How do third party administrators and pooled employer plans interact? A recent webcast took a deep dive into the question.
In the ASPPA-produced “TPAs and PEPs: Structure and Service Options,” the American Retirement Association’s Jake Linney addressed the services a TPA can provide to a PEP, the options for a TPA to sponsor a PEP as a pooled plan provider (PPP) and to provide fiduciary services to an outside PPP, and the options for providing non-fiduciary services to a PEP.
Setting up a PEP
Linney cited three models in which a TPA can set up a PEP:
- The small employer option, in which the TPA sets up a PEP for referrals they receive for small, cookie-cutter plans—usually safe harbor, start-up plans that need a simple service model. They are brought in via nonspecialist advisor or nonadvisor referral.
- The advisor specialist PEP, in which the TPA sets up a PEP for a top advisor with which they have a relationship. In this model, the advisor seeks a streamlined plan option for their cookie-cutter clients with a simplified service model.
- The partner distribution PEP, in which, for example, the TPA sets up a PEP for a regional CPA with 20 accountants.
Linney said that there are a variety of questions that a TPA can ask itself before setting up a PEP:
- Why would a partner want to set up a plan like this?
- How do you set up the partner for success?
- How do you create a sales network with the partner?
- How does your advisor/recordkeeper relationship change?
- How do you administer this plan?
Setting a partner up for success, he said, takes:
- creating a value proposition for them;
- giving them the tools to be successful; and
- having a precise value proposition in order for them to go out and sell the PEP.
Linney outlined steps a TPA can take to increase PEP sales:
- Identify a National Sales Director to prospect PEP distributors.
- Once you have a relationship, establish a key account manager who sets up a distribution network to sell through the PEP distributors.
- Develop an internal sales team.
- Work with the PEP distributor to set goals, metrics and reporting. Have clear goals and metrics so everyone has a clear vision about where you’re headed. After that, meet regularly to check on progress.
- Work with key account sales to clarify PEP distributor service.
- Work with account managers and administrators to clarify participating employer service.
Linney outlined the federal laws and regulations that govern the plan administrator’s role in a PEP. Under Code Section 413(e)(3)(A), a PPP is designated by the terms of the plan as:
- a named fiduciary;
- the plan administrator; and
- the person responsible to perform all administrative duties.
Linney told attendees that the IRS is going to publish model plan language for the amendments to Code Section 413 and ERISA Sections 3(43) and 3(44). But for now, under current guidance a mass submitter may offer a variety of administrative provisions in its plan, as outlined in Internal Revenue Bulletin 2017-29. One should pursue good faith compliance until guidance comes out, per Code Section 413(e)(4)(B), he advised.