According to a July 2013 GAO study, only 12% of the 4.8MM US Employers with more than one but less than 25 employees offers a workplace retirement plan. (401(k) / SIMPLE / SEP). This leaves millions of Americans without “coverage,” and is exacerbating the problem of funding Americans’ retirement. It’s also a problem that, given the right products, Advisors are best-suited to address.
Tired of waiting for private-enterprise to better this statistic, a handful of states are examining a political response. California and Connecticut are two examples, each studying “Feasibility” of laws that would require business with a minimum number of Employees (10 in CA, 5 in CT) who do not offer a retirement plan to participate in a “Payroll Deduction” IRA programs managed by these states.
This is in addition to H.R 2035 (Sponsored by Richard Neal D-MA) at the Federal level, which would require business with more than 10 employees to either offer a workplace savings plan, or facilitate employee deferrals into IRAs.
Obviously, there’s a big difference between bills / feasibility studies and law. But, if private enterprise alone won’t improve the statistics above, then government is obliged to try.
As an organization who specializes in delivering 401(k)s and Payroll Deduction IRAs to the small-business segment (1-25 Employees), www.theonline401k.com believes this an opportunity for advisors to engage their small-business customers on the benefits of tax privileged retirement savings. We can help Advisors easily, inexpensively, and profitably set-up workplace savings plans – so that these various governmental mandates won’t apply.
A guest post by John Marion from Howard Capital Management
Howard Capital Management started on the journey to achieving Computer Model Certification 5 months ago. We started down the road because we wanted an independent third party to review our methods for compliance with ERISA and we wanted the certification to show it.
There are very few companies that are approved by the Department of Labor to certify computer models under ERISA. DALBAR is one of the best know of these companies. So we chose DALBAR as the “gold standard” to conduct our certification.
Five months ago, we asked DALBAR to open the Optimizer’s hood and kick the tires. The certification process covers the following points, among others:
- Clean background check
- Investment theory is generally accepted
- Performance and fees are reasonable
- 5-year track record
- No conflicts of interest
After 7 weeks of intense scrutiny, we received DALBAR’s certification on May 20th, 2013. Needless to say we are proud to have received this credential.
Now we can say that the Optimizer has been evaluated by DALBAR to determine if it meets the requirements to be used as a Certified Computer Model as defined by the Employee Retirement Income Security Act of 1974, as amended [“ERISA”] Section 408(g) and Internal Revenue Code [“IRC”] Section 4975(d)(17). As a result, the HCM 401(k) Optimizer® computer model has been granted Certified Computer Model status by DALBAR. This is important, because ERISA plan fiduciaries who meet all other ERISA requirements and use a certified computer model will qualify for the fiduciary relief granted under ERISA Section 408(g).
There are very few companies offering models that have been certified and none that we know of that embrace the Advisor as the Optimizer does.This is very important because it allows us to partner with advisors to offer plan sponsors a solution that can grant them fiduciary relief.
Image Courtesy of nuttakit at Freedigitalphotos.net
We have always believed that the local Financial Advisor working on cooperation with a Proactive Plan Sponsor can make a difference when it comes to participant outcomes. We also believe that when you unconditionally serve the rank and file employees good things happen for the employees, the Plan Sponsor and the Advisor.
The debate continues as more and more data is revealed about the effectiveness of: Auto-enrollment; auto-escalation; one-on-one enrollment meetings.
So when I come across a person that HAS seen it work, I am happy to listen to what they have to say. Ed Dressel, the President of Trust Builders and TRAK is one of those people that does believe it works.
You can listen to how his product is helping Advisors garner more business and increase participant outcomes here
You can read his thoughts about participant education here
You can watch how his software enables Advisors to get away from technical talk and show participants the money and how time changes their outcomes here
Photo courtesy of Adamr and freedigitalphotos.net
What if you woke up and a new agency had been added to oversee how your industry did business?
What if the statistics that your industry promoted were not answering the bigger questions?
What if new regulations (if enacted) would alter the way you did business?
What if you would take on increased liability if you had to change your business model?
What if the fees you currently charge were being compressed?
What if the industry you practice in did not rank high in the “trust” category?
I have been accused of being Chicken Little before. I only had to be correct once for that moniker to go away.
Things are changing my friends and if we (the real We) don’t get together, folks will be taking care of their retirement accounts on the webpage just behind their health insurance.
To read articles that inspired my remarks click here