Common Remitter

[austin3515]

What do you guys know about being a common remitter, and the SPARK Data Files? We;'ve been asked to propose on this service. Does my question alone indicate that I have no business getting invovled? I read some articles that talk about people doing it in Excel, and others with comprehensive web-based platforms that connect sponsors, fund companies and employees. We're bidding on a very small start-up one.

[ETA Consulting LLC]

Common remitter services is merely using a single platform to disburse payroll withholdings across various fund companies for 403(b) plans. Just think, when you have a 401(k) plan, the employer typically cuts one check to the trust for funding the 401(k) deferrals, matching contributions, and loan repayments that are part of the single payroll. This is one check going to the trust. With a 403(b), you may have one participant with investment elections stating 25% goes to Custodian A, 25% to Custodian B, and 50% to Custodian C. The employer would have to cut three checks for each payroll (the aggregate for each company). A common remitter would coordinate all this so the employer would still have to cut only one check; maintaining the feel as if it were only one trust (even though there are more).

Good Luck!

[austin3515]

Is it the sort of thing that can be done "one-off" though, or must you have some form of technology behind you. For example, no one would get into recordkeeping without investing a lot of money in the technology. Is this the same thing?

[ETA Consulting LLC]

You'd typically need a strong recordkeeping system behind you. What you are doing is effectively creating a feeling as if the participant (and the employer) is dealing with only one provider, instead of many. Hence, instead of the employer coordinating and remitting payments to many different providers, they are remitting only one payment to you. You are breaking the payments downs to ensure the appropriate amounts are being sent (pursuant to participant elections that are maintained on your system).

Hope this helps.

[Bill Presson]

Austin, our Dallas office does some of this, but we're phasing out of it.

After watching what they were doing for the past 9 months, I realized that unless you are doing a lot of it and it is highly automated, it's very difficult to make money.

The biggest issues we faced were the actual movement of the money. We had a "bin" set up at Mid Atlantic Trust. All of the money would be deposited there. With schools and governmental entities, it's very difficult to get agreement to do an ACH, so they would all send checks. When we get the payroll file, we have to process where the investment elections say the money needs to go. It can easily be 5-8 different places. You need to then get the money from your centralized "bin" to the investment providers. There is a cost for each transaction. There is also some amount of time delay (depending on wire/check, etc.) in getting the money actually invested. You also have to determine what kind of "back up" you are going to send to each provider so they know how and for whom to invest the money.

So we've decided that we are probably going to reduce our plans like this.

Just FYI.

Good luck.

[austin3515]

We found a couple company's that do this and gave out their names, so we're out

THANKS!!