MEPS/PEPS

Is there anything going on out there for these plans?  I keep hearing "theyre coming!".  Are they?  I haven't heard anything.  I would expect the Empowers and John Hancocks, etc. to be the ones leading the charge, but I don;t hear anything.

They're definitely coming but not till 1/1/21. We'll have the capability and are getting things prepared now, but not advertising anything. The only advertising I've seen at this point is Terry Power's group.

Are any of the national players setting one up? Or will it be more of a niche thing?  Why would the big players do this knowing it cuts out their number one referral source, advisors?  Or are they setting these up so you can plug and play with your own advisor/TPA?

Everyone says the market is moving but I'm skeptical for reasons that I find not to be related to my bias...  Employers just seem to be giving up too much control over something that is integral to their operations.  That's my take on it anway...  You have a few late deposits and they force you to pay $1,200 for a VFCP [edit] application is only the first example that would come to mind...

16 minutes ago, austin3515 said:

Are any of the national players setting one up? Or will it be more of a niche thing?  Why would the big players do this knowing it cuts out their number one referral source, advisors?  Or are they setting these up so you can plug and play with your own advisor/TPA?

The big players are absolutely going to have them, but they will wait until all the questions have been answered before they start marketing.  At this point, Id expect marketing from the smaller shops since they dont have small army of attorneys telling them to hold off until the have crossed every t.  

There is a market for it, but I dont think it is going to drastically change the industry.

Thank you RBG.  I hope we're right.

2 hours ago, RatherBeGolfing said:

The big players are absolutely going to have them, but they will wait until all the questions have been answered before they start marketing.  At this point, Id expect marketing from the smaller shops since they dont have small army of attorneys telling them to hold off until the have crossed every t.  

There is a market for it, but I dont think it is going to drastically change the industry.

I don't know if we qualify as a big player or not, but we found that the demand was NOT for a MEP/PEP, but rather to have a way ADVISORS can commonly service their clients, consistently and efficiently.  A PEP actually doesn't make economic sense for the service provider unless they have unlimited IT resources to automate everything (I WISH!) - otherwise, there is a lot of manual "combine for this purpose, pull apart for that.

We're working on what the advisors want, but it won't be a PEP.

Lockton:  https://benefitslink.com/cgi-bin/pr/index.cgi?rm=press_release&id=53530

Northshire Consulting (Chamber of Commerce plans):  https://benefitslink.com/cgi-bin/pr/index.cgi?rm=press_release&id=53505

Platinum 401k:  https://benefitslink.com/cgi-bin/pr/index.cgi?rm=press_release&id=53488

We have an open MEP that we will be converting to a PEP and we operate in most states.  With that being said, we have spent the last few years setting up a partnership with us as plan sponsor, recordkeeper and Plan Administrator, an outside 3(38) and an outside 3(16) administrator.  We have several 3(21) advisors that sell into the plan.  We have invested a lot of money in software, employee credentialing and ongoing education (personnel, advisors and employers) to put it together.  There is a market for these types of plans, but it is not a solution for everyone.  If you have an employer that wants almost no inolvement in the running of their plan, they may be a good candidate for a PEP.  Ideally, if the employer uses an outside payroll vendor with a portal (180 or 360) where we can pull data from and push data to their payroll vendor, it becomes an even better candidate.  In addition, we require an auto enrollment feature for each sub plan in the MEP.  We are an open architecture recordkeeper and our software allows us to roll up the data for some purposes and break it down for other purposes.  www.automep.com

Can I ask what happens if you have a client that sends in a deposit a month late because perhaps there was a data feed issue, or they did not release the funds in time?  I realize that you're in a different positiion as the plan sponsor then "just recordkeeper."  I am very intersted in getting a better understanding on how problems are addressed when you (as the "vendor") just a lot more skin in the game on these sorts of things.

Thanks in advance if you're willing to share!

I was wondering how audits were going to work.  If the PEP has over 100 participants is every participating employer subject to audit?  If my company has 10 participants in a 500 or 1000 participant PEP, am I part of that audit process?  And if not, why not?  

Good question!  I know the auditors want to do internal control walk throughs as well.  I assume each employer has their own "systems" that need to be reviewed at some point.  Interesting. 

The Plan as a whole is subject to audit, that much I know.

15 hours ago, Gilmore said:

I was wondering how audits were going to work.  If the PEP has over 100 participants is every participating employer subject to audit?  If my company has 10 participants in a 500 or 1000 participant PEP, am I part of that audit process?  And if not, why not?  

The PEP needs an audit - and to the extent that controls are tested involving employer activities, any or all of the participating employers may be tapped to "participate" in that audit.  Because of hte number of employers expected in a PEP, the audit will likely be more extensive (and expensive) than a single plan audit, and every participating employer in the PEP will pay a share of that cost (directly or indirectly) even if, as a standalone plan, and audit would not be required.  One of the (many) reasons we concluded that the economies just aren't there....  Good in theory, not always practical or efficient in practice.

25 minutes ago, MoJo said:

One of the (many) reasons we concluded that the economies just aren't there

I agree 100%.  Which is why most of the promoters are no longer using cost and "economies of scale" as their main selling point, instead pivoting to more of a "we are a fiduciary and will take care of everything!" pitch. 

2 minutes ago, RatherBeGolfing said:

I agree 100%.  Which is why most of the promoters are no longer using cost and "economies of scale" as their main selling point, instead pivoting to more of a "we are a fiduciary and will take care of everything!" pitch. 

Which can be done without the overhead of a PEP.  That's part of what we are building (as noted above) to satisfy the ask of our advisor partners....

"By allowing most of the management and administrative responsibilities of sponsoring a retirement plan to be transferred to a pooled plan provider, PEPs will give employers, especially small unrelated employers, a way to offer their employees a workplace retirement savings option with reduced burdens and costs compared to sponsoring their own separate retirement plan."

That little marketing piece comes straight out of the DOL's NPRM.

When I saw that I wondered how they can know that before any plan is even up and running?

21 hours ago, austin3515 said:

Can I ask what happens if you have a client that sends in a deposit a month late because perhaps there was a data feed issue, or they did not release the funds in time?  I realize that you're in a different positiion as the plan sponsor then "just recordkeeper."  I am very intersted in getting a better understanding on how problems are addressed when you (as the "vendor") just a lot more skin in the game on these sorts of things.

Thanks in advance if you're willing to share!

We have a lot of controls in place at our firm and we have an annual SOC 1/SSAE-18 audit done of our recordkeeping and our fiduciary services.  For the MEP plan, we are responsible for pulling the data from the payroll companies and ordering the money from the company bank account to be sent to the trust company.  If the data feed is not at the payroll company or the ACH pull is not processed, we are on the phone immediately to rectify.  If a plan is a continual problem, the proposed PEP rules gives us a way to spin that plan out to a stand alone plan.  Software and programming is key here so that we are not manually tracking payroll dates.  We are directly integrated with several different payroll providers so for a lot of the sub plans, the data is fed to us directly from the payroll companies.  Fortunately, we have our own programmers on staff so we can have our programmers talk directly to their programmers and work out the direct links.  Getting direct feeds also means that we get census and payroll data every pay period which is huge.  In order the make the MEP efficient, we have to require that the employer use a payroll system so that we can get data electronically.  We can't spend the time hand keying anything and it cuts way down on the errors.  It also means that if the employer can get the data into the payroll software, we can get almost everything we need directly from payroll, without having the employer report it to us separately.

Thanks Pam!

ASPPA Connect today has an article on the excessive fee suit against ADP Total Source.  The article says, 

"With regard to those administrative expenses, the plaintiffs highlighted a certain irony in the defendants’ arguments that the administration of the MEP was “far more difficult and expensive to administer and recordkeep than the single-employer plans that Plaintiffs use as comparisons.” "

Ironically Gilmore, it seems to me an Employee Leasing arrangement would be the scenario where it could make some sense in terms of econcomies of scale.  But as a general rule all of the things that make administering a stand alone plan more expensive are still present in an open MEP:

-Onboarding expense / conversion. Anyone who has been through these knows this takes probably 15 to 20 hours of a recordkeepers time, probably more for all I know.

-Customer service / call centers.  If the average account balance is low, an Open MEP won;t fix that serving such accounts is just not profitable no matter how many you do.

-Ongoing customer service.  For every ongoing plan, customers are going to have questions, and problems, etc.  You have a 1,000 employers on your plan?  Good for you! You've got 1,000 sets of problems - not 1.

-Last I checked every Employer of course still requires testing.

The audit is of course the big variable and whether it helps or hurts depends on whether or not you have more or less than 100 participants.

So Pam don;t get me wrong, I see very much so that  there is a place for these in the market especially depending on the mindset of the employer.  The question for me a TPA is, "does my world evaporate in favor of the open MEP approach?".  I consistently conclude there is a place in the market for me too! 

I'll just add that I feel like the competitive process for these will almost end up being like the bundled versus unbundled arrangement. Bundled has always been cheaper, but cost is not the number one factor for any of my clients.

4 hours ago, austin3515 said:

Bundled has always been cheaper

until you don't want to be bundled anymore.  I have seen so many "cheaper" plans become more expensive overall when someone wants to leave that service provider.  

4 hours ago, austin3515 said:

but cost is not the number one factor for any of my clients.

And this is exactly what my experience has been as well. An honestly, the vast majority of my clients pay for (and deduct) the service provider fees on the employer level rather than plan level.

On 8/29/2020 at 6:36 AM, austin3515 said:

So Pam don;t get me wrong, I see very much so that  there is a place for these in the market especially depending on the mindset of the employer.  The question for me a TPA is, "does my world evaporate in favor of the open MEP approach?".  I consistently conclude there is a place in the market for me too! 

 

I agree with you.  MEP/PEP is not a solution for a lot of plans and I would not want to try to run one without a lot of software, programming and experienced staff.  Luckily for me, I have a group of recordkeeping employees who have been with me for close to 20 years and they hate to do anything manually.  We have our own custom written software that we use to manage our plans and our own IT department.  Our rule is that if you can think of a way program it, request the programming!  We have a "button" to do most everything and there is very little that is manually processed.  We do use commercially produced software for trading, etc. but our backbone software does all of the data scrubbing and exports to the other software.  It has been a huge investment but it means that we can be really flexible going forward.  Our biggest growth is in the area of working behind TPAs who do the plan documents, 5500 and plan testing and we do the fiduciary recordkeeping on an open architecture platform.  It creates the flexibility for the 3(21) or 3(38) to have 25,000+ investment options available and still allows the plans to stay with the TPA that they really enjoy. 

1 hour ago, Pam Shoup said:

I agree with you.  MEP/PEP is not a solution for a lot of plans and I would not want to try to run one without a lot of software, programming and experienced staff.  Luckily for me, I have a group of recordkeeping employees who have been with me for close to 20 years and they hate to do anything manually.  We have our own custom written software that we use to manage our plans and our own IT department.  Our rule is that if you can think of a way program it, request the programming!  We have a "button" to do most everything and there is very little that is manually processed.  We do use commercially produced software for trading, etc. but our backbone software does all of the data scrubbing and exports to the other software.  It has been a huge investment but it means that we can be really flexible going forward.  Our biggest growth is in the area of working behind TPAs who do the plan documents, 5500 and plan testing and we do the fiduciary recordkeeping on an open architecture platform.  It creates the flexibility for the 3(21) or 3(38) to have 25,000+ investment options available and still allows the plans to stay with the TPA that they really enjoy. 

But then you have to standardize what you get from the clients.  We have clients who cannot even provide us reports with full social security numbers.  Others cannot generate custom reports in Excel.  And many more have no desire to learn how to do anything "techy".  i.e., I think you're target market is relatively narrow.  Even PayChex and ADP can be tough to deal with.