PLANADVISER - September/October 2022 - 37

401(k). Employees making catch-up contributions after
age 50 may contribute an additional $3,000 this year to a
SIMPLE, vs. $6,000 to a 401(k) plan.
As businesses grow and mature, they may also encounter
user and investment limits with their SEP plan or SIMPLE,
and experts agree that some companies may benefit by
switching to a traditional 401(k). Yet, there are both real and
perceived barriers to transitioning plans, and that can keep
employers on the fence about acting until they must.
Sources say the industry has new solutions that can
make the transition relatively easy but admit that advisers
and providers could do more to get the word to employers.
Costs and Confusion
Financial advisers may want to focus outreach and engagement
efforts on employers that offer SEPs or SIMPLEs, to get
them thinking now about their retirement offering's future.
" There are some misconceptions
out there about what transitioning to a
401(k)-style retirement plan means in
terms of cost, time and effort, " explains
Christa Lacono, Los Angeles-based institutional
retirement senior product manager
at Capital Group. " Often, employers assume
that their costs will go up significantly or
that it will take a lot of time and resources
to make the move. If you're a small business,
you may not have [either]. But this is
where working with financial professionals on plan design
can help. The costs have come down, and there are more
solutions available for small plans than ever before. "
Jason Crane, head of retirement distribution at Ascensus
a bigger push into 401(k) plans by small-business owners,
according to sources. The availability of these offerings
also provides a new impetus for companies to work with a
financial adviser who can help explain the various options
and their trade-offs.
Capital Group recently launched its SIMPLE IRA [Individual
Retirement Account] Plus plan, which has the basic
structure of a SIMPLE but with a level of financial advice
and menu customization baked in. Lacono says the Plus
plan can provide solutions for employers that want a bit
more out of their retirement offerings but hesitate to transition
to a full 401(k) just yet. " We think this is a way for
small employers to set their employees up for success, " she
says. " We're also continuing to add features. We think this
is a really viable option for small businesses because they
can still offer a simplified plan but also begin building a
relationship with an adviser. "
" There are some misconceptions out
there about what transitioning to a
401(k)-style retirement plan means
in terms of cost, time and effort. "
Lacono adds that, with something such as the Plus plan,
in Chicago agrees. " I think there's been a growing recognition
within the adviser space that working with smaller
plans is possible and can lead to a broader relationship, "
he says. " Many of the needs of small plans are the same as
larger ones', and you may see employers want to do something
later on with insurance or cash balance plans, for
example. Advisers who take the time to build the relationship
early are going to see more of those opportunities. "
Recent innovations in financial technology have lessened
the administrative burden for advisers, Crane says.
Automation makes it easier to bring on new plan participants,
and technology can help manage basic portfolios.
Taken together, these factors have changed the economics
of plan management, so that advisers do not necessarily
need high plan minimums to make the costs work out.
" What we see today is that there are advisers who can work
with almost any size plan, " he says. " That's a shift that has
happened in the past few years that people may not be
readily aware of and can help employers bring a new layer
of financial advice and capability to their plans. "
New Solutions
Other things are changing, too. New product offerings are
giving employers more options for how they structure their
plan or plans. This enables greater plan customization and
employers can designate a target-date fund as the default
option but also provide a customized menu for participants
who are more proactive about investing. The result
is a user experience that hues more closely to what participants
get in a 401(k) plan, which can be helpful from a
change management perspective if an employer moves to
a 401(k) offering later, once the business grows.
The new state-run IRA programs, too, are prompting
some small employers to consider their options. The staterun
programs typically offer a very basic IRA to workers
who have no access to a plan. Generally,
in states with
these programs, employers not offering a retirement
benefit must register their employees with the state option.
Ascensus currently provides the basic account individuals
get if they are enrolled in CalSavers, California's
state-backed plan. Crane says, when employers look at the
basic plan, some decide they want to engage with a financial
adviser to get more customization and sponsor their
own offering for employees.
" From our view, we want to see people get enrolled in
a plan so we can solve the coverage gap issue. That's why
we've been very involved with the state plans; we think
there has to be more than one solution, " Crane notes. " But,
that said, we've seen where some smaller employers look at
the basic state IRA and decide they want more. So the existence
of the state plans is really moving the conversation
about retirement forward, and more employers are getting
engaged on this issue, which is positive. " -Bailey McCann
planadviser.com September-October 2022 | 37
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PLANADVISER - September/October 2022

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