back to pre-deceased status upon divorce and then using the family order as outlined in the plan document. My favorite story in this regard has to do with “The Pension Pickle,” a report published in the New York Post on Jan. 31, 2005. A man had been happily married to his wife, a school principal, for more than 20 years. She had a $900,000 pension in her name with no beneficiary listed on file, which was assumed (according to the husband) to be passed to the husband if she were to predecease him.

She passed away from a heart attack in 2001. The plan administrator found a beneficiary form from 27 or so years before that listed her sister and parents as beneficiaries. Since the parents were deceased and there was no other beneficiary form, the wife’s sister received the entire benefit.

The ruling was never overturned. After more than 20 years of marriage, the widower never received a dime of his wife’s pension — and the sister-in-law was not about to turn any over.

I am sure every enrollment specialist knows this story and is also very familiar with this advice: “In case of a divorce, you need to update your beneficiary form because if you don’t, your pension benefit will go to your ex-spouse, not your current one.” This was probably the truth in many previous plan documents, but after reviewing several PPA plan documents, the new mainstream language seems to better protect the intentions of the participant and his or her family. I guess the beneficiary section of the enrollment meeting will have to be completed without the “Pension Pickle” and other stories.

Plan documents have become much more complicated and

in the plan document. You may be pleasantly surprised or change your thinking, or even change the way you give advice on different technical issues. This is an important way good attorneys, administrators and pension professionals show their value.

The next day, a prestigious benefits attorney talked about the same beneficiary provision in his presentation — mentioning it as a passing comment and noting that his firm always had this divorce provision in their plan documents. So what I thought was my newly found knowledge had been practiced by document-drafting attorneys for some time!

However, as the days passed, many industry professionals that I consulted with were unaware that the beneficiary provision in a PPA plan document could state that in the event of a divorce, the participant’s ex-spouse will be treated as having predeceased the participant and that benefits will go to family members in a specific order. The original excitement about our “discovery” was back; since then I have had the opportunity to share the news at several client enrollment meetings, easing the minds of many participants.

An updated beneficiary form is the best way to ensure that retirement assets are properly passed from one generation to the next according to the wishes of the participant. In a complicated industry with complicated rules, it’s good to know we are moving toward protecting the retirement security, and the wishes, of plan participants and their loved ones.

Paul Carmichael, QKA, ERPA, is the director of marketing at UB Pensions. He received his MBA from

Dowling College and BA degree from the State University College at Oneonta, and also obtained the ERPA Circular 230 designation, which allows him to represent clients as power of attorney on pension issues.

sophisticated, all for the better. The above enlightening provision, buried in the hundreds of pages in the plan document, is one example of how plan document evolution protects and clarifies basic values. I am sure others can share many other examples of updated provisions over the years to clarify and protect plan participants and their beneficiaries.

So my associates and I were off to Philadelphia to share our newly found knowledge with our fellow ASPPA members. We were out with several of them, doing what TPAs do at conferences — sharing stories, ideas and good times over dinner. Discussing the beneficiary situation led to more in-depth conversations on different aspects of the PPA plan document. The bottom line conclusion: It’s important to ensure that all employees and professionals — or at least a compliance manager — read through all the provisions

Nearly all pre-PPA plan documents lacked a provision about reverting back to pre-deceased status upon divorce and then using the family order as outlined in the plan document.”


s actuaries, one of the many challenges we face is taking over the actuarial and administrative services of an existing defined benefit plan from another actuary. You may have heard of the

“80/20/80 Takeover Rule”: 80% of your headaches come from 20% of your clients, and 80% of those 20% are takeovers.

In dealing with a takeover, the new actuary must first collect sufficient information from the plan administrator, the previous actuary and/or the third party administrator. “Sufficient” information may vary from plan to plan, but I generally begin with this thorough list of items I would ideally like to obtain:1. Plan documents. At the

very least, collect the current executed plan document and all corresponding plan amendments. If the plan is combined with a defined contribution plan for testing purposes, collect that plan document as well. Prior plan documents and plan amendments

since plan inception may prove to be very useful, especially any documents or amendments that have modified benefits. The current determination letter (or opinion or advisory letter if the plan is a pre-approved plan) will prove to be helpful during a plan audit or plan termination.

2. Census information. Accurate census is crucial to our actuarial results. The census should identify all of the participants included in the prior year’s actuarial valuation, and it should include any information necessary to calculate benefits and liabilities, including historical

plan compensation and hours. Information such as dates of participation, vesting service, credited service and accrued benefits are very helpful.

3. Asset information. Collect a Statement of Net Assets as of the most recent valuation date, including a reconciliation of the trust since the prior valuation date. It’s important to collect the dates and amounts of any contributions, distributions, fees, etc. paid from the plan.

4. Actuarial reports and certifications. While only the most recent actuarial report is necessary for a takeover, I advise collecting the reports for the three most recent plan years. The AFTAP certification for the prior year is important, as well as any additional years in which benefits were restricted. You will also need an executed copy of the plan sponsor’s funding elections. If the plan is not a safe harbor plan, you will want the compliance testing as well.

Beware the 80/20/80 Takeover Rule.

DB Plan Takeovers

DB PLANS

BY LAUREN OKUM

As a consulting actuary, it is important to know what has been communicated to participants.”

A

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5. Participant communications. As a consulting actuary, it is important to know what has been communicated to participants. You should collect the Summary Plan Description, any applicable Summary of Material Modifications, individual benefit statements, the most recent Annual Funding Notice or Summary Annual Report and any notices informing participants of benefit restrictions.

6. Government filings. You may download the prior Form 5500 and Form 5500-SF filings, including the Schedule SB, from www.efast.dol.gov. You should collect the full Form 5500-EZ filings for the past three years. You will also want to collect PBGC premium and Form 8955-SSA filings.Unfortunately, we have all had

issues obtaining information from the previous actuary. Actuaries should be reminded of the Actuarial Standards of Practice (ASOPs) and the Code of Conduct applicable for their member organization(s). Annotation 10-5 of ASPPA’s Code of Professional Conduct for Actuaries states, “...the Actuary shall cooperate in furnishing relevant information...” and “The Actuary shall not refuse to consult or cooperate with the prospective new or additional actuary based upon unresolved compensation issues with the Principal unless such refusal is in accordance with a pre-existing agreement with the Principal.” Note that the Code of Conduct applies to retired actuaries as well.

On occasion, the previous actuary is cooperative but does not have all of the historical information to share. For example, the previous actuary might not have compensation and hours from 15 years ago when a participant terminated and his accrued benefit was calculated. May the new actuary rely upon the accrued benefit provided? According to ASOP 41 Section 3.4.3, “An actuary who makes an actuarial

approval of the funding method change is granted if the new actuary matches each of the funding target, target normal cost and actuarial value of assets within 5%.

In some cases, the new actuary will discover a mistake made by the previous actuary. If the mistake is an incorrect calculation of participant benefits — whether due to incorrectly coded software, misreading of the benefit formula or other document provisions, or data entry errors — then the new actuary should attempt to meet the 5% threshold using the previous actuary’s benefit amounts. The previous actuary should then revise his or her results with the corrected amounts. The IRS has indicated that it is not necessary to amend the Schedule SB when the revised results do not create a funding deficiency. If the revised results impact the carryover or prefunding balances, then the changes can be reported on the current year Schedule SB.

Some takeovers are very smooth, while others reveal minor to more complex issues that are outside of the scope of this article. It’s important to remember that we have all had to deal with both sides of the equation: We’ve won a client from another actuary, and we’ve lost a client to another actuary. It is our duty as actuaries to cooperate with each other.

Lauren Okum, ASA, EA, MAAA, MSPA, is the owner of Premier Actuarial Solutions, an actuarial firm

that specializes in the design and administration of defined benefit plans. She has more than 20 years of experience in the actuarial profession. She graduated summa cum laude with highest distinction in Actuarial Science of the University of Illinois at Urbana-Champaign and attended Harvard Business School for her MBA.

communication assumes responsibility for it, except to the extent the actuary disclaims responsibility by stating reliance on other sources. ... An actuarial communication making use of any such reliance should define the extent of the reliance, for example by stating whether or not checks as to reasonableness have been applied. An actuary may rely upon other sources for information, except where limited or prohibited by applicable standards of practice or law or regulation.” ASOP 23 Section 3.5 states, “...the actuary should consider further steps, when practical, to improve the quality of the data.”

In my opinion, the new actuary should make a reasonable effort to obtain the data and match the accrued benefits. If the data cannot be obtained, the actuary may use the accrued benefits provided, disclosing the reliance.

After collecting sufficient information, the new actuary must match the previous actuary’s results within a threshold. Otherwise, a change in the plan’s enrolled actuary may be deemed a funding method change. The Internal Revenue Code, as modified by the Pension Protection Act of 2006, requires that a change in funding method be approved by the Secretary. IRS Announcement 2015-3 provides automatic approval of a change in funding method resulting from a change in the plan’s enrolled actuary under certain circumstances. In general, if there is (1) a change in the enrolled actuary, (2) a change in the business organization providing actuarial services and (3) a change in the valuation software, automatic

Unfortunately, we have all had issues obtaining information from the prior actuary.”


’m always surprised every time the U.S. Supreme Court takes another ERISA case. It is an open secret among federal judges that ERISA cases are their least favorite ones. They often are complicated, counterintuitive and time consuming.

Yet, it seems the Supreme Court has taken a major ERISA case or two every term in recent memory. Last

year it was Fifth Third Bankcorp v. Dudenhoeffer, which surprisingly threw out the Moench Presumption used by fiduciaries of company stock funds to argue that offering the investment had a presumption of prudence against fiduciary breach claims. The Moench Presumption has been around for more than 20 years since first being adopted by the 3rd Circuit.

In Dudenhoeffer, the Supreme Court found that company stock fiduciaries are held to the same stringent ERISA fiduciary duties as all other fiduciaries, with the exception of the duty of diversification. In the opinion, the Supreme Court also rejected hard-wiring fiduciary

decisions into a plan document by rejecting the argument that the plan document required the company stock to be offered and there was nothing the fiduciaries could do.

TIBBLE: ERISA STATUTE OF LIMITATIONSThis year the major case heard by the Supreme Court

was Tibble v. Edison International, which addressed the proper scope of ERISA’s 6-year statute of limitations. In Tibble, the Supreme Court reversed an earlier 9th Circuit ruling that under ERISA’s 6-year statute of limitations, a breach of the fiduciary duty of prudence was time barred for investments selected more than 6 years before a lawsuit is brought.

The 9th Circuit had ruled the only exception to the time bar is if there was a material change in circumstances with regard to the investment such that it was almost like having a brand new investment in a plan. Rejecting this interpretation, the Supreme Court agreed with the plaintiff plan participants and the Secretary of Labor, who submitted an amicus brief in support of the plaintiffs, that

LEGAL

U.S. Supreme Court watch: two decisions from 2015, and two slated for 2016.

ERISA Litigation Round Up

BY THOMAS E. CLARK JR

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prudent process because they failed to consider the best interests of the participants. The question then becomes: Once you’ve shown a failure of procedural prudence, what can the fiduciary prove to show they still made the right substantive choice? The defendants wanted a standard that would have allowed them to put on evidence that a prudent fiduciary could have made the same decision. The plaintiffs, and ultimately the 4th Circuit, supported a standard where the defendant must show that a prudent fiduciary would have made the same decision. Hence the “Could Have vs. Would Have” issue that the case became known for.

As it was explained to me by one of the attorneys representing the plaintiffs, the “Could Have” standard is essentially proving that if you surveyed 100 prudent fiduciaries, one of them would make the same decision, while the “Would Have” standard would require proving that 51 of 100 would make the same decision. Simply stated, the “Would Have” standard gives the defendant no benefit of the doubt, and they can only escape liability in the most stringent of circumstances.

In declining to hear the case, the Supreme Court probably took into consideration a brief from the Solicitor General and the Department of Labor that argued the 4th Circuit got the decision right and that the Court should not hear it.

THE COURT’S CURRENT TERMWhat can we expect during the

Supreme Court’s 2015-2016 term, which began this month? The justices have not agreed to hear any major fiduciary cases, but they have agreed to hear two ERISA cases dealing with very different issues:

• In Gobeille v. Liberty Mutual Insurance Company, the issue to be decided is whether the 2nd Circuit was wrong in holding that ERISA preempts Vermont’s health care database law as applied to the TPA for a self-funded ERISA plan.

• In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, the Court will decide whether under ERISA, a lawsuit by an ERISA fiduciary against a participant to recover an alleged overpayment by the plan seeks “equitable relief” within the meaning of ERISA Section 502(a)(3), if the fiduciary has not identified a particular fund that is in the participant’s possession and control at the time the fiduciary asserts its claim.

For more information about these cases, readers are encouraged to go to scotusblog.com to read the briefs filed in the cases — as well as the author’s own blog, fiduciarymattersblog.com, which will cover the opinions when they are handed down next year.

Thomas E. Clark Jr., JD, LLM, is Of Counsel with The Wagner Law Group. He recently opened the firm’s St.

Louis office, where he provides counsel to plan sponsors, fiduciaries and service providers.

ERISA’s fiduciary duties include a duty to monitor separate and apart from a prudent duty of selection.

At oral argument, the justices were skeptical that they should delve into what exactly the duty to monitor means. Ultimately that skepticism was enshrined in their opinion. In a rare 9-0 opinion, they found that a duty to monitor exists but declined to provide any details beyond pointing to the common law of trusts as inspiration — which they have done in numerous previous opinions. Instead, the case was remanded to the 9th Circuit to decide on the scope, although it won’t be surprising if the decision is sent all the way back to the district court.

TATUM: REVERSE STOCK DROP CASE

Shortly after deciding the Tibble case, the Supreme Court declined to hear Tatum v. RJR Pension Committee, a so-called “reverse stock drop” case in which the primary complaint was that the fiduciaries improperly eliminated a company stock fund when they should have known that the price of the stock would go up in the future.

Ultimately, the Tatum case was less about company stock funds and more about the consequences of when a fiduciary has breached their duty of prudence by failing to put in place a prudent process to evaluate an investment decision. Can the defendant avoid liability by arguing that the result would be the same even if they had a prudent process in place (i.e., the ultimate decision was still substantively prudent)?

Here, it was the decision of whether to keep or eliminate Nabisco stock in the RJR 401(k) plan after the company split into two. The plaintiffs alleged that the defendants met for just about an hour and only considered their own liability in deciding to eliminate the stock. Ultimately, the stock price bounced back and the participants in the plan missed out on these gains.

The 4th Circuit concluded that the defendants failed to have a

The “Would Have” standard gives the defendant no benefit of the doubt, and they can only escape liability in the most stringent of circumstances.”


REGULATIONS

The IRS’ complex website gets hundreds of millions of visits per year. Here’s how to make your visit simpler.

Navigating the IRS.gov Maze

BY MIKE BUSHNELL

he Internal Revenue Service’s website has a wealth of resources for retirement plan professionals of all stripes. But with so much prominent space devoted to rules for tax filers, it can be difficult for pension professionals to find the information they need to best do their jobs. Fortunately, as the old adage says, everything is easy to find once you know

where to look.

RETIREMENT PLAN INFORMATIONFirst and foremost, retirement professionals can

skip most of the clutter on the homepage of IRS.gov by bookmarking IRS.gov/Retirement-Plans, the “Retirement Plans” landing page. Then with just one click you can access published guidance, interest rate and actuarial tables,

required forms, the latest news updates, and much more. Unfortunately, the link to this page is not prominent on the main IRS.gov homepage; visitors can find a link by hovering over the “Information For…” tab at the top far right corner of each page, but it is not particularly intuitive.

Once on the Retirement Plans landing page, ASPPA members will find two blue boxes containing the vast majority of the page’s content. The boxes break up the information into two audiences: Resources for Individuals and Retirement Plan Administration. Under the latter box, there are three columns; the first (“Choosing Your Plan”) features information about retirement plans for all kinds of employers and workers, while the second (“Maintaining Your Plan”) has guidance on operating and maintaining plans, pertinent tables, and other resources for benefits

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Don’t Touch That Keyboard!

A printed magazine isn’t exactly the optimal format for an article about how

to navigate a website. So we have posted this column on ASPPA Net, at http://asppa-net.org/IRSWebsite, with hyperlinks to all of the web pages highlighted in yellow.

black boxes; the one on the right, titled “Contact Us,” features links for visitors to find their local IRS offices, to contact the taxpayer advocate, and a link to reach out to someone at the IRS about troubles they’re having accessing content on the website. So, for what it’s worth, at least the IRS knows their site isn’t the simplest to navigate.

IRS.gov is the most popular U.S. government website during tax season, and even in the middle of the summer it is the third-most popular federally funded site, according to the Office of Management and Budget’s Digital Analytics Program. With so many visitors needing so many different resources, and so few plan professionals relative to the number of individual tax filers, it’s no wonder the information ASPPA members need is so scattered. But with this guide, and perhaps a little patience, pension professionals can get what they need without pining for the days of actuarial punch cards.

Mike Bushnell is the American Retirement Association’s Web Content Manager. He is also a

contributing writer for Plan Consultant.

home page features the most popular IRS documents for individuals and businesses; visitors can also click the blue button in the center of the page that says “Find All Current Forms & Pubs” to access a complete list of IRS publications for all audiences.

On the left side of the main landing page, there is an index of publication-related information, including electronic books, summaries of recent changes to IRS forms, documents from the prior year, a link to order official hard copies of IRS forms by mail, and more. The site is currently beta testing a “Current Forms & Publications Search,” allowing visitors to directly look up specific forms without having to click around the site. Visitors can access the search function by clicking the link in the green box prominently displayed above the featured forms on the main Forms and Publications landing page.

RESOURCE LIBRARYASPPA members will also find

the “Help & Resources” tab to be very useful; you can find it located to the right of “Forms & Pubs” on the gray navigation tab on the top of the page, or in the gray footer of each page underneath the “Our Agency” column, located furthest to the left, three selections down. You can also visit the page directly at IRS.gov/Help-&-Resources.

On the main Help and Resources page, visitors should first look to the left side to find a link to the Interactive Tax Assistant, designed to help people walk through multi-layered questions they might have about anything IRS-related. Underneath that link is a column titled “Additional Resources,” which allows visitors to view a wealth of pertinent guidance in two or less steps, including a glossary of tax topics, an index of filing options, and a search function for the full Internal Revenue Code.

At the bottom of the main Help and Resources page, there are two

practitioners, including plan language resources, an audit process guide and more.

The third column, “Filing and Reporting Requirements,” serves as a gateway to all kinds of pertinent forms and publications, including Forms 5500 and 5330, guidance on basic reporting and disclosure rules, and much more. The column also has links for both individuals and plan sponsors to find guidance on how to report retirement plan transactions.

ACCESSING RELEVANT DOCUMENTS

From anywhere on the site, visitors may also access the forms and publications directly by clicking the “Forms & Pubs” link on the top gray navigation tab directly below the search bar. You can also enter IRS.gov/Forms-&-Pubs to reach the same place. While it’s certainly not the most intuitive process, plan professionals do actually have a few different ways of accessing the resources and guidance they need with a limited number of steps.

The Forms and Publications

With so many visitors needing so many different resources, and so few plan professionals relative to the number of individual tax filers, it’s no wonder the information ASPPA members need is so scattered.”


RECORDKEEPING

Here’s how an understanding of employee learning autonomy can enhance retirement engagement.BY BRIAN KALLBACK

Focus on Teaching First, Then Finance

“Iwent to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”

— Henry David ThoreauIn Walden, Thoreau described his life of

deliberate living as he lived “simply” in the woods around Walden Pond. Many of his anecdotes and aphorisms speak loudly today in our busy and interconnected world. However, it can be very difficult to make Walden relevant to a group of high school juniors. Yet, here I was, a new teacher fresh out of college staring down a classroom of 29 high school juniors who were more interested in their iPhones and a Friday night football game. In order to help the students enjoy Walden, I had to prepare discussions, activities and lectures that allowed the students to choose to want to learn the material.

The situation is no different with a retirement plan education meeting. At one early morning session, I was looking into the eyes of 64 manufacturing employees. I had spent time preparing a presentation full of slides, statistics and calculations. Walden was not on the agenda, but I did discuss compound interest, the importance of consistent savings and asset allocation. Afterwards, I felt like I had delivered an outstanding presentation. Yet, in looking at the post-meeting analytics, the needle barely moved. I realized I did not create the right conditions

for employees to choose to become engaged. The lessons I learned during my time in front of a classroom came back to mind.

When conducting an education meeting, we must view ourselves as teachers first and financial professionals second. We must look at our engagement strategies through the lens of adult learning techniques.

Behavioral finance has been an outstanding addition to retirement academia. Auto features, such as enrollment,

escalation and rebalancing, allow employers to combat employee inertia. Yet, we need to understand the dynamics of adult learning so we can create sustained self-directed employee engagement.

Some plan providers have decided to solely utilize auto features rather than develop their education teams. A focus on adult learning strategies is not a departure or replacement for behavioral finance applications or auto features. By coaching your education team to use relevant adult learning techniques, you will find the results include becoming a stronger, more effective presenter — and

more employees who choose to take action regarding their retirement.

Learning begins when an employee chooses to become engaged in their education and selects a learning method. Traditional training in the retirement industry is instructor-led, with employees passively listening at desks or tables with chairs. In this environment, employees are dependent on educators to direct their knowledge and content.

The alternative dynamic is where employees choose to

Analytics from education sessions generally present a place to begin the discussion rather than a way to define it.”

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be the drivers of their learning while the educator serves as a facilitator or consultant. For instance, employees could decide they want to study asset allocation (self-direction), but prefer to attend a group meeting rather than use the website (dependency). If I use the Khan Academy to research advanced mathematics, I am making a choice to learn in a self-directed manner. The freedom to initiate learning and choose a method is the most critical aspect of the learning strategy process.

If an employee is required to attend a retirement plan group meeting and sits passively during a presentation, there is no self-direction involved. That employee is dependent on the educator to pour forth knowledge and, more importantly, create motivation to learn. We must understand the responsibility this puts on us and adjust our teaching strategies to meet the needs of many diverse adult learners.

In our efforts to differentiate our participant education services, we apply a few practical applications to help employees make a conscious decision to learn. Every interaction with an employee — whether within a group, individual, or virtual setting — should include answers to the following questions:• Do the employees know why they

need to learn this material? An audience of employees is constantly balancing the benefits of learning new material versus the negative

present a place to begin the discussion rather than a way to define it.

When the Department of Labor releases the final version of its proposed fiduciary rule, the dependent learners in our audience may be the most affected. These are the employees who count on the educator for guidance and direction. They may be unmotivated to learn new material and become ready to learn what the educator tells them they should know. The self-directed employee will find ways to learn no matter the regulations set forth. However, it is the dependent employee who is most reliant on the intentions and abilities of the educator.

An educator’s responsibility — whether standing before a secondary education classroom or a group of employees — is to understand the audience well enough to ensure that the intended learning is delivered to most attendees. If the learning is not received, then the educator did not accomplish the purpose of the presentation — no matter how nice his or her suit looks or how polished the marketing materials are.

As Thoreau says in Walden, “things do not change; we change.” By beginning to view your educators as teachers and focusing on relevant adult learning strategies, you can “deliberately” differentiate your education services and “simplify” the lives of employees.

Brian Kallback, CFP®, CLU®, QKA is the participant services manager for Heartland Retirement

Plan Services (HRPS). He serves employers via strategic direction of their education services and coaches the Heartland education team on teaching strategies. HRPS is offered through Dubuque Bank & Trust, a subsidiary of Heartland Financial USA, Inc. Products offered through HRPS are not FDIC insured, are not bank guaranteed and may lose value.

consequences of not learning it. An effective educator spends time crafting an introduction that immediately gets the employees’ attention and consistently returns to the “why” throughout the presentation.

• Does your presentation relate to what the employees likely have experienced in their lives? Whether it is your information, personality or appearance, employees are consistently measuring you against their past experience. How many times have you heard about an investment strategy an employee’s friend/relative/distant cousin/etc. shared with them? When you start to discuss investments, do employees’ stories begin with “I remember how much I lost in 2008…”?

• Do you have a way to get the audience engaged? Many of the financial presentations I observe involve a static presenter (usually safely behind a podium) speaking while the audience sits silently. When we are in the midst of a conversation with a potential client, I love to see their financial advisor come in, talk about the economy and the markets for a while, and then tell everyone to save for retirement. This may allow the advisor to claim he or she completed the education program, but it is rarely effective at creating employee engagement and personal autonomy. When you create a foundation through teaching, employees can be better served.

Innovative teaching strategies that utilize relevant adult learning theories are measured with metrics similar to other education initiatives. Participation rates, web traffic and appropriate asset allocation should improve. The number of those who are on track to reach their retirement goals should also increase. Yet, analogous to the education industry, standardized metrics and testing often do not tell the entire story. Analytics from education sessions generally

A foundation of adult learning strategies will help your team more effectively instruct on financial wellness, retirement and investments.


FEATURE

A WBC session featuring three thought leaders takes a freewheeling look at the state of the industry today.

SWOT Analysis for the Retirement Industry

BY JOHN ORTMAN

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O ne of the highlights of this year’s

Western Benefits Conference, held June 19-22, 2015 in San Francisco, was a general session featuring a panel of industry leaders who shared their thoughts on changes in the retirement plan industry and the strengths, weaknesses, opportunities and threats currently facing retirement professionals — an old-fashioned SWOT analysis.

The panelists were:• Robert M. Kaplan, CPC, QPA,

CFP, APA, Vice President, National Training Consultant at Voya Financial;

• Adam C. Pozek, ERPA, QPA, QPFC, Partner, DWC ERISA Consultants, LLC; and

• Sheldon H. Smith, Esq., APM, Of Counsel, Bryan Cave LLP.

Highlights of the wide-ranging session included discussions about the impact of health care reform, state auto-IRA programs and tax reform, as well as a look at what’s happening in the recordkeeping and TPA sectors.

IMPACT OF HEALTH CARE REFORM

POZEK: Without debating the pros or cons of the Affordable Care Act, I certainly haven’t spoken to any business owners who have said that their health care premiums have gone down since that has come to pass. Certainly, with escalating costs and businesses trying to do more with less, something’s got to give.

In talking to participants, my experience is that more of them appreciate the immediacy of medical benefits than the esoteric question, “What’s life going to be like and how much money am I going to have in 30 years when I retire?” So in terms of a benefit that’s going to resonate with employees, health care, at least in my

experience, seems to be the one that wins the day.

What does this mean in terms of encouraging clients to make matching contributions or adding automatic enrollment, which are going to mean higher costs? It’s certainly very easy to focus on our retirement niche, but it’s also important to step back and recognize that there are competing interests within the benefits realm. It’s a great opportunity, if you’re a retirement specialist, to form partnerships with those who might be health and welfare specialists. I think it certainly creates an opportunity for more collaboration with our colleagues in ways that can bring greater service to our clients — and certainly, opportunities to win additional business for ourselves.

I think there are tremendous opportunities there, as long as we recognize the reality that our clients are operating in right now and try to be part of the solution to that.

KAPLAN: It certainly is a challenge. One of the things I’m seeing with a lot of the advisors we work with is that they are building their businesses and not just talking about qualified retirement plans. But there’s actually a third leg of that stool when it comes to employees’ expenses, which is that there are a lot of people who have to factor in college savings at the same time. To have an advisor who’s working with two or three parts of that, I think, is very important because they will try

to keep people focused on health care and education for the kids — but not forget about how important saving for retirement is.

SMITH: In working with large clients’ HR departments, what I have learned is that their focus primarily is on setting a certain percentage of the expense which, as a corporate matter, they are allotted for employee benefits.

Generally, when we look at wages as part of the benefit, we add to that the taxes that are attributable to that, OASDI and health insurance. I’m talking about the employer share. Then we add whatever the retirement plan cost is, and now adding the Affordable Care Act cost. Most employers in this country have pretty much decided that they want to be somewhere around 32% to 38% of their overall labor costs.

I find that to be an exceedingly grave threat to the retirement plan industry because if health care premiums continue to increase, but the employers are bound and determined to retain that smaller percentage or that exact percentage for the cost of labor, then they will begin to cut the cost of their retirement contributions. The first thing that will go down in order to make up for an increase in health care premiums will be the employer match.

They also tell me that the number one concern from their employees is health care. It’s not retirement. That’s

In the TPA marketplace, I think, there's a great opportunity to provide added service, to provide that proactivity, to go to our clients and be true consultative partners and not just a service provider or a vendor.”

OPPORTUNITY KNOCKS

Adam Pozek


the same thing, obviously, that we’ve heard forever and ever. Unfortunately, people don’t even think about retirement until they’re quite a bit older. For that reason, I think there is a huge threat to the retirement plan industry, depending upon how the economics of health care work out.

As Adam and Bob indicated, there’s also a great opportunity here. Employers recognize that from a standpoint of understanding all of this, they need our help. As they have in the past when it comes to retirement plans, they would love to have single-source assistance from people who are knowledgeable about their employee benefit package.

Now that the package has taken

on a different structure because of the Affordable Care Act, they would really like for us to be educated both with respect to the retirement plan side and the health and welfare side, so that they can make one phone call and not a myriad of calls in order to get their questions answered about things that might be contradictory or even in conflict with one another. I think that’s a great opportunity for us.

If we’ve only been retirement plan professionals in the past, then by learning about health care reform, about what a cafeteria plan is, we might be able to move people into a structure that allows for pre-tax opportunities that would cover both health and welfare structures

and 401(k) elective deferrals in a single arrangement, and start to move employers in a way that makes more sense to them. There’s a great opportunity, but from talking to my clients I also perceive a great risk.

STATE-RUN PRIVATE SECTOR PLANS KAPLAN: It seems like quite a few of the bills that have been introduced in the current Congress that have to do with retirement plans seem to be about expanding coverage. Also, one that we’re waiting for from Senator Hatch will include additional simplification, with new types of safe harbor plans and a SIMPLE-type plan. Anything that drives more coverage is really good news.

At the state level, like in Illinois, for example, they’re talking about an employer mandate — if you have more than 25 employees and you don’t offer a private sector plan, you have to at least offer a retirement savings vehicle. I see that as a great opportunity for us as an industry to be able to talk to plan sponsors about perhaps having a different type of plan, where it may be better for their long-term employees or management or perhaps putting in a cash balance plan or a safe harbor.

At the same time, even if it’s plans where we’re not thinking of ourselves immediately as being a consultant of sophisticated plans, when you have people starting off on retirement

savings, they’re going to want to continue that. When you have employers that offer any type of plan, at some point, they’re going to grow into what I will call a “real” plan, not the state IRA-type plan.

POZEK: I think it could be a natural reaction to look at somebody’s situation and just see the threat. I’m sure we’ve all competed for a client where the firm that ultimately won said, “We’re going to make it easy. All you have to do is push a button. If you come to us, it’s going to be that simple.” But we all know it’s never that simple.

Certainly, I think there is the concern that the more of these smaller plan options become available

through states, that’s going to put increased competitive pressures on us in terms of a downward compression on pricing.

I do think that there are several opportunities. Bob alluded to one: If it expands coverage and gets people used to the idea of saving

— both employers and employees — that’s a good thing. Hopefully those companies are going to be successful. They’re going to grow. And they’re going to get to a point where maybe they need something that’s a little more sophisticated than the simplified option that they started with.

I think another opportunity that it creates is in terms of innovation. Certainly, the marketplace has evolved quite a bit in the last 10 to 20 years. If you look at other industries, many use technology to make their customers’ lives easier. I think that in many ways the retirement space is probably a little bit behind in those areas.

So this is a great opportunity for

We all have to be vigilant in making sure that when we have an opportunity to talk to our own elected representatives, we make it clear to them that they’re looking at it all wrong. This is not an expenditure; it’s a deferral.”

ADVOCACY

Sheldon Smith

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expenditure; it’s a deferral. If you have an opportunity to talk to your representative, I would encourage you to try and pound that home, because otherwise — especially with tax reform — this is potentially a great risk to retirement savings in this country.

RECORD KEEPERS’ FUTUREKAPLAN: In the record keeping

world, with consolidation, a lot of the companies who are purchasing or merging will now have access to large plans, medium sized plans, and small plans as well. I think from the record keeper’s point of view, that is very helpful. I see a lot of promise in the future for that.

We see most of the innovation in our industry coming at the behest of large plans that want unique designs or unique technology. Once companies like ours develop that, you can just bring that downstream to medium and small plans. I think that a lot of that consolidation and a lot of the future will be bright because of that.

TPAs: CREATING VALUEPOZEK: I think that in the TPA

marketplace, there are some of the same consolidation pressures that Bob referred to. Certainly, there are firms that are acquired as owners decide to retire. That can certainly create pricing pressures, which are always a challenge.

One of the opportunities that I see, certainly with regard to the clients and the other colleagues with

not expenditures like a charitable contribution deduction or a principal interest on your residence deduction. Instead, they look at the retirement plan deduction as a cost to the government.

Obviously, if they reduce it significantly and you’re working with small plans, what you’re going to hear from the business owner is, “If I can use a 15, 18 or 20% capital gains rate, why shouldn’t I just go invest outside the plan? I don’t need to have a plan. If my employees have any brains, they’ll go invest. They don’t make nearly as much money. Maybe they’ll get the 10% capital gains rate, depending upon how tax reform comes out. Therefore, I don’t need a plan to get a tax advantage. Why should I worry about paying 39% 20 years from now?”

We’ll see how that all evolves. But I think small plans, particularly, will be at the greatest risk.

Maybe there’s an opportunity in the way that we can advocate over the next few years because so many Baby Boomers are going to retire and so much money will come into the federal fisc as a result of these deferred dollars now being taxed. But that’s a difficult sell and probably presents more of a threat, more of a risk, more of a weakness, if you will, than an opportunity.

We all have to be vigilant in making sure that when we have an opportunity to talk to our own elected representatives, we make it clear to them that they’re looking at it all wrong. This is not an

us to say, “If small businesses are being attracted to some of these simplified solutions because they’re made easy, how can we use technology? How can we use different resources that are available to us to create a simple yet robust solution that we can be a part of?”

There’s a lot of really smart people in this room. Maybe this is the competitive pressure, if you will, that could spur the next innovation in terms of moving our industry forward. I think there are a lot of opportunities here.

RAMIFICATIONS OF TAX REFORM

KAPLAN: With any tax reform change that is enacted, oftentimes what legislators want to do is maybe keep this tax rate stable or lower the tax rates, but expand the base of taxable income.

As long as we have a private sector where there will still be tax advantages to have in a plan, those advantages will be less and less outside of a plan. A lot of the employers plus the employees will have the one tax deferred vehicle or Roth vehicle available to them within a plan. That, I think, is a good opportunity for us.

SMITH: There’s also a significant threat there. There are many senators and many representatives — probably a majority in the House, and maybe close to a majority in the Senate — who want to go back to the ’80s, and reduce the limitations. They want to reduce the 415(c) limit again. They want to reduce the deduction limitations.

Unfortunately, from the standpoint of the budgeting process in Congress, they’re still looking at the cost, if you will, of this “tax freebie,” which is how they look at it. They consider it to be a tax expenditure. Generally speaking, they refuse in the budgeting process to look at the fact that these are deferrals and

We see most of the innovation in our industry coming at the behest of large plans that want unique designs or unique technology. Once companies like ours develop that, you can just bring that downstream to medium and small plans.”

TPA INNOVATION

Bob Kaplan


whom I work, is the opportunity to provide great service. Certainly, if we go back to the 2008-2009 time frame, low price was the driver. Everybody was concerned about shaving as much out of their budget as they absolutely, positively, could.

What I’m starting to see now is the pendulum swinging back. Not necessarily that people want to spend more than they need to, but more of a focus on service; more of a recognition that, “Hey, this is difficult stuff. I’ve got a business to run. I don’t want to be worried about figuring out who my HCEs are. I want someone who’s going to be proactive and come to me with things that I might want to consider rather than waiting for me to sit back.”

In the TPA marketplace, I think, there’s a great opportunity to provide added service, to provide that proactivity, to go to our clients and be true consultative partners and not just a service provider or a vendor. I think that has added advantages both from our standpoint as a TPA, but also from our client standpoint in terms of

creating greater value for the business owners as well as the participants.

RETIREMENT INDUSTRY BRAIN DRAIN

POZEK: I think when you mention retirements and things of that nature, there’s certainly a concern about the loss of institutional knowledge. As folks decide to move on to greener pastures, one of the concerns that I see is that there would be a gap where that institutional knowledge could be forgotten.

I know that certainly when we’re out looking to bring on new folks into our company, we don’t get a lot of resumes or a lot of interest from younger people seeking to get into this business. So I think one of the risks and opportunities that we have as professionals is marketing or reshaping what we do as an industry to make it more attractive to folks who want to join.

As much as I love technology, I think that it has also created a situation where folks can very easily rely on the computer to do it. There’s no longer a situation where you're sitting down and doing all of this fun stuff that we used to do by hand and really understanding how it works. Now, I just feed the data into a computer and push a button, and the test comes out and tells me if it passes or fails. A lot of times, for some of the plans that we work on, that might be good enough. But for those who would truly become professionals and consultants and find a home in this business, it’s not enough.

I think there are certainly opportunities for those of us who work with younger employees. We have a great opportunity to modify our training that acknowledges the fact that folks aren’t going to be doing this stuff by hand and helping them understand not only just the basic mechanics, but the context that it fits into, how it all works and why it matters.

KAPLAN: I look at it in another way. What we see in very large

companies, like the one that I work for, is that when those people retire, there’s room for the middle managers to move up. There’s movement on that ladder, which can be a good thing.

There’s no replacement for experience. We understand that. If you look back on what we were working on 20 years ago or 25 years ago, safe harbor plans didn't exist, or automatic enrollment plans. Obviously, there’s a shift going on now with technology and a focus on the participant. A lot of people who are fairly young have grown up, particularly in the DC world, with what we’re seeing right now, taking shape as the future of the industry. I think there’s great opportunity there as well.

What you’re looking for is somebody who’s got the drive and ambition and wants to learn. Because we have an awful lot of people who just want somebody to pass this information on or help them grow in their careers.

SMITH: From the legal profession standpoint, it’s become very difficult to get young lawyers to want to practice ERISA. One of the things that I've learned primarily from my students is that it would be okay if they had to be tax attorneys and it would be okay if they had to be labor attorneys, but we’re asking them to be both tax attorneys and labor attorneys in order to be highly successful ERISA attorneys. Many people just don’t want to march up that learning curve.

I also think there are great risks in terms of the loss of this knowledge that's been built up over many years. The opportunity is there for those young people who want to participate and learn, but the risk is there to the industry, generally.

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ASPPA A H B

• Elegant thank you in the Anniversary Book itselfkoob eht gniynapmocca rettel s’tnediserP eht no ogol ynapmoC •

• Rotating ad on the Anniversary Book website/webpage fo seireS • ASPPA Connect articles pointing back to the

Anniversary Book website/webpage ni da uoy knahT • Plan Consultant magazine adjacent to

articles based on the book ecnerefnoC launnA APPSA 6102 eht ta egangis uoy knahT •

along with thank you slides during a special event, reception or general session

6102 eht ta pihsredael APPSA eht morf tnemegdelwonkcA •ASPPA Annual Conference main stage

Benefi ts of Corporate Sponsorship* Sponsor ASPPA’s History Book Celebrate ASPPA’s 50th anniversary!

Show your commitment to the industry!

Become a part of history!

For details, contact Fred Ullman, Director

of Sales, at fullman@USARetirement .org or

703-516-9300, ext. 113.

A s part of ASPPA’s 50th anniversary celebration, we’re publishing a special book telling ASPPA’s rich history. The history book will be a tribute celebrating and honoring the people who make up ASPPA and who drive our mission to preserve and enhance the nation’s private pension system. It will be unveiled

at the 2016 Annual Conference and every member of ASPPA will receive a complimentary copy.

We’ve just created a special opportunity for a limited number of corporate sponsors to help underwrite the history book, as well as related web-based video efforts that are in the works. Sponsorship of the history book will clearly demonstrate your commitment to retirement plan professionals and their goals. Sponsors will be closely associated with this literary legacy and viewed as true supporters by ASPPA members.

We’re also creating an opportunity for individual ASPPA members to support the history book effort via a dedication/remembrance program — for more information, go to asppa-net.org/About/ASPPA-History-Book


Think the proposed rule won’t affect TPAs and recordkeepers? Think again.Think the proposed rule won’t affect TPAs and recordkeepers? Think again.


Where Do We Go From Here?BY DAVID N. LEVINE AND GEORGE M. SEPSAKOS

COVER STORY

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Icould result in their classification as an investment advice fiduciary. The proposal dramatically changes this perceived level of comfort.

THE BASICS OF THE RULEAt first glance, a TPA or

recordkeeper might assume that the DOL’s proposal of the definition of an investment advice fiduciary will have little or no impact on their activities. However, the proposal’s broad scope makes this assumption incorrect in many cases. To provide a framework for understanding the impact on TPAs and recordkeepers, let’s review the key features of the proposal.

How the Proposal Is StructuredTo understand how the proposal

holds the potential to significantly impact TPAs and recordkeepers, it is essential to first understand how it is structured. The proposal does not merely create a new definition of investment advice fiduciary. Instead, with a proposed definition of investment advice fiduciary that also contains numerous “carve-outs” from the definition, changes to a number of prohibited transaction exemptions, and the proposal of a new prohibited transaction exemption called “best interest contract exemption” (sometimes called the BIC exemption or the BICE), the proposal establishes a process that any potential investment advice fiduciary — including a TPA or recordkeeper — will need to go through to determine whether or not it is an investment advice fiduciary and whether its business practices will be affected.

A Brief Summary of the Proposal

The proposal itself is extremely complex, with numerous moving parts. However, there are a number of key steps that will be directly relevant to a TPA or recordkeeper.

First, the proposed amendment to the fiduciary regulation would provide

In April 2015, the Department of Labor released its complex package of proposed guidance on the so-called “conflict of interest” rule. In the six months that have passed, more attention has been paid by industry and mainstream media to defined contribution plans than in decades. More than 2,000 comments have been submitted to the DOL, including one from the American Retirement Association addressing concerns raised by ASPPA members.1 This article reviews the proposal and looks at how it could impact third-party administrators and recordkeepers.

BACKGROUND

Ever since ERISA was enacted in 1974, ERISA section 3(21) has contained a definition of the term “fiduciary.” ERISA section 3(21)(a)(ii) provides that any individual who “renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so” is a fiduciary. This “type” of fiduciary is often referred to as an “investment advice fiduciary.” Notably, ERISA section 3(21) provides that other individuals — such as those making discretionary decisions about plan administration — are also fiduciaries.

As TPAs’ and recordkeepers’ businesses have evolved since 1974, many have put in controls and processes to ensure that they are not fiduciaries by avoiding making discretionary decisions about plan administration. These steps have generally been successful at preventing TPAs and recordkeepers being labeled as fiduciaries. Furthermore, under regulations issued in 19752 and still in force today, most TPAs and recordkeepers have had little concern that their traditional TPA and/or recordkeeping services

1 http://asppa-net.org/Portals/2/PDFs/Comment%20Letters/ARA%20Fiduciary%20Comment.pdf. 2 29 U.S.C. section 2510.3-21(c)(1).

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• Investment Education. Persons who provide “investment education.” Notably, this carve-out would replace existing DOL guidance that has long been relied on to draw the line between investment education and advice.3 One key distinction between the existing DOL guidance and this new carve-out is that the information and materials provided as part of “education” may not include advice or recommendations regarding specific investment products, specific investment managers or the value of particular securities or other property.

The proposal also establishes the new “best interest contract exemption.” This exemption’s stated intent is to address distributions and rollovers from a plan or IRA, and investment advice provided to participants, beneficiaries, IRA owners, and plan sponsors of a non-participant directed plan having fewer than 100 participants. As drafted, it would be the lead exemption in dealing with plan distribution and IRA advice. The exemption includes numerous requirements that, if applicable to a TPA or recordkeeper, would result in significant new compliance requirements and costs.

Lastly, numerous existing prohibited transaction exemptions would be revised under the proposal. A key theme of these changes would be that the terms of existing exemptive relief would be significantly tightened and a common set of “impartial conduct standards” would apply across a wide range of prohibited transaction exemptions.

IMPACT ON TPAs AND RECORDKEEPERS

While each TPA and recordkeeper operates in a different manner, there are numerous areas in which the proposal could directly impact all TPAs and recordkeepers.

in sales to plans and transactions between counterparties. It is only applicable to sales to certain plans, not to individual plan participants or IRAs. Numerous procedural requirements need to be satisfied, depending on whether: (1) the plan fiduciary representing the plan has fiduciary responsibility for managing more than $100 million in assets; or (2) the plan has 100 or more participants. Notably, these requirements make the counterparty carve-out unavailable to many small plans.

• Platform Providers. Organizations that market and make available platforms for a plan fiduciary to select and monitor investment alternatives that are offered to participants and beneficiaries, provided that the person acknowledges in writing that they are not providing investment advice to the plan.

• Selection and Monitoring Assistance. Organizations that, in connection with platform provider services, “merely identifies investment alternatives that meet objective criteria specified by the plan fiduciary (e.g., stated parameters concerning expense ratios, size of fund, type of asset, credit quality)” or “merely provides objective financial data and comparisons with independent benchmarks to the plan fiduciary.”

that a person is an ERISA investment advice fiduciary if he or she:• provides one of the following four

types of advice directly to a plan, a plan fiduciary, a participant or beneficiary, an IRA or an IRA holder: (1) recommendations about the advisability of acquiring, holding, disposing or exchanging securities or other property, including recommendations to receive a distribution of benefits or roll over assets from a plan or IRA; (2) recommendations about the management of securities or other property, including recommendations as to the management of assets be rolled over to or distributed from an IRA; (3) appraisals or fairness opinions concerning the value of securities or other property if made in connection with a specific transaction involving a plan or IRA; or (4) recommendations of a person who will also receive a fee or other compensation for providing any of the three categories listed above; and

• either directly or indirectly (whether through or together with an affiliate), represents or acknowledges fiduciary status, or provides the advice under an agreement, arrangement or understanding that the advice is individualized to, or specifically directed to, the recipient of the advice for consideration in making investment or management decisions with respect to securities or other property.

Second, after creating this more expansive definition of investment advice fiduciary, the proposed amendment offers several “carve-outs” that generally exclude persons from being treated as investment advice fiduciaries. Key carve-outs that could impact a TPA or recordkeeper include the following.• Counterparties. Persons involved

The proposal dramatically changes TPAs’ and recordkeepers’ perceived level of comfort.”

3 Interpretive Bulletin 96-1, 29 CFR 2509.96-1.


arrangements involving TPAs, recordkeepers and components of larger “platforms” that might be able to utilize the platform provider carve-out themselves. These multi-party arrangements do not have clear relief from triggering investment advice fiduciary status under the proposal.

• Sales Presentations. Significant concerns have been raised that sales presentations made by a TPA or recordkeeper before the TPA or recordkeeper is hired could lead to fiduciary status if a proposed investment lineup is included in the sales presentation.

• Ancillary Services. As the retirement services industry has consolidated, many TPAs and recordkeepers have branched out into new services — either directly offered by them or through collaborations. Because of the expansive definition of investment advice fiduciary contained in the proposal, these ancillary services provided by TPAs and recordkeepers may be swept in and considered fiduciary acts. Furthermore, with the counterparty exemption generally unavailable to small plans, TPAs and recordkeepers may be unable to use the counterparty carve-out from investment advice fiduciary status.

Investment Education and Advice

As noted above, the DOL’s existing guidance on the line between investment education and advice would be replaced and restricted under the proposed education carve-out. Some TPAs and recordkeepers may currently provide education to plan participants where they reference specific investments in the fund lineup chosen by a plan sponsor or plan fiduciary. Under the proposal, the use of the actual plan investments in educational activities would now be swept into the definition of fiduciary investment advice, and would not be carved out as education. Thus, TPAs and recordkeepers providing this

Account Solutions. More and more plan sponsors are looking to managed account providers to help participants allocate their investments among the funds in a plan’s investment lineup. In some cases, a TPA or recordkeeper may already have a relationship with a managed account provider that is integrated with their systems and processes. Because the managed account provider would probably be an investment advice fiduciary, the recommending TPA or recordkeeper would probably be considered an investment advice fiduciary as well.

Numerous comments submitted to the DOL on the proposal address both of these situations and many hope that final guidance will allow TPAs and recordkeepers to continue providing these services — whether through an expansion of the platform provider carve-out or similar relief.

Sales Activities

TPAs and recordkeepers are provided some relief for providing platforms to under the platform provider carve-out and for “selling” their services under the counterparty carve-out. However, numerous areas remain a concern for TPAs and recordkeepers to consider:• Collaborative Sales of Solutions to

Clients. As drafted, the platform provider carve-out can be framed as a carve-out from fiduciary status for direct sales of a retirement platform to a plan sponsor in the small plan market. However, many TPAs and recordkeepers work in collaborative

TPAs and recordkeepers regularly serve as the main coordinator of an employer’s retirement plan and may serve as a single point of contact in order to reduce the administrative burden imposed on employers. In fact, it is this personalized level of service that often leads to the selection of a specific TPA or recordkeeper. However, it is this same level of service that could lead a TPA or recordkeeper to be classified as an investment advice fiduciary.

Below we highlight a number of TPA and recordkeeper activities and services that could be impacted by the proposal.

Vendor Recommendation

A key feature of the proposal is that a recommendation of a person who would be classified as an investment advice fiduciary themselves because of the services they will provide will make a TPA or recordkeeper into an investment advice fiduciary. Examples of this rule affecting a TPA or recordkeeper include the following:• Recommendation of an Adviser to Select

Funds. A TPA or recordkeeper may recommend third party advisers who can recommend or select specific funds for inclusion in a plan’s core lineup. Since the selection of these funds would likely result in the third party being an investment advice fiduciary, the recommending TPA or recordkeeper would likely be considered an investment advice fiduciary as well.

• Recommendation of Managed

The use of the actual plan investments in educational activities would now be swept into the definition of fiduciary investment advice.”

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prohibited transaction exemptions, including potential new prohibited transaction exemptions (or subparts of prohibited transaction exemptions). For political reasons, the regulations are likely to be “effective” by May 2016 and “applicable” before the next presidential inauguration on Jan. 20, 2017. Will there be delays in enforcement of these rules? Most likely.

However, now is not the time to dawdle. No matter what your role in the retirement ecosystem — TPA, recordkeeper, adviser, platform provider or other service provider — these regulations will probably affect your operations, relationships and services. Taking the time to systematically review your present and future services and relationships (including your insurance coverage and contract terms) will allow you to consider what steps to take to be prepared and take advantage of the changing concept of an investment advice fiduciary.

David N. Levine is a principal with the Groom Law Group, Chartered, in Washington, DC.

George M. Sepsakos is an associate in the Fiduciary Responsibility group at Groom.

connection with their advice to a client. The BIC exemption is complex, but in some cases, it may provide an avenue to continuing existing business activities.

Alternatively, affected TPAs and recordkeepers might instead look to the revised preexisting exemptions for potential relief. In the worst case, a TPA’s or recordkeeper’s contracts and other agreements would likely need to be revisited and revised quickly, since the transition relief in the proposal is extremely limited and provides very little protection against liability after the regulations become “applicable” (i.e., 8 months after the publication of the final rule). As such, if it appears that the proposal would significantly impact a TPA’s or recordkeeper’s contracts, it may be advisable to consider what steps will be necessary to ensure compliance (and provide contractual protection and/or necessary insurance coverage) before final guidance is issued.

WHERE THE PROCESS GOES FROM HERE

As we sit here in October 2015, several steps remain ahead. As the comments on the proposal and public testimony have highlighted, there are numerous concerns and questions about the proposal. However, barring congressional activity or court intervention, it is likely that we will see a finalized version of the proposal in early 2016. This finalized version will likely include revisions, although not wholesale revisions, to the proposed regulation and

education could be characterized as investment advice fiduciaries.

Distribution and Rollover Advice

One part of the proposal that has received significant attention is that the act of recommending a distribution or rollover from a plan can trigger investment advice fiduciary status. While many TPAs and recordkeepers may not make these recommendations directly, they may recommend one or more third-party advisers who will make these recommendations to individual plan participants. As already discussed, the recommendation of someone who is an investment advice fiduciary can make the recommender an investment advice fiduciary. Accordingly, TPAs and recordkeepers who maintain relationships with other parties to facilitate this advice could wind up classified as investment advice fiduciaries under the proposal.

The Impact of Being an Investment Advice Fiduciary

To the extent that TPAs and recordkeepers are swept into investment advice fiduciary status when the proposal is finalized, it may not be a major disruption of their business model. However, it will be necessary for affected TPAs and recordkeepers who are classified as investment advice fiduciaries to evaluate whether this status will result in any potential prohibited transactions — most commonly due to the payment of compensation to the TPA or recordkeeper in

The exemption includes numerous requirements that would result in significant new compliance

requirements and costs.”

FEATURE

Mistakes That Can Be Costly

Retirement Plan Asset Sharing in a DivorceBY HOWARD M. PHILLIPS

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knowing that a portion of the benefit/account came with the participant spouse into the marriage.

Each of these interpretations can produce vastly different results. For example:

Account at Date of Marriage (D of M): $50,000 Account at Date of Complaint/Separation (D of C/S): $200,000 Account at Date of Distribution (D of D): $250,000Years in Plan at D of C/S: 25Years in Plan at D of M: 15Years in Plan at D of D: 30

Based on these assumptions, and the ambiguous language in the PSA, the share to the AP could be:

a. $100,000 [(0.5)* ($200,000)], or b. $125,000 [(0.5)* ($250,000)], or c. $40,000 [(0.5)* (10/25)*

($200,000)] or $41,667 [(0.5)*(10/30)*($250,000)]

INEQUITABLE DIVISION WHEN A PARTICIPANT SPOUSE CAME TO THE MARRIAGE WITH A RETIREMENT BENEFIT/ACCOUNT If the participant spouse, his or her advisors or the plan administrator is not aware of the different methods of properly reflecting that premarital benefit/account, the selection of method could be less equitable for the participant spouse. For example, one or more of the methods available to reflect that premarital asset will deliver to the nonparticipant spouse a

share of the investment gains earned during the marriage by the premarital benefit/account. If such a method is set forth in the PSA or the QDRO, the participant spouse may get less than an equitable share. For example, the share to the AP in the example above could be $75,000 [(0.5)* ($200,000 - $50,000)], instead of $40,000. Both methods attempt to reflect that part of the account that accrued during the marriage. There are other methods.

INAPPROPRIATE SELECTION OF THE TIME TO RECEIVE A SHARE OF THE BENEFIT/ACCOUNT

If the participant spouse continues to earn a retirement benefit payable at some future retirement date, the nonparticipant spouse or his/her advisors should test to determine if the sharing should be done now (at the time of the complaint) or at that future retirement date. It is not unusual to find that state law will allow for sharing the benefit in the future. More importantly, the portion of that future benefit (which will be larger than it is now as a result of increased compensation and service in the benefit formula), prorated for the portion of that benefit earned during the marriage, may be larger than the portion of the benefit to be shared now (at the time of the complaint).

For example: Pension benefit accrued as of D of C/S*: $3,000/month Pension benefit payable as of retirement date: $6,600/monthYears of Marriage: 20Years in the Plan: 30Will the share to the AP be

$1,500/month [(0.5)* ($3,000)] or $2,200/month [(0.5)* (20/30)* ($6,600)]?

*All accrued during the marriage. The calculations above determine

a monthly retirement benefit share to the nonparticipant spouse, payable when the participant commences his/her benefit. In some cases, the divorcing parties do not want to wait until that future benefit

The first or second largest asset in a marital estate is usually one or both spouses’

retirement plans. Therefore, a mistake made in dividing these assets in a divorce could be very costly for one of the spouses, and, possibly, for those involved in the divorce documents (lawyers, plan administrators or their delegates).

Plan consultants, third party administrators and actuaries will be involved in reviewing Domestic Relations Orders (DROs) as a responsibility directed by the plan administrator. That review will evolve to a court entered Qualified Domestic Relations Order (QDRO). Since we live in a litigious world, the reviewing person, committee or firm will need to be both knowledgeable about QDROs, and as certain as they can be that the language in the QDRO accurately reflects the wishes of the divorcing parties.

Following are some of the avoidable mistakes and pitfalls in the preparation and review of a QDRO.

A POORLY WORDED PROPERTY SETTLEMENT AGREEMENT

The Property Settlement Agreement (PSA) sets forth the agreement between the parties with regard to each of the assets in the marital estate. If the PSA provision in connection with retirement plan benefits/accounts is not specific, the implementation of that provision may not result in what was meant by the provision.

For example, if the provision states that the nonparticipant spouse (known as the Alternate Payee or AP) gets 50% of the participant’s benefit/account, the interpretation could be:

a. 50% of the benefit/account accrued as of the date of the complaint or separation;

b. 50% of the benefit/account in place when the participant spouse is paid the benefit/account; or

c. 50% of the benefit/account that accrued during the marriage,

We must address how, if at all, the DOL proposal redefining who is a fiduciary is applicable to DRO reviewers.”


commencement date to fulfill the sharing. In that case, if allowable under state law, a determination can be made as to the value of that shared benefit payable in the future. That valuation is typically done by an actuary, where the actuarial assumptions used by the actuary in the calculation must be agreed to by the parties and their advisors. That value might be paid now or segregated in the plan as the AP’s separate share.

INAPPROPRIATE TREATMENT OF SPECIAL ISSUES THAT ARISE WHEN DIVIDING RETIREMENT PLAN ASSETS

1. Community property states — the AP may own 50% of the account/benefit before the sharing is resolved.

2. Same gender marriage (SGM) — as a result of the Supreme Court decision announced in June 2015, SGM spouses in all states have the same rights as spouses in a traditional marriage, and the same rights in a divorce. Special Note: Some state courts have attributed marital rights to domestic partners. The federal courts have not.

3. Handling post-divorce occurrences — such as death of either party, account/benefit increases, or new spouse.

Those involved in making a DRO a QDRO must answer these questions:

a. Do we restrict our review only to a determination that the DRO fits within the terms of the plan?

b. Do we request a copy of the PSA in order to make certain that the DRO matches the terms of the agreement?

c. If we see something, do we say something? In other words, is there likelihood that we may be involved in a future litigation by making the DRO a QDRO when there is something in the QDRO that did not match the wishes of the parties?

d. If one or more of the answers to these questions is yes, do we: (i) fully train a department to handle DRO reviews; or (ii) outsource the review to an organization that is fully experienced in conducting these reviews?

Answers to these questions must be deliberated carefully. Mistakes can be costly.

Furthermore, as part of these deliberations, we must address how, if at all, the DOL proposal redefining who is a fiduciary is applicable to DRO reviewers.

POSSIBLE IMPACT OF DOL PROPOSED FIDUCIARY RULE

Do people involved in the review of DROs expose themselves or their firm to the proposed DOL fiduciary rule? Although the likelihood is “no,” there may be “experts” who say “maybe.” Why?• Fiduciaries are “plan

administrators” who exercise discretion with the administration of a plan and who discharge their duties prudently and solely in the interest of plan participants and beneficiaries. Note here that DOL has stated that an Alternate Payee is a beneficiary of the plan.

• Fiduciaries must act in the “best interest” of the participants and

beneficiaries. Although “best interest” is more likely than not applicable to investments, will the final DOL rule extend that applicability to some non-investment services? In a June 2015 article (“View From Groom: Fiduciary Advice Proposal Signals a Fundamental Shift in the DOL’s Approach”), Jennifer Eller, a principal with the Groom Law Group, Chartered, wrote, “…the Department has chosen to reformulate the definition of fiduciary to encompass numerous types of sales activities that are clearly non-fiduciary in nature under current law. Because ERISA imposes legal responsibilities and liability on those acting in a fiduciary capacity, the effect of any revision to the regulation defining who is a fiduciary will necessarily be magnified.”

• If the DRO reviewer is a “fiduciary,” does that mean he/she must request and review the Property Settlement Agreement (PSA) in order to be certain that the DRO matches the wishes of the parties as described in the PSA?

• If the PSA is ambiguous, is it the job of the DRO reviewer to consult with the parties and/or their advisors to remedy the ambiguity?

When questions arise about “fiduciaries” and the DOL rules on “fiduciaries,” the expert most frequently mentioned as the one to consult is Fred Reish, a Partner at the Drinker Biddle law firm. I discussed these questions with Fred, and here is his response:

“In terms of actuaries and TPAs approving QDROs, it could happen one of three ways, and the consequences and status vary. First, if the person reviewing and approving a QDRO is the 3(16) administrative fiduciary for that purpose, then that 3(16) must be prudent in the review and approval. For both that purpose and the duty of loyalty (sometimes called “best interest”), the 3(16) needs to protect the plan and the participant

Therefore, a mistake made in dividing these assets in a divorce could be very costly for one of the spouses, and, possibly, for those involved in the divorce documents (lawyers, plan administrators or their delegates).”

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Most of the community property state controversy revolves around the question, “Does ERISA preempt state law as it is applicable to ERISA plans?” The U.S. Supreme Court, in their Boggs decision, settled the issue narrowly. That is, the settled issue was only with regard to ERISA preemption of a community property state law in connection with a testamentary (bequeathed by will) directive of a nonparticipant spouse. At issue was the rights of a nonparticipant spouse who provided in her will for her

community property portion of her former husband’s account to go to her children. Two U.S. Circuits disagreed on those rights — the 9th Circuit said she could not because of ERISA preemption, and the 5th Circuit said she could. The Court reversed the 5th Circuit’s decision.

g) An actuary DRO reviewer should consult ASOP 34.

CONCLUSIONIt is likely that calls for DRO

reviews will only increase, due to the rising divorce rate coupled with the Supreme Court’s Windsor ruling on same gender marriage. Therefore, TPAs and actuaries must be prepared for that growth.

Howard M. Phillips is a pension actuary. A past president of Consulting Actuaries Incorporated and

ASPPA, Howard has earned a Fellowship in the Society of Actuaries and a Fellowship in the Conference of Consulting Actuaries. He is a member, and past Board member, of the American Academy of Actuaries and ASPPA, and is enrolled to practice by a Joint Board of the Departments of Labor and Treasury. Howard is the author of Dividing Retirement Plan Assets in a Divorce.

The author extends special thanks to Mike Preston of Preston Actuarial Services for his peer review of this article.

to actuarial standards of practice; specifically ASOP 34, “Actuarial Practice Concerning Retirement Plan Benefits in Domestic Relations Actions.”

When dealing with these concerns, it’s important to bear in mind:

a) Easy to fix/verify.b) While federal law does not

allow a change in survivor benefits that belong to the non-participant spouse, state law will need to be consulted in connection with other stipulations in a prenuptual agreement.

c) A determination will be needed as to who is the borrower. Which of the parties (possibly both) enjoyed the loan’s proceeds?

d) If a plan amendment is out of the question, this remedy may need a lengthy conversation with the parties and their counsel.

e) An interim “death” DRO may need to be prepared quickly, with a full DRO prepared later.

f ) Drafting a DRO in a community property state is not as easy as one might think. Court opinions applicable to sharing retirement benefits in a divorce in these states are not consistent. Generally speaking, one might think that the nonparticipant spouse owns 50% of the benefit/account before the sharing discussion begins. Moreover, the sharing process in connection with death of a party before distributions occur is different than the “in life” sharing.

by ensuring that the DRO is Q, or qualified.

“A second scenario is where the TPA/actuary compares the DRO to a checklist and advises the plan sponsor (who in this case is the 3(16)) that the DRO satisfies the requirements to be qualified. In that case, the TPA/actuary is not a fiduciary, but must use reasonable care to avoid professional liability.

“In the third case, the TPA/actuary could actually approve the DRO, but without being a 3(16). In that case, the TPA/actuary has become a functional fiduciary and must adhere to the prudent man rule and the duty of loyalty.”

After discussion with other professionals who practice in this area, I believe that most who review DROs do so thinking they fall into Reish’s second scenario. However, care must be taken to ensure that the 3(16) fiduciary agrees.

Other Concerns for ReviewersWhat other concerns may arise

for a DRO reviewer? Here are seven:1. One or more items required by

law to be in the DRO (e.g., names, addresses, Social Security numbers of the parties) may be missing.

2. A provision in the DRO or the PSA which ends with “…per the pre-nuptial agreement executed by the parties.”

3. One or more outstanding plan loans, the repayment of which could be addressed in the DRO.

4. The PSA language sets forth the sharing in a defined benefit plan, described as if the Alternate Payee will have a separate account in the plan, and the plan only allows sharing via a sharing of the participant’s stream of payments.

5. The reviewer is told the participant spouse is in poor health, and may not survive the time needed to finalize a QDRO.

6. The plan is sponsored by an employer in a community property state.

7. The reviewer may be subject


UPCOMING CONFERENCES

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Jan. 21–22 ACOPA LA Advanced Pension ConferenceUniversal City, CA

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June 6–9 Women Business Leaders Forum New Orleans, LA

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July 19–22 Western Benefits Conference Seattle, WA

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REGIONALC O N F E R E N C E S

AMERICAN SOCIETY OF

PENSION PROFESSIONALS

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PHILADELPHIA MAY 19–20, 2016 MARRIOTT DOWNTOWN

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HOTEL CHICAGO

BOSTON JULY 14–15, 2016

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CINCINNATINOV. 9–10, 2015

NORTHERN KENTUCKY CONVENTION CENTER


Elevator Pitches — and Retaining a Client’s Loyalty

Sometimes you have just a short time to make an

impression.

BY JOHN IEKEL

MARKETING

Most of us are not going to find ourselves alone with a prospect in an elevator. But even if you’re not on an elevator, the fact remains that sometimes you have

just a short time to make an impression, capture attention and attract — and later, retain — a client’s loyalty.

So what’s your elevator pitch? To gain some insight into successful elevator pitches and

client retention strategies, we asked the experts at some top firms what works for them.

LOOK AT US! One has to attract clients before one can serve them. And

part of that is setting yourself apart from the competition. Some employ a big-picture approach. But a forest won’t

be a forest very long if each one of its trees is not adequately nourished.

“Laser focus is critical,” says Seth Holstad, an account executive at Alliance Benefit Group North Central States, Inc. (ABGNCS). “If you go too broad, you may be good at many things but not great at any one thing. Once you know what that thing is, capitalize on it.”

MassMutual melds the two, with an approach that is broad-based in a way that emphasizes individualized service. “We see the employee benefits marketplace undergoing a convergence as more employers seek to help their employees better manage their benefits and personal financial decisions,” says Chelsea Atiyeh, a regional sales director for MassMutual Retirement Services.

“What differentiates our approach to measuring plan

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health is the use of actual data — not averages or assumptions — to appropriately measure and improve results,” Atiyeh says. Alliance Benefit Group of Illinois (ABGI) also believes in providing data plan sponsors will find useful; it provides an annual report for plan sponsors and advisors that president/CEO John D. Blossom says “slices and dices participant behavior with demographic data on retirement readiness, investment diversification, contribution levels, etc.”

Theresa E. Piotrowski, a principal at Alliance Pension Consultants, LLC, reports that Alliance’s “combination of our open architecture investment platform and our advanced plan design expertise create a unique product offering” that clients can leverage, in turn, to attract new clients and increase their assets under management.

Micah DiSalvo, BMO Retirement Services’ national sales director, says his firm targets plan sponsors in the professional services and industrial markets. He also cites BMO’s penchant for encouraging new approaches, including challenging plan sponsors and participants to think differently about retirement security.

KEEP THE CUSTOMER SATISFIED

You’ve landed a client — now you’ve got to keep them. But how?

“Every action participants take through the website, on their statements, interaction with a call center representative, or in person with our education team is tracked,” MassMutual’s Atiyeh says. “Using this data we are able to provide prescriptive solutions for both plan sponsors and plan participants, customize their experience based on their past behavior and actions to help them achieve their retirement plan goals.”

MassMutual also recently restructured its relationship management team. This includes

85 education specialists deployed across the nation whose sole responsibility is driving participants to take action. And that’s paid off, Atiyeh reports: “Our relationship management team is a big reason why MassMutual has recently enjoyed record plan sponsor retention rates.”

Alliance seeks to earn loyalty by creating strong partnerships through service and by watching out for clients’ best interest. What drives loyalty to Alliance, according to Piotrowski, is that it:1. does not offer services that compete

with those its clients offer;2. critically reviews plans to identify

weaknesses in plan design and operations;

3. makes sure investments have no underlying issues, and helps address any identified; and

4. keeps clients informed.Making sure clients know they

are important is part of ABGI’s approach. “We do our best to provide each participant, each advisor and each plan sponsor with a sense of their importance to us and our value to them,” says Blossom.

Another loyalty-builder: cooperation. Jason Crane, Transamerica Retirement Services’ managing director of retirement sales, says Transamerica works to put together solutions that will best meet the needs of clients and their employees. So does ABGNCS, which believes that plan sponsors

With the Labor Department’s reproposed fiduciary regulations, what the rules will require is coming into sharper relief.”

know their own clients best and that their knowledge is “invaluable in structuring a total retirement plan solution that is as unique as their client,” Holstad says.

MAKE IT PERSONAL Keep in mind that you’re meeting

real needs and addressing individual concerns. “Not a single participant woke up in a cold sweat last night worried about the average expense ratio on their small cap growth fund. When we keep this is mind, we can address the real concern participants have: Am I going to have enough to retire?” says Atiyeh.

Serving individuals is key for ABGI, according to Blossom: “Recognizing the need for a holistic solution to help participants to save enough, we created a ‘Financial Fitness Center’ to help participants with financial well-being. It begins with a personal fitness assessment, includes individual personal phone consultation, or chat time, about any financial matter, and a financial aggregator to assemble and monitor all of a participant’s financial matters that post a daily net worth.”

In the process of meeting personal needs, listen. Crane says Transamerica is “continually listening” about what clients find useful. “We are also listening to our firm-level relationships with key distributors, and with other invested intermediaries like third party administrators,” he adds.

ADDING VALUE Another key component of good

client service, being competitive and retaining clients is adding value to what they do.

DiSalvo says BMO does so through “our expertise in plan design and ultimately driving better retirement outcomes for plan sponsors and participants.” Transamerica takes a similar tack; Crane says their services are “wide-ranging, and can be customized to meet the plan’s needs.”


includes financial fitness and lifetime income tools.

PLAYING BY THE RULES With the Labor Department’s

reproposed fiduciary regulations, what the rules will require is coming into sharper relief.

“We are particularly concerned about the possibility that helpful education may be precluded by redefining traditional education as advice through changes to the 96-1 rules,” says Blossom.

ABGNCS is proactive about obeying the letter and spirit of the new rules, according to Holstad — even though they have not been issued in final form and are not compulsory — yet.

Alliance is even more vociferous about that, which Piotrowski outlined: “Alliance’s resources are solely dedicated to retirement plan consulting, administration, record keeping and actuarial services. By focusing only on this business, Alliance operates without bias. We receive no compensation from the investments that our clients invest in nor do we have the distractions related to the sale of ancillary services.”

Piotrowski continued, “We charge a flat fee based on work performed, independent of plan asset values. We also don’t sell any products, such as IRAs, insurance or wealth management. We are solely dedicated to providing expert retirement plan design, recordkeeping and administration.” She adds, “Most importantly, we are up-front with our costs and provide full fee transparency. There are no hidden or wrap fees and all ad hoc service rates are provided.”

THE BIG PICTURE An elevator can’t take anyone

anywhere if it just sits in one place. Similarly, an elevator pitch won’t work if the company making it remains static and relies on doing the things one way because That’s The

Way We’ve Always Done It. ABGI has an eye on the future.

“We try to stay ahead of the curve for new ideas and services,” notes Blossom. And, he adds, “As interest in the amount of income that plan accounts will generate (not just focusing on more and more retirement capital) is heightening, we offer a ‘Lifetime Income Center.’”

DiSalvo said BMO has a big-picture approach and focuses on providing an open architecture platform with no proprietary minimums, combined with fee levelization.

Transamerica also thinks big. “We are bringing our ideas to the public domain and believe retirement readiness is a national issue. We are committed to changing the way people save by building a coalition to promote a retirement savings rate of 10% or more annually. We’re focused on leading the retirement readiness movement to help people create better financial futures,” Crane notes.

A sense of mission also fuels Transamerica, Crane reports: “We believe that people want financial security and independence, and it is our mission to help people save and invest wisely to live the life they want. If an employee can retire from their company with confidence, then I believe we all have achieved our goal.” He adds that helping the sponsor’s employees become ready for a secure retirement “is the ultimate measure of success for a retirement plan.”

Atiyeh concurs. “In every sales opportunity I make sure all parties are on the same page as to the purpose of the retirement plan: To help participants retire on time with choices. When I can keep that as the focus of the meeting it becomes clear to plan sponsors what is truly important.”

Keep the bottom line in mind — that of employers and participants. Atiyeh says employers are “increasingly realizing that it’s healthy for their bottom line to help employees retire on time,” According to Piotrowski, Alliance does both by offering “a high quality product in a very cost-efficient approach” as well as plan designs that can increase assets under management at a greater rate than traditional 401(k) plans.

ABGNCS looks within so it can look without. Says Holstad, “Providers need to have superior tools and customer service that are more than words in a mission statement or core values. Each employee in the organization must believe in and live by those values each and every day. Our organization does that. We instill and reinforce our core values from the very first day an employee starts with us.”

IT IS THE 21ST CENTURY…Technology is a key component

in attracting, serving and keeping a client. Here’s a sampling of how: � MassMutual offers iPod Touch

devices for use in education meetings and new patent-pending employee benefits guidance tool. � Transamerica provides a free

retirement forecast app. � Alliance has a website specially

geared toward participants, which offers them education, financial planning calculators, financial education articles, worksheets, interactive presentations, links to introductory videos and a retirement income feature that is displayed along with the estimated impact of increasing contribution amounts. � ABGNCS provides a plan

website, guides, video tutorials, a system that allows messages to be emailed to participants, whiteboard videos and an online tool that helps participants with planning. � ABGI’s website features tools

that make it easy for participants to understand options and make appropriate investment choices; it also


his summer, animal lovers worldwide were outraged by news reports that Cecil, a beloved lion that was one of Zimbabwe’s top tourist attractions, had been killed by a big game hunter. In a public statement released shortly after the story broke, Minnesota dentist Walter Palmer admitted to having shot Cecil, but claimed that he’d thought the hunt had been

legal. Zimbabwean officials, however, reportedly believed that Cecil had been poached illegally, and sought Dr. Palmer’s extradition to stand trial in Africa.

One might think that Dr. Palmer’s hunting hobby was irrelevant to his professional standing as a dentist, but a quick search online proves otherwise. Within a day of being identified as Cecil’s killer, Dr. Palmer shut

down his dental practice’s website and voicemail, closed his Facebook page and retreated from the public’s fury. Undeterred, angry commentators posted scores of furious diatribes on Dr. Palmer’s Yelp and Google pages, and continued to excoriate him all over the Internet. They joked repeatedly about Dr. Palmer’s profession, saying it was no surprise that a dentist’s favorite pastime was inflicting pain. Dentists nationwide must have winced.

Dr. Palmer’s fate rests initially in the hands of the United States and Zimbabwean governments. Eventually, though, the Minnesota Board of Dentists may be called upon to decide whether to discipline him. Then, the board will have to grapple with a question that bedevils disciplinary bodies in every profession: If a professional does something disgraceful that causes public outcry

ETHICS

A professional’s public disgrace can reflect badly not only on the individual, but on his profession as a whole.

Professionals Behaving Badly

BY LAUREN BLOOM

T

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but isn’t directly related to the professional’s practice, should he be disciplined by his profession?

The answer typically lies in the profession’s code of conduct. The American Dental Association’s Principles of Ethics and Code of Professional Conduct focuses primarily on dentists’ actions in the workplace, but includes a call for dentists to “represent themselves in a manner that contributes to the esteem of the profession.” However, that call is made in the context of marketing. Would big game hunting, even illegally, violate that provision?

And what if Walter Palmer were a member of ASPPA?

Every professional association’s code of conduct is designed to meet the needs of its members and the expectations of its publics. ASPPA’s Code of Professional Conduct is no exception. ASPPA members are required to comply with ASPPA’s Code. The employee benefits field is highly regulated, however, and ASPPA’s members work in many different specialties in that field. Most of them have professional credentials in addition to those conferred by ASPPA. Consequently, ASPPA’s Code has to set strong ethical standards for several professions without conflicting with applicable regulations, licensing requirements and the obligations imposed by the codes of conduct of the accounting, actuarial, investment advisory, legal and other professions to which ASPPA’s members belong.

ASPPA’s Code of Professional Conduct does not specifically require ASPPA members to refrain from engaging in conduct that puts the reputation of employee benefit professionals at risk. Thus, a publicly disgraced member of ASPPA might

lying to federal officials in 2008 about the circumstances surrounding a bear hunt. The fact that he was still practicing dentistry in 2015 suggests that the Minnesota Board of Dentistry may not have deemed his felony conviction sufficiently relevant to discipline him for it. But if Dr. Palmer is convicted of poaching in Zimbabwe, or of possession of hunting trophies in violation of U.S. law, the Minnesota board may want to take a second look.

Professionals enjoy positions of special trust in American society, which is why a professional’s duties of honesty, integrity and competence are so important. A professional’s public disgrace can reflect badly not only on the individual, but on his profession as a whole. The argument that a professional’s bad behavior was unrelated to his professional practice is a feeble one. It’s better to refrain from disgraceful, and especially illegal, conduct in the first place.

Lauren Bloom is the General Counsel & Director of Professionalism, Elegant Solutions Consulting, LLC,

in Springfield, VA. She is an attorney who speaks, writes and consults on business ethics and litigation risk management.

think his or her continued status was secure. Before breathing a sigh of relief, though, the disgraced professional would be wise to take a more careful look at two provisions in the ASPPA Code.

First, Section 13 of the Code states that “[a] Member whose professional conduct is regulated by another membership organization shall abide by the professional Code of Conduct (or similar rules) of such organization. For example, a Member who is an actuary shall also abide by the Code of Professional Conduct for actuaries.” Precept 1 of the actuarial code requires actuaries, among other things, to “uphold the reputation of the actuarial profession.” Thus, an ASPPA actuary who violated Precept 1 of the actuarial code might well find her membership in ASPPA at risk under Section 13 of the ASPPA Code. The professional codes of several other professions contain similar provisions, and might also provide a basis for discipline under Section 13.

Second, Section 10 of the ASPPA Code provides in part, “[a] Member who pleads guilty to or is found guilty of any misdemeanor related to financial matters or any felony shall be presumed to have contravened this Code and shall be subject to ASPPA’s counseling and disciplinary procedures.” Not all disgraceful incidents are illegal, and not all felonies are directly related to a professional’s practice. However, many professional bodies are reluctant to keep convicted felons among their members. Section 10 gives ASPPA the necessary flexibility to inquire into a member’s illegal conduct and discipline him as appropriate.

According to news reports, Dr. Palmer has a felony conviction for

What if Walter Palmer were a member of ASPPA?”


BY YA N NI S P. K OU M A N TA R O S A N D A D A M C . P O Z E K

E ver been on the way to the airport hoping to have time to grab a bite to eat before catching your flight? How about the same scenario during a short layover between flights? Nothing can lead to

a case of “hangry” more quickly than having those plans thwarted by traffic or a flight delay. AirGrub may be about to rid airports of hangry once and for all. Here’s how it works:

Step 1: Download the app.Step 2: Enter flight info or search by airport. Step 3: Order meal based on options available in terminal.

Step 4: On way to gate, skip line and pick up your fresh-made meal! Step 5: Bid hangry a not-so-fond farewell without having to bogart the pretzels.Okay, so I added Step 5. Your seatmates will

thank you for not making them listen to your stomach growling for the entire flight. AirGrub only launched a few short months ago; so far it’s only online at the Boston and San Francisco airports, but they are ramped up to add many more airports in the near future. Since the app is free for both iOS and Android, you will have a few bucks left over to get some fries with that.

TECHNOLOGY

AirGrub» AirGrub.com

Work Smarterby Leveraging Cheap

Technology

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N ot that long ago, if you lived outside a major metropolitan area like New York or Los Angeles, it was kind of a rarity to hear someone speaking a non-English language. Sure, you might have heard the occasional Spanish, but thinking back 10 years, how often did you have to communicate with someone speaking… I don’t know… maybe Slovakian?

Fortunately, we now have more opportunities to interact with people from different cultures who speak different languages. Maybe it’s at the airport; maybe it’s at the local coffee shop; or maybe it’s at a client enrollment meeting. Regardless of the locale, that language barrier can still be a thing. Introducing iTranslate Voice — the language barrier breaker downer.

There are more than 90 languages available, from Danish and Dutch to Hindi and Hungarian, Thai and Turkish. Tap the American flag and talk into the phone in English, and the app translates to the selected language with both text and audio. To reply, do it in reverse… the other person taps their flag and talks, and the app translates back into English. If the other person has the app running on their phone, you can even have a conversation back and forth through the built in AirTranslate function. You might not want to translate an entire SPD with it, but it will certainly help you through more than just small talk. The app is available for iOS and Android devices. It’s a little more expensive at $6.99, but still not enough to worry about the currency conversion.

Now, let’s all join hands and sing “It’s A Small World After All.”

I love the cloud. In fact, it probably is one of the greatest technological advancements of the last decade for small and medium sized businesses. Remember back in the day, when you had to

email files to yourself to print out on a home printer or a Kinkos (before it became Fedex Kinkos, then finally Fedex Office)?

Those days are over, and the cloud is now becoming less cloudy. Unclouded is an Android app to help you analyze and clean your cloud storage. Currently, the app can support cloud storage on both the Google Drive and Dropbox platforms, but speculation says Microsoft Office365 and Apple iCloud are around the corner.

How does it work? This radical algorithm lets you Explore Categories, Browse, Find Duplicates, see Last Modified, and Search. The Basic version is free, but for only $3.49 you can upgrade to Premium and link your Dropbox, Box, OneDrive and Drive accounts for full visibility. The only issue I have found is that you can only access one cloud at a time, which means that if you are trying to free up space by deleting duplicate pictures, the search feature and storage size are most helpful.

A ll right, all you retirement gurus, listen up! It’s time you took over control of your data and the ability for those pesky hackers to jack your stuff. Enter IPVanish to solve all your problems and provide you with “No

Fear Wi-Fi Roaming.”Free Wi-Fi is an awesome thing for all of us. Especially

criminals and hacks, who use this convenient resource to make you have to get a new Visa or Amex card every quarter! Basically, this product is one of the only tier-1 Virtual Private Network (VPN) solutions available to consumers, with speed, connectivity and the most competitive pricing anywhere.

For any of you other data junkies out there, the IPVanish VPN network spans 25,000+ Internet Protocols (IPs) on 225+ servers in 60+ countries. Wow. Why do you need IPVanish? (Or maybe you are a hacker and want to know about normal consumer uses.) Simple. You can watch your Netflix, Hulu, ESPN, etc. from anywhere in the world through the same VPN. Simultaneously, you stop spying, speed stealing and hacking, and keep your online presence private. It’s free to join, but

costs $6.49 to $10 per month.

iTranslateVoice» iTranslateVoice.com

Unclouded» unclouded.com

Adam and Yannis are always on the lookout for new and creative

mobile applications and other technologies. If you have any

tips or suggestions, please e-mail them at Adam.Pozek@

DWCconsultants.com and [email protected].

Yannis P. Koumantaros, CPC, QPA, QKA, is a shareholder with Spectrum Pension Consultants, Inc. in Tacoma, Wash. He is a frequent speaker at national conferences, and is the editor of the blog and

newsroom at www.SpectrumPension.com.

Adam C. Pozek, ERPA, QPA, QKA, QPFC, is a partner with DWC ERISA Consultants, LLC in Salem, N.H. He is a frequent writer and presenter and publishes a Blog at www.PozekOnPension.com.

IPVanish» ipvanish.com


Comment Letters on Fiduciary Rule, Form 5500-SUPThe latest on two important regulatory initiatives from the DOL and the IRS.

GAC UpdateBY CRAIG P. HOFFMAN

A SPPA’s Government Affairs Committee continues its efforts to represent

the concerns of our members to regulators in Washington. In this quarter’s column, I’d like to discuss two issues that were the subject of recent comment letters filed with the Department of Labor (DOL) and the Office of Management and Budget (OMB). (Note that all ASPPA comment letters are posted on ASPPA Net under the “Advocacy” tab.)

DOL FIDUCIARY RULEOne of the more important

recent DOL initiatives has been the proposed regulation to redefine who is a fiduciary by virtue of providing investment advice. (See the cover story in this issue.) In the 40 years since the current regulation was promulgated, much has changed in the way American workers save for retirement. In 1975, Section 401(k) had not yet been added to the Internal Revenue Code, and few defined contribution plans allowed participants the option to direct how their accounts would be invested.

The DOL proposal recognizes this dynamic. It is intended to reduce or eliminate potential conflicts of interest that might arise when retirement plan investment advisers get paid for making recommendations. In a joint comment letter on behalf of ASPPA, NAPA, ACOPA and NTSA, the American Retirement Association voiced support for the DOL’s goal of encouraging advisers to work under a standard that puts the best interests of

their clients first. The comment letter also suggested changes that would make the proposal more workable.

One of the more important requested improvements was to include a streamlined prohibited transaction exemption for “unconflicted” advisers in certain limited circumstances. Many retirement plan investment advisers operate under a “level compensation” model where their fees do not vary based on their investment recommendations. Since their fees are level, their advice is not conflicted.

The concern, however, arises when a participant wants to roll his or her account to an IRA and continue working with that same adviser. The services provided to an IRA owner usually require more time and effort than the typical services provided to an individual plan participant. As a result, advisers often charge a higher, but level, fee when they work with an IRA owner. If a plan participant wishes to continue working with the plan’s adviser when they roll their account to an IRA, the higher fee

would cause a prohibited transaction (even though the adviser’s fee is still level and unconflicted).

The comment letter recommends that the DOL provide a streamlined prohibited transaction exemption in these circumstances so that a plan participant can continue working with the adviser that he or she has come to know and trust. The streamlined exemption should be conditioned on three things:• the adviser’s IRA compensation

being based on a level fee arrangement;

• the compensation actually received must be reasonable for the services provided; and

• documentation is maintained to verify that the rollover was in the participant’s best interest and not done as a subterfuge to generate additional fees for the adviser.

FORM 5500-SUPThe second recent comment

letter, which was filed with the OMB by ASPPA GAC, related to the new questions that the IRS would like to add to the Form 5500 for the 2015 plan year. These questions may be answered through a new paper schedule, Form 5500-SUP, or for most filers, through new questions imbedded in and answered on the Form 5500 (and related schedules) in a normal EFAST filing.

The IRS first proposed adding the new questions in a notice filed in the Federal Register on Dec. 23, 2014. The notice asked for comments on the new questions, which ASPPA GAC provided in a letter filed on

The ARA comment letter suggested changes that would make the DOL’s proposal more workable.”

47WWW.ASPPA-NET.ORG

Unfortunately, as this edition of Plan Consultant went to print, it was not clear what the ultimate result of these lobbying efforts will be. ASPPA GAC will continue in our efforts to educate the regulators and members of Congress with the hope of ameliorating the potential adverse impact of implementing these changes for the 2015 plan year. This is sure to be a topic of discussion at the ASPPA Annual Conference later this month and in future editions of Plan Consultant.

Craig P. Hoffman, APM, is General Counsel for the American Retirement Association.

OMB on June 8, 2015. That letter took issue with the IRS supporting statement filed with OMB, which ASPPA GAC believed significantly underestimated the additional costs of plan administration resulting from the new questions. These added costs were magnified unnecessarily by the rush to get the new questions added for 2015.

A follow up face-to-face meeting with OMB, IRS and Treasury Department officials was held on July 14, 2015, to affirm the points made in the comment letters. In addition, meetings have been held on Capitol Hill to explain to members of Congress and their staff the unnecessary costs caused by the manner in which the new questions have been rolled out. ASPPA GAC found much empathy for our concerns, and members of Congress are expected to weigh in on the issue.

Feb. 23, 2015. That comment letter provided a number of suggestions regarding how the new information could be collected by the IRS in a more efficient and less burdensome manner. The letter also urged the IRS to delay the new data collection until no earlier than the 2016 plan year to reduce the unnecessary and costly burden caused by rushing to add the new questions on such short notice.

The next step in the process was an IRS filing made with the OMB on May 8, 2015. In that submission to OMB, the IRS indicated the new proposed questions would be included in the 2015 plan year Form 5500 without any changes from the draft published in the Federal Register. ASPPA GAC’s thoughtful comments and suggested improvements were disregarded entirely.

As a result, ASPPA GAC filed a follow-up comment letter with

» Death of a Salesman (continued from page 8)

the outcome of such a lawsuit. Furthermore, if the DOL does not provide some reasonable level of accommodation for direct sellers, it’s also possible that Democrats in Congress feeling sufficient political heat will rebel against the final rule and respond legislatively.

So pay attention to this aspect of the fiduciary saga. Even if it’s not currently getting as much media attention as other aspects of the rule, it is definitely a major issue. In the meantime, wither Willy Loman?

Brian H. Graff, Esq., APM, is the Executive Director of ASPPA and CEO of the American Retirement Association.this country you should be able to sell

your own stuff, whether it’s cars or annuities.

Without seeing the final DOL rule and how it handles this issue, it is impossible at this point to predict

after in the first place? Wouldn’t the investment world be better off without salespeople anyway?” There are certainly many people in the government, and in the retirement plan industry as well, who think along these lines. However, I for one do not subscribe to the view that all “salespeople” are bad actors. I believe salespeople serve an important role in the marketplace. That said, regardless of what your view is from a policy standpoint, I believe this issue is the single biggest threat to the viability of the proposed fiduciary rule going forward from a legal and political standpoint.

Unless the proposed rule is substantially changed to make it more practical for direct sellers, it is expected that lawsuits will be filed arguing that it represents an unreasonable restraint of trade. Many Americans still hold the perspective, both legally and politically, that in

...it is highly questionable how you could ever legally defend compliance with the standard as a captive insurance agent representing only proprietary products.”


ERISATHE

OUTLINE BOOK

2015

Sal L. Tripodi, J.D., LL.M.

www.asppa.org/EOB800.308.6714

49WWW.ASPPA-NET.ORG

ERISATHE

OUTLINE BOOK

2015

Sal L. Tripodi, J.D., LL.M.

www.asppa.org/EOB800.308.6714

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