PLANADVISER - September/October 2022 - 14

trends
Of Mutual Benefit
Advisers can help small nonprofits-a market that's expected to grow
FOR ADVISERS seeking new prospects, a developing corner
of the institutional retirement plan consulting space is
nonprofits, says Michael Flahaven, a senior vice president for
Hub International Ltd. in the firm's Midwest financial services
practice. Hub's retirement plan services team already has
clients in the nonprofit sector, he says, and the company sees
this as one of many areas with significant growth potential.
Flahaven says ensuring that nonprofit plan sponsors
understand their requirements and responsibilities under
the Employee Retirement Income Security Act is critical.
" Generally, all employer-sponsored retirement plans,
whether they're nonprofit 403(b)s, for-profit 401(k)s, pensions,
deferred compensation plans or profit-sharing plans, are
covered under ERISA, " he notes. " The exceptions are governmental
plans and plans offered by religious entities such as
churches, synagogues or mosques. "
He says it is important for advisers serving the latter group
of non-ERISA plans to help them see the importance of establishing
a prudent and effective plan management process.
There may be less potential fiduciary liability to address, but
participant outcomes will be better if the plan is operated in
an efficient, transparent and dependable manner.
According to Flahaven, there are a few actions advisers
can take to help protect nonprofit organizations as fiduciaries.
First is the provision of regular fiduciary training to the
named fiduciaries and to any functional fiduciaries, such as
the members of the retirement plan committee, should one
be in place.
Next, seek to ensure that adequate fiduciary liability
insurance policies have been established, assuming the plan
sponsor is covered by ERISA. Flahaven says advisers entering
this space should be very clear on when and how ERISA
applies in the operation of retirement plans by nonprofits. It
does not happen often, he says, but it is not unheard of to
come across a potential nonprofit client that mistakenly
believes its plan is exempt from ERISA.
Despite the benefits of following ERISA best practices,
Flahaven says, there are also advantages to being a nonERISA
plan. A non-ERISA nonprofit does not have to provide a
summary plan description and quarterly and annual investment
information to plan participants, for example. Nor do
non-ERISA plans need to file a Form 5500 or related schedules.
" Since 403(b) plans are subject to universal availability
requirements that mandate all employees are immediately
eligible to participate-with a few minor exceptions-the
plan does not have to conduct actual deferral percentage
testing, " Flahaven adds. " As a result, highly compensated
employees may save as much as they want, up to the legal
limit, without concerns for what non-HCEs save. This is also
true for ERISA 403(b) plans. " -John Manganaro
14 | planadviser.com September-October 2022
Art by Katherine Streeter
http://www.planadviser.com
PLANADVISER - September/October 2022

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