Data & Research August 1, 2016

Nearly All Sponsors Would Recommend Their Adviser to Another Employer

Only 10% would not make an endorsement.
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Sponsors are so satisfied with their retirement plan advisers that 88% would recommend them to another employer, Massachusetts Mutual Life Insurance Co. found in a survey of 565 employers. 

Thirty-seven percent said that they would be “very likely” to do so. Only 10% thought that they would not be inclined to make a recommendation.

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While it’s still true that advisers are responding to more formal requests for proposal (RFPs) than ever, still a majority (58%) of employers find advisers through referrals. While only 10% find advisers through online searches, of this group, 72% look for advisers who work with companies similar to theirs, 47% look for customer testimonials, 43% gravitate to an effective website, 41% seek out a good value proposition, 40% look for fee transparency and 29% want an adviser close to their headquarters.

Ninety-three percent said the costs and benefits of working with an adviser are favorable, and 94% are satisfied with their adviser overall.

Not all the findings appear so positive from advisers’ perspective, however, as more than one third (35%) of clients have switched their adviser somewhat recently. In fact, 41% of this group switched because their adviser was “simply bad,” another 17% switched to seek out lower fees, and 15% cited a change in their company’s management vision or ownership. Other reasons for switching advisers include the 11% wanting better overall service, 10% saying their favored adviser had left the practice, 7% wanting better investments, 6% citing poor returns, and 4% seeking out more robust fiduciary support.

“Overwhelmingly, retirement plan sponsors are pleased with the support they receive from their financial adviser and are more than willing to tell other employers,” says Tom Foster, national spokesperson and practice management leader for MassMutual’s retirement plan services. “It’s a great opportunity for advisers who want to build their retirement plan practices. The retirement plan business is all about solving problems. Advisers who are attentive and responsive, keep up with the regulatory environment, and work closely with sponsors to help their employees become retirement ready have tremendous opportunities to grow in the retirement plan marketplace.”

Greenwald & Associates conducted the survey in August and September last year for MassMutual. The complete findings can be downloaded here.

Compliance July 29, 2016

9th Circuit Agrees Dignity Health Pension Plan Is Not a Church Plan

The appellate court remanded the case back to a district court for further proceedings.
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The 9th U.S. Circuit Court of Appeals has ruled that Dignity Health’s pension plan is subject to the requirements of the Employee Retirement Income Security Act (ERISA) and does not qualify for ERISA’s ‘church plan’ exemption.

Agreeing with other circuits, the appellate court held that the plain language of ERISA requires that a “church plan” be established by a church or by a convention or association of churches. The 9th Circuit agreed with a district court ruling that Dignity Health had not argued it could meet that requirement.

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In its opinion, the appellate court also rejected Dignity Health’s argument that it should defer to a 1983 general counsel memorandum (GCM) from the Internal Revenue Service (IRS) in which the IRS determined that the retirement plans in question had not been established by a church but opined that the plans could qualify as church plans if they were maintained either by a church or a church-affiliated principal-purpose organization. The court said an agency’s interpretation of statute is entitled to deference “when it appears that Congress delegated authority to the agency generally to make rules carrying out the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.” The court noted that the GCM included a disclaimer that it is “not to be relied upon or otherwise cited by precedent by taxpayers.”

The 9th Circuit noted that the district court did not reach the question of whether the “church plan” exemption in ERISA is unconstitutional—a question raised by a recent filing of another lawsuit challenging a plan’s ‘church plan’ status. Dignity Health also urged the appellate court to review the district court’s rulings that the lawsuit was timely, that the plan was not established by a church and that the plan is not maintained by a principal-purpose organization, but the appellate court concluded that “interlocutory consideration of these issues is unwarranted.”

The case was remanded back to the district court for further proceedings. The 9th Circuit’s opinion is here.

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