PLANADVISER - March/April 2020 - 18

cover story
competitive without having any dollars in there, " Matheson
says. He conjectures that the first to buy in will " be established
smaller plans that are interested in the fiduciary risk
transfer or the cost savings. " From there, advisers " can pick
up the incremental new business, with clients where it's
their first money in and [the participants'] first deferrals. "
The first generation of PEPs is apt to be fairly bare-bones,
giving employers few options for customizing their plan for
their workers, Campbell says.
" At least at the beginning, PEPs won't be terribly flexible, "
he says. " To get the concept off the ground and running
efficiently, the initial PEPs may have some limited features.
But as the PEP market develops, we may start to see more
customization. "
The more complex a plan gets, the more regulatory guidance
it may need, Campbell adds. This is a further reason
the earliest plans will likely be less sophisticated.
Still another challenge advisers will face is the potential
revenue impact. There is much potential for new business,
but the whole purpose of PEPs is to create a less expensive
structure. That means existing clients that move into a PEP
will probably expect to receive discounted prices.
" PEPs are a less expensive structure, so someone is going
to get paid less, whether it's because they get disintermediated
or because the simple weight of purchasing power
leads to accelerated fee compression, " Swisher observes.
What's Next?
As PEPs will not come to market until the beginning of next
year, advisers have several months to prepare. Key to those
preparations will be for the adviser to have first decided
what his best role will be, whether to serve as a PPP, act
as a 3(38) fiduciary, provide another service, or do some
combination.
Advisers not creating a PEP on their own will need to
connect with service providers that are-to learn more about
their PEPs and also to potentially align themselves to work
with one of these providers in the future.
" This year is about [the various players] understanding
the potential that PEPs have-both good and bad-and
figuring out whether there's a role for them and their practice
and how it will affect their business, " Campbell says.
WHY CHOOSE AN OPEN MEP?
MYTH
REALITY
Open MEPs are a
low-cost retirement
plan alternative.
Employers are able
to totally offload
plan administration.
Open MEPs are likely to come in many " models, " as
plan providers create their own version of a multiple
employer plan. Pricing will depend on the size of the
plan, its design and the level of services provided.
" It's not just about whether PEPs are good or bad for your
client, but it's also about what it means for your practice and
whether you need to make changes. "
Before next January, the Treasury and DOL may also
provide further guidance, including
additional information on potential
ERISA [Employee Retirement
Income Security Act] issues, necessary
exemptions, and services a
PPP may outsource. Still, Campbell
says, there may be less such guidance
this year than some advisers
would like.
" The election is going to affect
While open MEPs are certain to take a large chunk of
the administrative burden off the shoulders of smallbusiness
owners, not every task can be outsourced. At
a minimum, employers will likely be required to submit
timely payrolls, receive and update participant deferral
and loan changes, and monitor outstanding loans.
Open MEPs relieve
employers of
their fiduciary
responsibilities.
Open MEPs are designed to relieve small-business
owners of many of the fiduciary responsibilities of implementing
and managing a plan, but not all. For example,
timely submission of payrolls, and tracking deferral and
loan changes are a fiduciary responsibility, and one that
employers will likely continue to handle under a MEP. It's
important for them to review any services agreement
with the 3(16) fiduciary to understand what is and what
is not covered under the agreement.
Source: MassMutual, " Open Multiple Employer Plans "
the regulatory agenda and timing, "
he says. " If Trump is re-elected, that
will have one effect. If not, there's a
bigger delay while the new administration
figures out what it wants
to do and what policies it wants to
keep or change, and where it is in
that process. "
Those who are planning to
create PEPs must start considering
their plan design and working on
plan documents, as well as identifying
potential clients and a sales
and marketing plan to reach them.
" What's the magic that's going
to make new clients or plans in
general join these things? " Rausser
says. " They're going to be like any
other
in that they're going to need to be
sold. Don't think that, just because
you built it, potential clients will
knock on the door and ask to be in
one. " -Beth Braverman
retirement plan structure,
18 | planadviser.com March-April 2020
http://www.planadviser.com
PLANADVISER - March/April 2020

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