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The Cash Balance Catch Up   

 

AUTHOR: Blake Willis, COO of JULY Services

I am grateful for the American small business owner, and I admire their grit, tenacity and innovative spirit. Small business owners account for over 50% of American employment and create more than 60% of new jobs . They put their money where their mouth is; more specifically, into their practices, firms and ventures.

But at JULY, we don’t want to just pay lip service to the vital role small business owners play in our economy. We want to equip these cornerstones of the economy with a tangible way to build retirement security. So, how do we help those who often spend decades plugging their profits back into their businesses and writing excessive checks to Uncle Sam at the expense of their 401(k)s? Cash balance plans.

Cash Balance Plan

A cash balance plan is a type of qualified retirement plan that enables business owners and highly compensated employees to maximize tax deductions and accelerate savings. A hybrid plan, it combines the best of both a defined benefit and a defined contribution plan.

JULY’s Regional Sales Directors provide expert field support for retirement plan-focused financial advisors and third party administrators. They organize and host educational events, coordinate plan design illustrations, prepare and present proposals, and are speakers on topics relevant to industry professionals. Geringer will be responsible for working with advisors and other JULY relationship partners in the West Central Region and will be based in Denver, Colorado. See JULY’s national sales map for more details.

Essentially, it’s a way to save more, faster.

Best Candidates

Healthcare industry professionals, lawyers, dentists and CPAs who own their own practice, or other types of businesses that have steady cashflows and high profits and are already maxing out their 401(k)s are likely to benefit from a cash balance plan.

 
 

Advantages

  Maximize Tax Deductions

  Accelerate Savings

  Provides Measure of Certainty

  Flexible Plan Design

  Easy to Understand

  Small Employee Benefit

Maximize Tax Deductions

Cash balance plans are one of the last, best tax deductions available to the American small business owner. Even the most aggressive small business 401(k) plan cannot replicate the financial benefit these plans offer.

How? Cash balance plans are uniquely structured to allow the business owner(s) to receive an outsized percentage of funds contributed to the plan compared to their employees. Paying a few thousand dollars to employees and an administrative fee that begins at four to five thousand dollars is quickly recovered by the gargantuan-in-comparison tax deduction the business owner receives.


Accelerate Savings

It’s not too late to save big. And quickly. Cash balance plans dramatically accelerate retirement savings. Yearly 401(k) contributions are capped at $57,000 for those under fifty and at $63,500 for those fifty and over. This level of savings is often not enough for high earners to maintain their lifestyle in retirement.

When high earners combine their cash balance plan with a traditional 401(k)/profit sharing plan – which almost all cash balance sponsors do – they can set aside $100K+ more per year.

Cash balance plans also offer an effective diversification method for owners who have too much money tied up in their firms or would like to hedge against some higher-return, riskier investments.

Provides Measure of Certainty

Cash balance plan contributions are typically invested in a conservative manner, but participants receive a set rate of return (normally 3-5%, which is defined in the plan document) regardless of the actual performance of the funds. Remember, since a cash balance is, in part, a defined benefit plan, the amount the owner will receive is defined no matter the gains or losses the investments yield.

A cash balance plan is not focused on huge gains from the market, which may make this seem like a less-than-flashy investment. And it is. But a cash balance plan not being subject to the whims of a highly volatile market is freshly compelling in the light of COVID-19.

Just this past March, the Dow dropped more than 35%, and the CBOE Volatility Index “VIX”, commonly known as the “fear index,” reached an all-time high. While the market has since recovered most of the ground it lost, the near and medium-term outlook remains highly uncertain, per Fed Chair Jerome Powell . Cash balance plans offer a refuge from market turbulence in the form of set, predictable returns for participants.


Flexibility in Plan Design

Cash balance plans offer a high degree of flexibility in plan construction.

A Tale of Two Partners – Consider an ENT practice with two partners. Think about these highly compensated professionals’ educational and career trajectories. The first partner just turned 35. The second partner is 55.

Both partners completed extensive schooling (often 8 or even 12 years of postsecondary education), studying hard in undergrad, medical school and in residency. Both partners worked to establish their practice. They assembled a great team, built their book and established a solid infrastructure. But that’s where their paths diverge.

The 35-year-old is still paying off student loans (often $100K+ for specialty doctors), is building a new home for her expanding family and saving intensely for her children’s education through a 529 plan. She is likely not interested in a cash balance plan.

The 55-year-old has raised a few kids, put them through college and paid off his daughter’s recent wedding. He is comfortable in his career, has no debt and few expenses and is rapidly approaching retirement age. He is a prime candidate for a cash balance plan.

A cash balance plan can help the 55-year-old understand his financial goals and create a plan to rapidly meet them. We can adjust the plan to exclude the younger partner, or bring them in at a much lower, but equally beneficial contribution level.

Easy to Understand

Like a 401(k), cash balance plan statements are easy to understand. Contribution and interest credits are clearly delineated in an easy-to-read, lump-sum format. Participants know exactly where their money is, how it’s being invested and what their account balance is.

Simply put, clarity + transparency = happy participants.

Employee Benefit

While cash balance plans require some pay-in to employees’ accounts, it is a small tradeoff when you take into consideration the enormous tax break employers reap because of it.

But even this small contribution can increase employee morale, help retention rates and attract new talent.

The Cash Balance Impact

I’ve become a champion for cash balance plans, because I see firsthand the outsized impact they have on individuals’ ability to save quickly and smartly for retirement.

The combined benefit of shielding a quarter million dollars from a 37% tax rate while earning a respectable three to five percent return on that investment makes a compelling argument.

As with any retirement plan, there are drawbacks. Some factors for small business owners and financial advisors to take into consideration before proceeding with a cash balance plan are: the IRS’ permanency requirement (plans are not to be altered often), an excise tax can be levied against the owner for failing to make yearly contributions and census data can affect the level of employer benefit.

Partner with JULY

Cash balance plans are the fast-growing segment of retirement plans. Financial advisors have an opportunity to partner with JULY to seize upon this trend.

Our advisor-centric approach provides support to educate advisors on cash balance plans, craft a proposal and design a plan for their clients.

For more on how cash balance plans work and the advantages they offer: https://www.julyservices.com/plan-types/cash-balance/

 
 

About the Author

Blake Willis is a highly recognized thought leader and event speaker within the retirement and financial services industry, and a domain expert in cash balance plans. He is one of the nation’s leading authorities on all aspects of retirement plan governance, plan design and 3(16) plan administrator roles, but also practical aspects of retirement plans such as product development and distribution strategies.

 

1 https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

2 Some plans may elect to credit the actual rate of return.

3 https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20200429.pdf

4 Assuming the highest tax bracket.

 

About JULY:

JULY is a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services. Our employees have served as plan experts to advisory firms, advisors, and employers in the small and micro 401(k) plan market for over 25 years. Over the last decade, our in-house software development team has built a host of proprietary technology solutions to streamline, automate, and simplify all facets of retirement planning to make processes rewarding and easy for our clients. For more information about JULY, visit our website https://www.julyservices.com.

 

Don’t Shirk Fiduciary Responsibility – Shift It   

 

Offering a retirement plan to employees has several benefits for small business owners.

1.  Speaks volumes about how they value their employees

2.  Demonstrates their long-range vision

3.  Allows them to participate in the plan themselves

However, reticence to accept fiduciary liability has long been a significant barrier to more widespread small business employer adoption of retirement plans.

A fiduciary is legally and ethically bound to act prudently on behalf of retirement plan participants. Small business employers are automatically granted fiduciary status when they provide employers with a retirement plan, which means they must assume liability and either themselves execute or outsource many administrative tasks for the plan. Plan fiduciaries are tasked with knowing the rules and managing over 200+ fiduciary tasks and could even face legal and financial repercussions if they neglect to prudently oversee the plan. Examples of some of these duties include:

1.  Monitoring plan providers and ensuring fees are reasonable

2.  Maintaining the plan document

3.  Approving distributions and loans

4.  Monitoring employee eligibility and contributions

JULY’s Proven 3(16) Track Record

JULY can take on the responsibilities a 3(16) fiduciary must perform every year, which can consume your plan administrator’s time.

We have years of experience serving as functional 3(16) fiduciaries through such innovative offerings as our Launch401k and Liberty401k plans. These customized, cost-effective, simple-to-operate plans lessen the fiduciary burden placed on small business owners.

Recently-passed legislation took steps allowing small businesses to even further shield themselves from fiduciary responsibility.

The SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act expands Americans’ access to retirement savings. It includes many provisions aimed at making it easier for small business employers to join multi-employer plans (MEPs), and pooled-employer plans (PEPs), for which a pooled plan provider (PPP) will serve as the designated 3(16) fiduciary.

Pooled Plan Providers (PPPs)

“Think of a PPP as a 3(16) plus,” Blake Willis, COO of JULY, says. While a small business owner’s fiduciary duty to their employees will never disappear entirely, a PPP shields them even further by serving as the top-level, named fiduciary for the plan participants. This finally shifts the real risk and administrative burden from employers – who lack time, industry-specific knowledge and resources – to the PPP.

JULY’s Fiduciary Promise

Small business owners/employers are naturally entrepreneurial spirits who relentlessly pursue their objectives. They are major drivers of job growth and spur innovation. However, the same risk-tolerant business approach that enables their companies to succeed is not necessarily transferrable when it comes to ensuring a high level of fiduciary care for their employees’ retirement plan.

Here at JULY, one of core values calls us to conduct business with a ‘Servant’s Heart’. This relationship-centered approach to business means we will always act with integrity. Whatever our fiduciary capacity, JULY holds itself to an unimpeachable standard when it comes to handling our participants’ retirement security.

 

About JULY

JULY is a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services. Our employees have served as plan experts to advisory firms, advisors, and employers in the small and micro 401(k) plan market for over 25 years. Over the last decade, our in-house software development team has built a host of proprietary technology solutions to streamline, automate, and simplify all facets of retirement planning to make processes rewarding and easy for our clients. For more information about JULY, visit our website at www.julyservices.com.

Expanding the Future of Retirement – MEPs, PEPs and the SECURE Act   

 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in late 2019. Designed to aid Americans’ ability to save for retirement, it enjoyed broad-based, bipartisan support in Congress. “The SECURE Act excites us here at JULY because its aim is in lockstep with our mission: building retirement security,” John Humphrey, President and CEO of JULY, says. “We enthusiastically support any legislation designed to expand Americans’ access to a more secure retirement future.”

 
 

Prior to the SECURE Act’s passage, small business owners and employees already had the option of utilizing a multiple employer plan (MEP) – a retirement savings plan shared by two or more related employers. This enabled them to lower a plan’s associated administrative costs and shift fiduciary responsibility from themselves to the plan provider. The SECURE Act sought to build upon – and slightly adjust – the MEP model’s demonstrated success in lowering costs and increasing access to retirement saving via several key provisions:

  Fixed the “One Bad Apple” Rule for MEPs

  Removed the “Common Nexus” Requirement

  Created Pooled Employer Plans (PEPs) to be Governed by Pooled Plan Providers (PPPs)

 

Fixed “One Bad Apple” Rule

MEPs are not a new concept, having been around for the better part of a century now. However, many companies were justifiably hesitant to adopt them because of a risk factor beyond their control: fellow participating employers in the plan. There was a fear that “one bad apple” among the employers that comprised the MEP would shirk fiduciary responsibility (e.g. fail to make timely contributions) therefore jeopardizing the plan’s overall health.

The SECURE Act created a mechanism for spinning these “bad apples” out of MEPs while keeping the rest of the participants’ funds safe. “Small business owners and employees will find MEPs not only digestible, but appetizing now that this safeguard is in place,” Blake Willis, COO of JULY, says.

Removed “Common Nexus” Requirement

Participating employers were formerly required to be bound by a connection besides their retirement plan such as being in the same trade industry or geographic location. The SECURE Act removed this limiting “common nexus” requirement. Companies are now free to band together with fellow unrelated employers under an Open MEP for the practical, attractive benefits of lowering costs, increasing bargaining power and shifting both the administrative and/or fiduciary burden.

Created Pooled Employer Plans (PEPs)

The SECURE Act also created an entirely new type of MEP: the pooled employer plan (PEP). A PEP allows unrelated small businesses to band together under one retirement plan, hopefully creating economies of scale, which must be governed by a pooled plan provider (PPP).

Think of a MEP as a sector fund. Its representative members are confined to a single industry. A PEP, on the other hand, is more akin to a general mutual fund. Its participating employers represent many industries from a broad swath of the market.

Pooled Plan Provider (PPP)

The SECURE Act stipulates that pooled plan providers (PPPs) will serve as a PEP’s named fiduciary and plan administrator. This builds upon and legitimizes the past decade’s trend whereby providers began taking on more 3(16) and 3(38) fiduciary responsibility.

While small business owners participating in a PEP will still have a fiduciary responsibility to choose a prudent advisor and ensure said advisor’s continued prudence, the PPP dramatically eases their exposure to liability. “The SECURE Act settles the question of whom top-level fiduciary responsibility belongs to,” Willis says. “It is definitively the province of the PPP.”

The professionals at JULY have a proven track record of providing 3(16) fiduciary services, and are well-positioned to enter the PEP market. The retirement plan industry awaits specific regulatory language about the SECURE Act’s provisions from the DOL. JULY is actively monitoring developments to ensure our products and services take full advantage of the Act’s many beneficial provisions.

Looking Ahead

"Small business owners will spend much of 2020 rebuilding their businesses as a result of the economic hit they incurred from COVID-19. However, one thing the pandemic hasn’t changed is this: providing employees with access to solid retirement security options is one of the best ways for small business owners to demonstrate they care about their employees’ wellbeing,"

– Humphrey says.

If the pandemic has brought anything into perspective, it’s how invaluable savings are during times of uncertainty. PEPs should provide a measure of comfort for small business owners and employees seeking to build retirement security.

 
 

About JULY:

JULY is a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services. Our employees have served as plan experts to advisory firms, advisors and employers in the small and micro 401(k) plan market for over 25 years. Over the last decade, our in-house software development team has built a host of proprietary technology solutions to streamline, automate and simplify all facets of retirement planning to make processes rewarding and easy for our clients. For more information about JULY, visit our website. https://www.julyservices.com .

 

Could Your 401(k) Plan Better Meet Your Business’ Needs?   

 

The beginning of the year is a popular time for employers to review their retirement plans for compliance and effectiveness. This year, when you’re evaluating your 401(k) plan, you may want to consider how, in addition to giving your employees a way to save for retirement, the plan could be used to improve your business’ bottom line.

 

Consider whether your business is taking full advantage of the basic benefits of sponsoring a retirement plan or if modifying your plan’s design could make it more valuable to the company. Employers generally sponsor retirement plans to help them recruit and retain qualified employees and for the tax advantages. Here are some business goals your plan might help you accomplish.

Protect Profits for Key Employees

Professional service firms and small businesses, in particular, may want to look at optimizing the plan’s ability to accumulate capital for certain key employees and owners/stockholders in a tax-deferred and cost-effective manner. One way is to make sure that the total plan administrative costs, including employer contributions, are less than the income and FICA taxes that would be due on those contributions if paid as compensation. The fact that plan account balances are protected in bankruptcy is an added benefit for this group of employees.

Cut Training Costs

Has your business incurred high training costs due to turnover of managers or other skilled personnel who aren’t viewed as “highly compensated” under the tax law? Use your 401(k) plan as a retention tool. One idea: Add a profit sharing feature to your plan that covers only these employees. Using a three-year cliff vesting schedule (100% vesting after three years) for the profit sharing contributions may help limit your training costs by lowering turnover and, thus, lessening the need for training. The plan could also allow withdrawal of the funds once they’d vested as an added retention incentive.

Increase Productivity

A management change often causes productivity to drop — sometimes significantly — while employees familiarize themselves with the new manager and his or her expectations. Bringing in a new employee at any level can decrease productivity temporarily while that employee learns the job. Using plan features to retain managers and trained employees can help maintain productivity levels.

Including plan features that employees want, such as a variety of investment options to choose from and investment tools, education, and assistance to help them plan for retirement, can increase productivity. Employees who are happy with their jobs and appreciate their benefits generally are more committed to their employer and more productive in their work.

As a plan sponsor, you can foster commitment and productivity by regularly providing employees with plan information and financial education. Providing regular communication about benefits can sometimes increase commitment almost as much as the benefits themselves. Employees feel you, the employer, care about their future.

Improve Customer Satisfaction

Happy employees usually provide better service and leave customers more satisfied. In addition to using your 401(k) plan to generally improve work force morale, you might want to consider taking specific steps to tie the plan to customer satisfaction. For example, you might tie profit sharing contributions or discretionary employer matching contributions to feedback you receive from periodic surveys of your customers. You might engage employees by conducting meetings to update them on customer satisfaction and expected contributions.

Of course, every employer’s needs are different. We would be happy to review your plan with you and discuss ideas for using it to accomplish specific business objectives.

 
 
“Using plan features to retain managers and trained employees can help maintain productivity levels.”
 

JULY Hires Ryan Geringer as West Central Sales Director   

 

Press Release

 

Waco, TX – July Business Services (JULY), a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services, is pleased to welcome Ryan Geringer as the company’s West Central Regional Sales Director. Geringer joins a growing team of regional business development leaders that provide expert service to financial advisors and TPA partners on all facets of the sales process, including retirement plan design, proposals, prospecting, and sales support.

Geringer has more than 15 years of sales and service experience in the retirement planning industry. Prior to joining JULY, he worked for Paychex Retirement, ASPire Financial Services and Great-West Life & Annuity Insurance Company. In each of these roles, he excelled at connecting advisors with resources and opportunities to help them grow their business.

“We are excited to welcome Ryan to our growing sales team. He has an appreciation for JULY’s independent, entrepreneurial culture and tech-enabled retirement platform and looks forward to working with advisors, plan sponsors and institutional partners in creating tailored retirement plans to help participants build retirement security.” – John Humphrey, JULY’s CEO.

JULY’s Regional Sales Directors provide expert field support for retirement plan-focused financial advisors and third party administrators. They organize and host educational events, coordinate plan design illustrations, prepare and present proposals, and are speakers on topics relevant to industry professionals. Geringer will be responsible for working with advisors and other JULY relationship partners in the West Central Region and will be based in Denver, Colorado. See JULY’s national sales map for more details.

 

About JULY:

JULY is a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services. Our employees have served as plan experts to advisory firms, advisors, and employers in the small and micro 401(k) plan market for over 25 years. Over the last decade, our in-house software development team has built a host of proprietary technology solutions to streamline, automate, and simplify all facets of retirement planning to make processes rewarding and easy for our clients. For more information about JULY, visit our website.

 

Creating SECURE Act Solutions   

 

JULY’s CEO, John Humphrey, contributed an insightful article to the Summer 2020 issue of Plan Consultant Magazine. The SECURE Act is a significant piece of legislation that clears the way for broader use of MEPs, but it could also be the catalyst for significant market disruption over the next decade.

Creating SECURE Act Solutions

Change is afoot—and with change comes both opportunity and risk

BY JOHN HUMPHREY

While the future is never certain, the SECURE Act1 could end up being one of the most significant pieces of legislation to shape the U.S. retirement plan landscape over the next decade. The full weight of the retirement plan industry is hard at work studying the legislation, awaiting regulations, and deciding how to go to market with SECURE Act solutions.

Over the next few years, providers will create or participate in varying flavors of multiple employer plan (MEP) products. These new solutions will have several goals, including reducing the retirement coverage and savings gaps, simplifying processes, lowering costs and fees, and, just maybe, shifting true fiduciary responsibility from the employer to the provider.

Now is the time for providers to seek answers, create solutions, take risks and define how they will participate in this changing retirement plan landscape.

JUST ANOTHER PLAN DESIGN?

In some ways, the emergence of MEPs is just a new plan design—like crosstested plans back in the early 1990s. Under this premise, providers need to know the rules and be ready to handle their specialties.

TPAs must be able to provide consulting and administration, recordkeepers need to retool systems and be ready to efficiently manage recordkeeping for MEPs, and advisory firms and asset managers must identify and align with vendors and platforms to take advantage of the new rules.

If a provider sees MEPs as just another new plan design, they simply need to learn the rules and align with other providers to assist them.

…OR A RETIREMENT PLAN MARKET MAKEOVER?

Looking through another lens, however, one can see a more disruptive picture. It is quite possible that MEPs could result in wholesale changes to both sales and servicing models for the qualified plan market. Through this lens, we might see a significant acceleration of trends from the past decade where providers began accepting some responsibility (i.e., 3(16) fiduciary, 3(38) fiduciary, etc.) to a marketplace where firms across the industry accept top-level fiduciary responsibility, and finally shift the real risk and administrative burden from employers who lack both the knowledge and resources to fulfill their roles.

While there are some vendors that were pioneers in offering fiduciarycentric service models, most still operate under a ''third party'' model designed in the early 1980s to shield providers from liability (and real responsibility).

While a solid argument can be made that 401(k) plans really are the responsibility of employers offering them, a different chorus seems to be growing. If more vendors embrace true fiduciary responsibility, a complete makeover of the retirement plan marketplace could occur.

Through this lens, providers would be advised to take a more aggressive, proactive approach to creating SECURE Act strategies to remain relevant and be positioned for future success.

WHO OWNS THE CLIENT?

An interesting question gaining momentum that could add fuel to the market makeover theory is: Who owns the client under these new arrangements? Will it be advisors, recordkeepers, TPAs, or asset managers? While this issue has been around for years, the SECURE Act is bringing it to the forefront.

Firms seeking to strengthen their positions may become sponsoring organizations of MEP products, including serving as creators of group programs under the Association Retirement Plan rules2 or ''group of plans'' (GOP) rules,3 or as Pooled Plan Providers (PPPs) of PEPs.

Pete Swisher, President of Waypoint Fiduciary, LLC, an industry expert on MEPs, provides consulting services to firms building SECURE Act solutions. In his practice, Pete confirms seeing product development work across the industry to allow providers to gain

 
''Now is the time for providers to seek answers, create solutions, take risks and define how they will participate in this changing retirement plan landscape.''

better control over client relationships. He states, ''Most of the retirement industry is focused on helping clients and co-workers through the COVID-19 crisis, but the irst movers on group solutions are still moving, innovators both inside and outside the U.S. are crafting responses, and the first PEPs are likely to launch, on schedule, on Jan. 1, 2021. After that you can expect a rolling series of announcements as an increasing number of vendors introduce SECURE-influenced changes to their product lineups.''

WHAT STEPS SHOULD PROVIDERS TAKE?

Here’s a look at how some organizations may be approaching SECURE Act product development and steps other firms may need to consider as they look ahead.

Advisors

Advisors are the driving force for retirement plan sales. They play vital roles in relationship management, building investment lineups, and enrolling and educating participants. Some advisory firms are studying the SECURE Act with a keen eye and see the opportunity as a final step toward finishing the ''who-owns-the-client'' debate.

These firms may create solutions where they serve as top-level fiduciary by becoming the sponsoring organization of multiple employer programs. In these ''advisor first'' solutions, firms may create or enhance in-house platforms, or look to recordkeepers and TPAs to assist them in building and managing their solutions.

Other advisory firms may seek ''off-the-shelf'' options or get help from other vendors in creating their own SECURE Act products to allow advisors to adapt and compete. In either scenario, advisory firms will be a driving force for the creation of SECURE Act solutions.

Recordkeepers

Recordkeepers are the technology hubs that bring together the retirement plan parties (participants, employers, advisors, TPAs, and asset managers). They provide sales support to advisors, offer broad-based payroll integration critical to fulfilling fiduciary responsibilities, and offer bundled plan administration and 3(16) fiduciary services or partner with outside TPAs for these functions.

Some recordkeepers may decide to create their own SECURE Act solutions, including serving as toplevel fiduciaries and distributing their products as off-the-shelf options through advisory firms who decide not to create their own products. Others may seek to enhance their technology and capabilities to help other providers create and manage white-labeled solutions.

Regardless of their strategy, recordkeepers may need to expand their capabilities to be fully prepared, including offering in-house 3(38) investment fiduciary services or enhancing partnerships with outside vendors, expanding payroll integration solutions, and partnering with TPAs or creating their own 3(16) fiduciary capabilities.

Third Party Administrators

TPAs are compliance experts. They are critical to designing plans and providing plan administration. They play vital roles in sales and servicing, and TPAs willing to take some risks could have interesting opportunities for SECURE Act solutions.

One obvious approach TPAs firms may consider is serving as delegated 3(16) plan administrators in vendors’ SECURE Act solutions. A growing number of TPAs now offer 3(16) services, and it is likely others are considering doing so.

Some TPAs may take a more proactive approach in creating their own MEP and pooled employer plan (PEP) products. This approach may be well-suited to larger TPAs with regional sales teams, in-house technology and product development capabilities, and solid distribution networks. These TPAs will need to identify product partners, including recordkeepers and 3(38) investment fiduciaries to help them round out services.

Asset Managers

Asset managers have played a significant role in spurring growth and capitalizing on the 401(k) opportunity over the past four decades, starting with the creation of bundled mutual fund and insurance company group annuity products in the mid-1990s. According to the Investment Company Institute,

total assets in 401(k) plans were $6.2 trillion as of Dec. 31, 2019, and about 65% of these assets were in mutual funds.

Because of the significant stake asset managers have in the 401(k) market, many are studying the SECURE Act and see it as an opportunity for furthering assets under management.

If forthcoming regulations are favorable and include the necessary fiduciary exceptions for including their products in investment lineups, asset managers could reinvent their bundled 401(k) platforms and create products serving as top-level fiduciaries. Because many of these firms already have national distribution networks, they could play a key role in disrupting the market. Some firms may offer advisor-friendly solutions, and others may expand their ''direct-to-sponsor'' approach.

CONCLUSION

The SECURE Act is a significant piece of legislation that clears the way for broader use of MEPs, but it could also be the catalyst for significant market disruption over the next decade. It is quite possible that the SECURE Act could turn the current ''third party'' service model into a ''first party'' model, in which vendors across the industry embrace being true fiduciaries to reduce employers’ liability and administrative burdens.

Vendors should take notice, study the legislation and upcoming regulations carefully, and begin modifying their service models and capabilities to remain relevant.

And as for the question of & who owns the client''—while the issue is clearly being brought to the forefront, given the complexity of our market and the need to make strides in improving the overall retirement system, now is the time for our industry to work together, leverage vendor strengths, and build the retirement system of tomorrow.

John Humphrey cofounded July Business Services in 1994, where he now serves as President and CEO. Previously he was a CPA with several national accounting firms, including Ernst & Young in Dallas.


©2020, American Society of Pension Professionals & Actuaries (ASPPA). Reprinted with permission from the Summer 2020 issue of Plan Consultant magazine.

Blake Willis Promoted to Chief Operating Officer   

 

Blake Willis Promoted to Chief Operating Officer

Waco, Texas, February 6, 2020 – July Business Services (JULY) recently announced that Blake Willis has been promoted to the role of Chief Operating Officer.

 

With over 20 years of industry experience in all facets of retirement plan sales and operations, Blake’s new role will further enhance JULY’s focus on operational and service excellence. He will drive operational improvements and offer executive leadership to the firm’s core operations, including recordkeeping, administration, actuarial and client services.

Prior to his role as COO Blake spent the past 5 years leading and building JULY’s sales and installation teams, including developing new institutional relationships and sales channels, representing JULY as a public speaker, and supplying technical and sales support to sales team members and advisors.

John Humphrey, President and CEO of JULY, says of Willis’ promotion: “I am excited about Blake assuming a broader responsibility as Chief Operating Officer for JULY. He has worked hard over the past several years and developed into a trusted resource for our sales team and advisors nationwide. His deep industry knowledge and experience combined with his get-it-done approach will now broaden his impact and help us continue our upward trajectory in recordkeeping and plan administration excellence.”

Regarding his new role as COO of JULY, Willis commented: “I am thrilled to serve JULY in this new capacity and look forward to playing an integral role in the continued growth of our company.”

 

About JULY:

July Business Services is a leading retirement plan provider that supports financial advisors and their clients by delivering successful retirement plan strategies through its fully independent, open-architecture retirement plan recordkeeping platform and plan administration services. JULY brings unbiased, expert knowledge to all facets of the retirement plan process including customized plan design, leading technology, and hands-on implementation and management of the plan. JULY supports clients with an expansive, conflict-free investment platform, including ETFs, collective trusts, professionally managed portfolios, and mutual funds.

Our team understands that retirement is the number one reason for individual investing, and for many investors, company-sponsored savings and investment plans are the foundation of their retirement savings strategies. Our role in assisting organizations to offer employee retirement plans is fundamental to our mission – “Building Retirement Security”. Please visit https://www.julyservices.com for more information.

 

JULY Honors Veterans   

 

In honor of Veterans Day, JULY proudly acknowledges the service and sacrifices of its employees and employee family members who have served our country within a branch of the U.S. Armed Forces. Following is a listing of those we celebrate and honor today.

JULY Employees

Name Branch of Service Details JULY Job Title
Anabel Figueroa U.S. Navy Chief Petty Officer, 15 years of service Fee and Billing Coordinator
Julie Gale U.S. Navy Petty Officer 3rd class Client Service Manager
 

Relatives of JULY Employees

* Deceased veteran

 
  • Eugene Edward McNamara

    Eugene Edward McNamara

    Specialist, Vietnam War
    Father of Kelli Pledger, Internal Sales Consultant

  • Mike Shumaker

    Mike Shumaker, third from left

    U.S. Army, Sergeant Major, 3rd Brigade Combat Team, 1st Calvary Division at Fort Hood Husband of Shelly Shumaker, Accounting and Payroll

    Additional Details:

    Mike has been on active duty for 24 years. Mike, Shelly and family have endured two deployments to the Balkans, three to Iraq, and one to Egypt (time totaling over 5 years).

    About the photo:

    Mike’s job at the time this photo was taken was in Egypt as part of the Multinational Forces & Observers Team. They were based with soldiers from all over the world. Their mission was to supervise the implementation of the security provisions of the Egyptian-Israeli Treaty of Peace and to prevent any violation of its terms. There were 14 countries represented in all. Mike made a ton of friends-his favorites were the soldiers from Fiji- and Genero, one very outspoken Italian soldier.

  • Great Uncles of John Humphrey

    Great Uncles of John Humphrey, CEO

  • Wayne Rockwell

    Wayne Rockwell

    U.S. Navy, WWII
    Grandfather of Michelle LeCates, VP of of Marketing & Relationship Management

  • Sammy Humphrey

    Sammy Humphrey

    North Korea, 1952
    Uncle of John Humphrey, CEO

 

 
  • Ray Johnson

    A newspaper clipping on Ray Johnson’s early military career

  • Ray Johnson

    A citation from the Secretary of the Navy for Ray Johnson’s division highlighting bravery and determination.

  • Ray Johnson

    Ray Johnson with his plane

  • Ray Johnson

    Ray Johnson in uniform

  • Frank Johnson

    Frank Johnson as a brand new arrival in the tropical land of Vietnam

 

 
  • michael giovenazzo

    Mike Giovenazzo, Uncle of Brian Smith, Regional Sales Director (Plaque is at Mt. Soledad National Veterans Memorial in La Jolla, CA)

  • Mike and Joe

    Mike Giovenazzo, Uncle of Brain Smith, Regional Sales Director, in Pearl Harbor days before the attack

  • giovenazzo brothers

    Uncles of Brian Smith, Regional Sales Director

  • jack smith

    Jack Smith, Uncle of Brian Smith, Regional Sales Director

  • jack

    Jack Smith, Uncle of Brian Smith, Regional Sales Director, aboard the U.S.S. Stonewall Jackson

  • Bob

    Bob Jones, Uncle of Brian Smith, Regional Sales Director, in Vietnam. At the time he was a Major, retired as a Colonel. He was a helicopter pilot in U.S. Army 1st Cavalry Division.

  • Frank Johnson

    Robert Casagrande (right), Grandfather of Brian Smith, Regional Sales Director, during WWII. He was a Staff Sargent in Patton’s Third Army.

 

 
  • Mel Mai

    Mel Mai

    U.A. Air Force – Served in WWII – Grandfather of Doug Mai, Director of Information Technology

  • John O'Neal

    John O'Neal

    U.S. Navy – Served in WWII – Grandfather of Doug Mai, Director of Information Technology

  • Fredrick J. Kroger*

    Fredrick J. Kroger*

    U.S. Army – Served in WWIIPOW in France – Grandfather of Megan Knapp, Marketing & Institutional Relationship Coordinator

  • Steven B. Bogner Steven B. Bogner

    Steven B. Bogner*

    U.S. Army – WWII, Wounded on Omaha Beach, Normandy, France – Step Grandfather of Megan Knapp, Marketing & Institutional Relationship Coordinator

    Details

JULY Announces PremierPath401k   

 

JULY Announces PremierPath401k – an Innovative Retirement Plan Solution for Small Businesses

PremierPath401k leverages capabilities of Envestnet and BNY Mellon’s Pershing

Waco, Texas, November 6, 2019 – July Business Services (JULY) has released a new streamlined retirement plan solution called PremierPath401k. The solution, custodied by BNY Mellon’s Pershing ("Pershing") Retirement Plan Network, includes a dynamic 3(38) investment lineup managed by Envestnet Retirement Solutions with integration into the Envestnet platform, allowing for advanced research, integrated analytics, and expert advisory support.

PremierPath401k leverages Pershing’s Retirement Plan Network, which is a trust-level platform designed to hold and service assets of qualified retirement plans.

PremierPath401k includes plan design options best suited for small businesses, payroll integration, and 3(16) and 3(38) fiduciary services.

With Envestnet Retirement Solutions serving as the 3(38) investment fiduciary, advisors and plan sponsors are provided with comprehensive quarterly reports, and a diverse, low-cost fund lineup. Complete plan level data integration ensures streamlined access to Envestnet’s advisor tools and resources.

According to a new state-by-state analysis published by the American Retirement Association (ARA), more than five million employers in the United States still don’t offer a workplace retirement savings benefit, a generation after the 401(k) plan design was first introduced. 1 PremierPath401k provides advisors and their clients a simple, easy-to-understand retirement program, taking much of the heavy lifting off plan sponsors.

 

"Building tech-enabled retirement solutions with institutional partners like Pershing and Envestnet gives advisors access to robust platforms and reporting. We strive to offer innovative solutions to help advisors grow their retirement plan practices while making retirement plans easier to set up and manage for small businesses and their employees,"

– said John Humphrey, JULY’s CEO.
 

"Advisors are increasingly recognizing the growth opportunities presented by offering small business 401(k) plans," said Hans Schemmel, director of retirement, insurance-based and cash management solutions at Pershing. "We are thrilled to have worked with JULY and Envestnet in bringing this packaged solution to our respective clients. This and other similar efforts we have underway underscore our commitment to delivering advisors best-in-class solutions that help drive their retirement business forward."

 

"Envestnet’s vision is to build a fully integrated unified advice platform to empower financial advisors to help their clients achieve their goals," said Khash Sarrafi, Senior Vice President of Institutional Sales for Envestnet Retirement Solutions. "We continue to seek innovative solutions that help advisors, and we believe providing a simple solution backed by strong key partnerships and proven methodology will deliver on our mission."

 

To learn more about PremierPath401k please visit https://premierpath401k.com.

1 Business Wire, July 23, 2019

 

About JULY:

JULY is a leading retirement plan provider that supports financial advisors and their clients by delivering successful retirement plan strategies through its fully independent, open-architecture retirement plan recordkeeping platform and plan administration services. JULY brings unbiased, expert knowledge to all facets of the retirement plan process including customized plan design, leading technology, and hands-on implementation and management of the plan.

Our team understands that retirement is the number one reason for individual investing, and for many investors, company-sponsored savings and investment plans are the foundation of their retirement savings strategies. Our role in assisting organizations to offer employee retirement plans is fundamental to our mission – "Building Retirement Security". Please visit https://www.julyservices.com for more information.

 

Encouraging Greater Plan Participation   

 

If your work force includes employees who aren’t taking full advantage of your 401(k) retirement plan, you may want to look for ways to increase plan participation. Below, we answer some commonly asked questions.

 

Why is it better to have more employees fully participating in a 401(k) plan?

Increasing employee participation can help plans pass nondiscrimination testing. If a plan does not have a 401(k) safe harbor provision, low participation rates among non-highly compensated employees (NHCEs) could cause the plan to fail the actual deferral percentage (ADP) and actual contribution percentage (ACP) tests. Sponsors of plans that fail may have to either make contributions to NHCEs or make corrective distributions from the 401(k) plan to highly compensated employees (HCEs). Neither option is desirable.

Are there any other benefits to increasing employee participation?

Yes. Employees who don’t take full advantage of a 401(k) plan are at risk of not having enough savings to retire comfortably. Increasing employee participation can help employers make sure their employees are better prepared financially for retirement.

How can employers increase 401(k) plan participation?

To increase employee participation, employers can implement plan design changes and provide financial education to employees.

What plan design changes can an employer make to help increase employee participation?

Implementing programs such as automatic enrollment, automatic contribution escalation, and matching, as well as instituting a shortened enrollment waiting period, can help increase employee participation in a 401(k) plan.

How does automatic enrollment work?

With automatic enrollment, employees are enrolled in the plan at a preset contribution rate. Employees can elect not to contribute or to contribute a different percentage of their pay. Since many employees choose not to opt out of automatic enrollment, automatic enrollment tends to increase participation rates.

Can you explain automatic contribution escalation?

Generally, the default deferral rate for 401(k) plans is too low for many employees to accumulate enough money to meet their retirement income needs. With automatic contribution escalation, an employee’s deferral rate is gradually increased over time and according to a specified schedule. An employee may opt out of the increases.

How do matching contributions increase participation?

When an employer matches all or a percentage of an employee’s contribution amount, employees are more motivated to contribute because the employer’s contribution is viewed as potentially “free money” for the employee. Though such a program would create a direct expense for the employer, it can be an effective way to increase participation.

What is a shortened enrollment waiting period?

Some plans require a new employee to wait a period of time before starting to make deferrals to the 401(k) plan. Shortening or even eliminating this waiting period would make it possible for more employees to become eligible to participate. If employer contributions are not accelerated, employers incur no additional contribution costs with this approach. However, if a company has a high rate of employee turnover, this strategy may result in a high number of 401(k) accounts with small balances, which could increase plan administration costs.

How will providing financial education to employees increase participation?

A knowledgeable employee is more likely to understand the value of participating in his or her 401(k) plan. So the education materials should clearly communicate both the importance of saving for retirement and the benefits of participating in a 401(k) plan. Several different types of education materials can be used. Employers also may want to consider providing one-on-one meetings with financial advisors.