PLANADVISER - July/August 2018 - 26

I certainly don't think people will be trying to comply with
rules that no longer exist. But I do believe there will be
continued trending to sponsors encouraging advisers to
take into account a participant's best interests in providing
information and advice on rollovers, " he says.
The demise of the revised fiduciary rule comes as plan
sponsors are beginning to take more interest in providing
help to their employees nearing retirement, says Douglas
Webster, managing director at SageView Advisory Group
in Knoxville, Tennessee. " Their employees are looking to
[them] for direction on how to prepare for retirement. They
want to know, 'How do I make this transition? Where do I
go?' " he says. " So sponsors are having more conversations
with us about providing resources for that transition, and
utilizing plan design and investment options that are more
distribution-phase friendly. We are very much seeing a
trend of sponsors wanting to encourage people to keep their
assets in the plan. "
Three Key Sponsor Decisions
If a plan sponsor wants an adviser's help to think through
distribution-phase issues, it first needs to decide whether it
prefers that departing employees keep their money in the
company plan or roll it out of the plan. " It's a timely question,
with what we just went through with the DOL rule, "
says Scott Matheson, managing director and defined contribution
(DC) practice leader at CAPTRUST in Raleigh, North
Carolina. " Before that, most plan sponsors had not given
thought to that question in particular. "
Sponsors considering the upside of people staying in the
plan should think about the economic benefits, Matheson
says. " You end up with larger account balances in the plan,
and the larger asset base gives the plan more purchasing
power for negotiating recordkeeping and other administrative
fees, " he says.
Employers also get benefits from a work-force management
standpoint when they turn their 401(k) from a capitalaccumulation
plan into a true retirement plan, Matheson
says. " Offering a 'cradle to grave' retirement plan can be a
good idea if an employer is trying to solve for recruitment,
retention and retirement issues, " he says. " But if they don't
have the final 'retirement' leg of the stool-and it's just 'OK,
good luck out there'-it can be very hard as an employer to
convincingly tell that story. "
Pensionmark Financial Group LLC advisers talk to sponsors
about the benefits but also the challenges of reaching
departed employees who remain in the plan, says Jennifer
Tanck, the firm's executive vice president and chief compliance
officer, in Santa Barbara, California. " The No. 1 'con'
is, how much control do employers have over terminated
participants? They have to receive all
sures and notices as the employer's active participants. But
these are the folks who tend to forget to tell their previous
employer when they move, and then the employer has to
track them down to give them the required notices.
" Add to that when former employees get divorced, and
all of a sudden there's a QDRO [qualified domestic relations
order] involved, adding another terminated account, "
he continues. " Also, if the sponsor decides to move from
one recordkeeper to another, all participants must receive
conversion disclosures,
including re-enrollment and fund
changes, which can be cumbersome and costly. "
Attorney Bruce Ashton often hears employers say that
when a former employee remains in the plan, they have taken
on additional fiduciary responsibility and risk for someone
who no longer even works there. " If you assume that former
employees are more likely to become disgruntled, to become
'squeaky wheels,' there is that risk, " says Ashton, a partner
at Drinker Biddle & Reath LLP in Los Angeles. " But as long as
the plan is operated appropriately and the sponsor carries
out its fiduciary responsibilities properly, it is not giving its
former employees much to squeak about. "
Weighing the pros and cons of departed employees
staying in the plan, Ashton says, " The pro of lower costs
generally outweighs the cons of squeaky wheels and having
to ensure that former employees get all the required notices. "
Second, employers who elect to let money remain in the
plan need to think about providing retirees with helpful
distribution options, Matheson says. They should consider
not just adding alternatives such as systematic withdrawals,
but also keeping the costs low for retirees who utilize those
options, he says.
" Plan sponsors have not been uniform in having good
distribution options beyond lump sums, to encourage people
to stay in [the] plan, " he says. " But just providing lump sums
does not give retirees a way to carry through a sustainable
withdrawal strategy or to do multiple periodic withdrawals. "
While Webster sees more plan sponsor interest in
offering distribution options that are tailored to retirees, he
has yet to see many sponsors adopt in-plan annuities, due to
concerns such as complexity and fees. " I think we're going to
see continued advancement in technology and robo-advice
solutions that will give these participants improved personalization
for investment and distribution options, " he says.
" Maybe those solutions will integrate some insurance-based
products, but I think that [approach] will be packaged under
more of a managed account solution, rather than offered as
a stand-alone option in the plan. "
And third, employers thinking about distributionthe
same disclophase
issues should decide whether they want an adviser
to educate their participants about distribution options or,
instead, advise them. " There's no doubt that, because of
the DOL rule, employers are now very aware that [advisers]
could be talking to their participants about rollovers, " says
attorney David Kaleda, a partner at Groom Law Group,
Chartered, in Washington, D.C. " Some of them like the idea
that if anybody is going to offer their participants rollover
recommendations, he should always act in the participants'
best interests. It will be interesting to see if many sponsors
insist that you, as an adviser, have to contractually agree
to act as a fiduciary if you want to give their participants
advice on rollovers. "
In the purely legal sense, it is now as if the DOL's revised
fiduciary rule never existed, Oringer says. " But the amended
rule heightened sensitivity to these conflicts of interest. And
I'd think that advisers would want to at least consider, from
a business perspective, whether they want to go all the way
back to the way things were. For a financial institution to say,
26 | planadviser.com july-august 2018
http://www.planadviserdigital.com/planadviser/july_august_2018/TrackLink.action?pageName=26&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - July/August 2018

Table of Contents for the Digital Edition of PLANADVISER - July/August 2018
