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Back to the Basics – Pay Special Attention to the Fund Menu.

At some point, a certain amount of apathy and blasé comes to those who watch legal proceedings relevant to retirement plans. Another excessive fee lawsuit involving overpriced funds. More performance lagging investments. Failure to negotiate rising recordkeeping costs. However, a unanimous, swift, and pointed proclamation from the Supreme Court merits attention. And the most recent treatise demands that plan sponsors and their advisors go back to the basics with respect to retirement plan fund menus.In the matter of Hughes v. Northwestern University, SCOTUS rejected the idea that a fiduciary can escape the legal challenge of having imprudent investment options in the plan, as long as there are other, prudent options. Rather, the Court reinforced the notion that plan fiduciaries must monitor “all” plan investments and remove “any” imprudent ones. Furthermore, fiduciaries must consider all the investments “at regular intervals” to ensure that they are prudent. Is this being done? As a plan sponsor or a retirement plan advisor, are you regularly reviewing your plan’s fund menu? With all the focus on “financial wellness” and “fiduciary training,” let’s not forget the basics: Fiduciaries must actively review plan investment options, ideally against stated criteria, at regular intervals. Equally important is documentation of

Don’t let your current recordkeeper decide who your new recordkeeper will be.

Don’t let your current recordkeeper decide who your new recordkeeper will be. There has been considerable consolidation among retirement plan recordkeepers over the past few years.  The retirement plan business of Prudential Financial and MassMutual were recently purchased by Empower.  Principal acquired Wells Fargo’s retirement plan recordkeeping and trust business.  PNC Bank sold their book of retirement plan clients to Newport Group, who in turn recently announced that they (Newport) will merge into Ascensus.  Ascensus themselves has acquired over 30 third party administrators over the past few years.  Voya is rumored to be buying Alight.  It’s hard to keep track without a score card. Yet, plan sponsors and retirement plan advisors must keep track! The objective of the acquirer of course is to pick up several hundred or thousands of new plan clients from the exiting recordkeeper.  Post-acquisition, sponsors will likely have to transition to the new recordkeeper’s systems.  There will most assuredly be a new service agreement, new contacts, perhaps a new fee schedule and undoubtedly new (or missing!)  processes, procedures, features and benefits.  Despite this potential turmoil, many sponsors and advisors simply go with the flow and stand by while the plan transitions. This is unwise at best and negligent at worst. 

Revenue sharing is on the decline, as it should be.

The use of revenue sharing in retirement plans is on the decline, and this is a good thing. Plan sponsor surveys by both Callan and the Plan Sponsor Council of America highlight the decline in use of revenue sharing from over 21% of plans to about 15% in 2019. However, revenue sharing still runs rampant in smaller 401(k)s, and among 403(b) plans. Revenue sharing is an additional cost, tacked onto the expense ratio of a mutual fund or insurance product to pay for (typically) either the advisor’s services (aka 12(b)(1)s) and/or recordkeeping services (sub TAs). It ranges between 5 and 75 basis points and basically represents indirect and sub-surface payments from one service provider to another. The model is fraught with problems. For example: Uneven revenue sharing among different funds in a given plan means that some participants are paying more (in the form of a higher expense ratio) than others for the same service. Poorly disclosed revenue sharing leaves participants and many plan sponsors in the dark about what they’re paying. Indeed as many as 30% of plan sponsors admitted to not knowing if revenue share agreements were in force. Given all the recent fee litigation, sponsors should want to know, and advisors should

From the Desk of the President

It has been 6 months since NWPS officially became part of the Raymond James family of companies, and consistent with our initial messaging, it has been business as usual. NWPS continues to welcome new clients monthly, continues to adhere to our "no solicitation" policy of either plan sponsors or participants and has no plans to introduce Raymond James products or advisors to our clients. We have not changed our service model nor reduced staff. On the contrary, we have increased headcount over the last 6 months. We are also in the midst of an IT transition which will further enhance our cybersecurity capabilities and add more layers of protection for our clients and their participants. More visibly, we have rolled out and (already) enhanced a new retirement readiness tool on the participant website called iJoin. We're getting great feedback from participants. We have found that once a participant goes through the experience, they often return multiple times to review and tweak their retirement strategy —- which is exactly what we like to see. We've also added nearly two dozen short, BrainShark-like videos on everything from The Power of Compounding to The Cost of Waiting. Take a preview here. More enhancements in

NWPS Adds to Its Business Development Team with Industry Professional Mike Cohen AIF

NWPS is pleased to announce the appointment of Mike Cohen as Director of Advisor Relations. Mr. Cohen comes to NWPS with over 15 years of retirement industry experience having held senior positions with Charles Schwab Trust Bank, The Standard and TRI-AD. In this newly created role, Mike will focus on managing NWPS’ strategic relationships including with leading wirehouses, independents, RIAs, money managers and custodians. “Mike’s extensive experience working with retirement plan professionals and home office leaders makes him uniquely qualified to serve as a resource for our business partners and their clients,” remarked Tim Wulfekuhle, President & CEO of NWPS. “He is an authentic, seasoned relationship manger and we are thrilled to welcome Mike to our team.” Mike received his bachelor’s degree from the University of Colorado. He holds the FINRA Series 7 and 63 licenses and is an Accredited Investment Fiduciary with Fi360.

Recordkeeper consolidation may be coming, but don’t squeeze the participant!

The idea that a recordkeeper should “monetize” participants is appalling. George and Abigail Revoir of AMRev Consulting, writing in the November 4th 2020 edition of RPA Convergence opine on recordkeeper consolidation and the ever widening gap between mega and midsize providers. No question there is revenue pressure in our business, but one comment in their otherwise satisfactory analysis of this trend stopped us in our tracks. The end game, says the Revoirs, is to “monetize the participants.” Monetize the participants? How appalling! What plan sponsor wants to hear that in a “finals” presentation! “Mr. Plan Sponsor, we offer X, Y and Z services, but what we’re really after is access to your employees to upsell them non-plan related products and services.” Which CFO is OK providing 100% of employees’ personally identifiable information to an organization that will use it to “monetize” her employees? Be assured, it is quite possible to profitably serve plan sponsors and their participants with accurate, responsive and innovate recordkeeping without having to view participants as piggy banks. NWPS has been doing it for 26 years and we are certainly not the only ones. And let’s not forget the current discussion over who really owns the participant data

Just Say No – to Silos

Why intelligent minds like Steve Jobs and Elon Musk reject silos. NWPS competes with the largest of 401(k) vendors. We frequently go up against Vanguard, Fidelity, Empower and the others. While there are many facets to our story, a differentiating one is that NWPS does not have departments or “silos” for different processes (e.g. the document department, the compliance group, the year-end services division, the distribution unit). Rather, each client is assigned a dedicated team with a lead consultant responsible for all aspects of plan operations. There are no silos at NWPS with robotic employees performing repetitive tasks. It has been this way since our founding in 1994. Little did we know that Steve Jobs and Elon Musk have publicly endorsed our service model! Writing for Inc.com, author and leadership expert Justin Bariso recounts how both Jobs and Musk rejected silos that “create an us vs. them mentality.” The cost of this divisive model increases as a company grows. In an organization with functional silos, each department has its own set of success metrics, often not aligned with other departments. Each silo ends up attempting to curry the favor of management by hitting their own goals, frequently at the expense

New Dollar Limits Applicable to Qualified Plans Released

The IRS issued new dollar limitations that are applicable to qualified retirement plans for plan years beginning in 2021 (except for the 401(k) deferral limit and Catch-Up Contribution limit, which apply on a calendar year basis). Some of the most commonly noted limitations are as follows: The limit on contributions by employees who participate in 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $19,500. The catch-up contribution limit for employees age 50 and older who participate in these plans remains unchanged at $6,500. The limitation for defined contribution (DC) plans under Section 415(c)(1)(A) (annual additions) has been increased for 2021 to $58,000 from $57,000. The limitation used in the definition of “highly compensated employee” under Section 414(q)(1)(B) remains unchanged at $130,000. The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $230,000.   Details on these and other retirement-related cost-of-living adjustments for 2021 can be found here, and are in IRS Notice 2020-79.