PLANADVISER - September/October 2018 - 25

MEPs enable small companies, working closely with an
adviser and provider, to enjoy the economies of scale historically
reserved for larger plans. At the same time, MEPs can still
offer each adopter flexibility in plan design features, including
matching or discretionary employer contributions.
Either way, advisers are a crucial lynchpin in evaluating the
best path for small businesses, ready to educate their clients
about new options and helping them to understand the labor
market and tax-benefit implications of private plan sponsorship.
Adviser Opportunity
" Plan sponsors, advisers, and recordkeepers have made steady
progress on market practice innovations that, collectively, have
created a huge opportunity for advisers, " says Musto.
The combination of a high-quality financial adviser and
a local third-party administrator (TPA), steeped in plan design,
administration, and compliance expertise, is a natural, industrydriven
solution to small plan challenges.
Advisers and TPAs can gather a team of experts that is highly
flexible, ensuring that challenges in plan servicing are backed up
by the right partners. Among the additional services that TPAs can
" layer " onto the adviser's offering is acting as a fiduciary in the
context of ERISA's section 3(16). This allows the adviser to more
seamlessly bundle fiduciary oversight of plan administration with
his or her own 3(21) or 3(38) investment services.
For small businesses that are profitable professional practices,
one suggestion could be a cash balance plan. These hybrid
plans, combining the flexibility of workplace savings and the high
contribution limits of a defined benefit plan, are gaining significant
traction in this part of the small plan market. According to
the Kravitz Cash Balance Research Report, their number surged
from 3,500 to over 23,000 in the last 10 years.
Their generous tax advantages make them a boon to
firm owners who have delayed retirement saving and want to
contribute over $50,000 a year. These plans can also greatly
benefit employees, with employers
contributions to employee accounts by 50% or more when
adding a cash balance plan.
Small Business
in the U.S. Economy
99% 48% 63%
of U.S.
businesses
of U.S.
workforce
of all new
job creation
Source: U.S. Small Business Administration Office of Advocacy,
" Frequently Asked Questions, " August 2018.
typically increasing their
A similarly tax-advantaged savings vehicle that has become
the talk of the industry in recent years is the health savings account.
" HSAs have a dual-utility when it comes to workplace
savings plans, " says Musto. HSAs can play a significant role in
protecting retirement savings from unforeseen medical expenses.
And HSA savers can, after age 65 or upon Medicare eligibility,
withdraw HSA savings not used for eligible health expenses and
pay tax at the same rate as they would for a standard IRA distribution.
As
the HSA market continues to mature, advisers will play
a crucial role in integrating HSA investment into broader, holistic
planning strategies for their clients.
The Rise of the Purpose-Built Provider
Plan sponsors and advisers today are looking for recordkeepers
that offer expertise,
technology, and independence, ensuring
that they offer contemporary best practices that allow advisers to
concentrate on what they do best. Such " purpose-built " providers,
whose core focus lies with retirement plan servicing, are creating
even more efficiency for advisers in the small market.
* Expertise: Advisers benefit from these providers'
specialized expertise in the small market. They are capable
of providing plan design, servicing, and technical consulting
both directly or through TPA partners in a way that largeplan-focused
providers may not.
* Technology: Platforms purpose-built for the small
market deliver efficiency and quality at a cost structure that
enables advisers to drive investment selection independently
and provides the information and insights most helpful to
them in managing their practice.
* Independence: Increasingly, these purpose-built firms
are looked to as a source of conflict-free, open-architecture
solutions offering best-of-breed services from different
providers. This enables advisers to work in a completely
conflict-free model on behalf of their client.
Today, several diverse trends are converging on workplace
savings markets that promise to contribute to both
increased retirement savings levels and broader coverage,
notably in small businesses, says Musto.
" Advisers will ultimately be at the heart of this continued
transformation, guiding America's small business owners to
make informed decisions about their future and the future of
their employees, " he concludes. n
To learn more about the adviser opportunity in the small
business segment, visit bit.ly/SmallBizOpp.
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PLANADVISER - September/October 2018

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