ERISA 403(b) Plans — Service Model for K-12 Advisors

Bill Fisher

As discussed in the Summer 2012 Issue of 403(b) Advisor magazine, by Michael Webb TGPC, (then NTSA Education Committee Chair), for advisors who are traditionally working in the K-12 marketplace, “breaking into the health care/private non-profit industry can be a daunting proposition. It won’t happen overnight, but with the proper effort and focus, its not insurmountable.” From there, he covered the “transition from participant as the primary client to the sponsor in that role”, as well as becoming a “subject matter expert” in ERISA 403(b), to assist in the developing this line of business for your practice. This article serves as a very good primer, for advisors interested in moving into the ERISA 403(b) marketplace.

The differences between the Non-ERISA and ERISA 403(b) worlds are also found in the expectations and structure related to the servicing of these plans. More often than not, ERISA 403(b)s may have a single vendor, or at most two or three. And, there is typically little uniformity in the quality or quantity of services delivered to the sponsor and participants by multiple plan vendors. Many client organizations want to work with the largest institutional providers, but come to find them lacking the individual service attention that is more commonly found in the K-12 market. Combined with a regulatory focus on fiduciary issues over the last 6 years, this has created lots of opportunity for advisors willing to put forth the time and effort.

Organizations, whose retirement plans are covered by ERISA, tend to be run more like for-profit organizations than K-12s. Under ERISA, the sponsor is held accountable for a great deal more than in Non-ERISA plans, and therefore their expectation for service is different, particularly as the primary client is the plan sponsor. Unlike K-12s, non-profit organizations do not always subscribe to a continuous series of individual meetings with plan participants in the workplace, as a desired service model. More often, that model can be disruptive and inconsistent, even with the advisors best intentions. A more effective model will help the sponsor deliver effective communications, and the education needed to help the participant understand their choices, and exercise direction of their accounts. Unfortunately, many of these plan sponsors have never had effective on-site service of this nature, or it hasn’t been delivered consistently.

So, let’s look at some components of a service model that we have seen top advisors use, that have proven to be effective in the ERISA 403(b) market place. These will combine high touch service for the sponsor, with K-12 quality individual service for the plan participants.

At its core, your job is to help plan participants achieve a successful retirement outcome. So, set the expectations for the service model at the beginning of the relationship. Remind the sponsor that what makes you an excellent service provider is that you are committed to doing the work that you are being paid to do.

To accomplish this, consider the following:

Develop a formal schedule of meetings during the course of the year.
 

• Schedule two formal service days at each sponsor location per year, as a minimum. Consistency is a key for the entire employee base.
   
• Include a group session of no more than 45 minutes each to provide information valuable to all employees, including market and regulatory updates, current events that a relevant to the retirement plan, plan performance, and recent or upcoming plan events. Leave time for questions.
   
• Follow each group meeting with time for individual meetings of 20 minutes each. This gives employees time to ask questions that they prefer not to ask in front of their peers, or the boss. With the consent and help of the sponsor, use a sign-up sheet to help organize these meetings. This sheet will usually fill up by the end of your group meetings, even if they were blank when you started.

Providing effective communications to the sponsor and plan participants.
 

• Use an outline for your group and personal discussions. This is just for you, and will keep you on time and on track. Delivering the same message consistently will help avoid conflicting information and confusion with multiple groups and individuals.
   
• Provide your own materials, like risk profiles, or other handouts that you prefer. ALWAYS bring along, or have access to all participant statement data while you are on site. Even when reminded, participants many times don’t bring statements on meeting day. And, the HR Staff will thank you if they don’t have to provide them. Use your own technology, and log in to see the “advisor view” of account statements, at a minimum. Problem solved.
   
• Ask the sponsor if there are any items that they want included in your discussions. It is their time, and you can be helpful in communicating a message that they want emphasized in your talk. Employer contributions benefit enhancements and other issues that support your primary client are always a good thing to include, where appropriate.

Being respectful of the unique requirements of the sponsor, including time on site, disruption of workflow, and any employment policies that are related to your services.
 

• If your time allotment is 45 minutes, then stop talking at 30 minutes, and answer questions. If you finish early, then the employees are back at their posts early. The boss is happy. The same applies to participant one on one sessions. If that discussion is longer than 20 minutes, politely offer to schedule additional time later, to be respectful to the other employees, and the employer.
   
• Most employers can’t gather everyone in a meeting at the same time. Be creative on how to reach everyone. Offer to meet with each department; or management first and then staff; rotate between different office groups; but be flexible and take the lead from the sponsor on how best to organize your meetings. If you need to run multiple meetings, do it. If you need to meet with three shifts, do it. They may have moved to your firm, because the last service provider wasn’t willing to do those things.
   
• Any individuals benefits discussion must always be considered confidential. In some organizations, the discussion of any employees specific compensation in public forum may be grounds for termination. Understand the local privacy and confidentiality policies and follow them.

Be open and honest about all services that you can provide. While your focus is on the sponsors retirement plan, you also provide other services (ex. comprehensive financial planning). This can be a vital part of your value added proposition to the sponsor. However, keep in mind:
 

• Employers don’t like review meetings that turn into marketing sessions regarding non-plan products and services. As mentioned above, stay on time, and stay on task.
   
• You can mention your credentials, expertise and financial planning knowledge as additional benefit to plan participants, if presented professionally, and with the consent of the employer.
   
• At the outset of the relationship with the sponsor, ask if you can mention the other work you and your firm does, and make a commitment to keep non-plan related discussions off-the-clock and off-site, if needed.

Finally, create a review process that allows the sponsor to get feedback from the participants, as well as present their own at periodic review meetings.
 

• Developing and adhering to a review process with the plan sponsor and participants is a vital part of the service relationship. For some, this takes courage. But, you cannot shy away from difficult conversations with your clients. Take them on, without delay.
   
• This can be done formally, in writing with a brief customer service survey, or informally by covering anecdotal information with the sponsor.
   
• Good news travels fast, but bad news travels faster. Creating a process for a dialogue as part of your service to deal with small problems as they might arise, is far better than being called in to explain one big problem.

Moving into the ERISA 403(b) market requires a commitment of time, energy, and a willingness to become a “subject matter expert.” Michael Webb was also correct in saying that it is not “insurmountable.”

The service model you develop is a key component in the success of this transition, and the subsequent acquisition and retention of plan sponsor clients. By combining high touch service items for the sponsor with a K-12 style individual service model, you can deliver excellent service in the ERISA 403(b) market. The service items listed here are not exhaustive, and I am certain that you have processes that would be excellent additions to this list. As always, leading advisors continue to evolve and elevate their best practices, by incorporating the best practices of others. I hope that you find these helpful.

Bill Fisher is Director of Business Development at PenServ Plan Services, Inc. He also serves as
NTSA Leadership Council Chair and is a member of the NTSA Professional Education Committee.

Opinions expressed are those of the author, and do not necessarily reflect the views of NTSA or its members.