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Business at a Glance as of 12/31/22

• Plan assets under advisement: Massa: $2 billion; QPA: $6 billion.
• Median plan size (in assets): $16 million
• Plans under administration: Massa: 36; QPA: 103 
• Total participants served: Massa: 40,000; QPA: 120,000

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PLANADVISER: Tell us about your practice and how you got into advising retirement plans.

Massa: First of all, when they asked me in grade school what I wanted to do when I grew up, it certainly wasn’t this. After I graduated college in the middle of the recession after the first Gulf War, I tried hard to find an opportunity that fit me. The father of the woman I was dating was a benefits consultant for Buck, and I thought what he did was interesting. Then a chance meeting turned into a networking opportunity led me to a customer service job at Merrill Lynch. That opened a door for me to work in their retirement legal department as basically a paralegal. I was answering questions about ERISA and IRAs that I probably had little business talking about, but I learned an incredible amount in a short time. I moved on to take on roles as a relationship manager, documents specialist, employee educator, bank trustee, marketing product manager, compliance specialist and eventually even running the operations for a TPA. All the while, I would watch how so many advisers knew so little about retirement plans and yet would get paid egregious compensation while providing next to nothing in service. I knew there had to be a better way.

Our advisory practice started in 2010 as the offspring of a local health and welfare consulting firm with literally zero assets. Our goal was a different one. Yes, we believed in the standard services of funds, fees and fiduciary responsibility, which were still state-of-the-art at that time. But we believed that to be a consultant, you had to hold yourself to a higher standard. We started offering plan corrections and remediation services, helping sponsors repair their plans under ECPRS, which few other non-TPA firms were capable of doing. While most advisers were still offering two-page Investment Policy Statements, we were drafting complex committee charters, education policy statements and even codes of ethics. The bulk of our contemporaries at the time that we would compete against considered plan design consulting to be akin to asking if you had a match. In contrast, we were helping employers compare their plan document’s compensation definition to the codes set up in their payroll system to ensure they were in alignment. For mid-sized plan sponsors that had experienced problems in the past, what we were doing was revolutionary—a tangible differentiator.

By 2014, we had grown to almost $3 billion in assets, and we were named a finalist for team of the year with PLANADVISER for the first time. Our team had grown from four idealist advisers to seven seasoned professionals with a knack for getting our clients the most out of their vendor relationships.

After our health and welfare parent company was purchased in 2016, we tried to integrate our services into the core functions of the new, larger organization, but the two weren’t in alignment. So we approached management about an opportunity to purchase our business with the help of a partner committed to retirement plans and ultimately partnered with Qualified Plan Advisers. Since then, we were once again named a finalist for team of the year in 2018, and today, our assets have grown to $6 billion. Along the way, we’ve added services such as employee one-on-one education, financial wellness, HSA management, student loan debt programs, liability insurance evaluations, Adviser adviser-managed accounts, pension LDI investment management, pension buy-out services and ESG investment evaluation.

PLANADVISER: How is your team/process/structure unique? How has it evolved? Where will you be in five years?

Massa: I believe that what is unique about our team is that there is no competition between any of our fee-based-revenue-compensated staff in the QPA Houston office. All the compensation is shared in a more egalitarian approach. It encourages us to partner up on existing clients and new opportunities based on each person’s strengths. We also don’t place a fixed sales or production quota on each other. The Houston team prides itself on the fact we aren’t a marketing organization. We do not even consider ourselves salespeople. We are consultants with a wide-ranging set of skills and expertise. Our first goal is to ensure the existing clients are happy and that they come first all the time. We don’t cancel or reschedule meetings with existing customers to meet with a prospective customer … ever. We also do not actively prospect. 100% of our clients come from client referrals, as well as other centers of influence, which we believe is much more effective and more client-centric.

The team also consists of salaried professionals who support our clients. Legally, they licensed Series 65 investment advisers capable of managing their own clients whenever they choose to do so. They’ve been trained by us on every aspect of retirement plans (e.g., controlled groups, compliance testing, 5500s, plan document interpretation and, of course, investment management analysis). Clients are assigned multiple points of contact to ensure that they can be attended to by someone familiar with their plans. All of the work associated with each client (e.g., investment research, meeting minutes, compliance testing review and quality control, 5500 reviews, plan document review, employee education meetings, etc.) is divided between our salaried and non-salaried professionals during weekly and quarterly one-on-one meetings, which keeps each team member fully up-to-date on what is happening with every client. This ensures that we operate as a team, since any of us could be called upon to help any client at the firm.

As far as where we’ll be in five years, I expect the industry will once again have changed, as it always does. Five years ago, financial wellness was a mere buzzword, and now it’s everywhere. In the future, financial wellness programs at U.S. companies will become commonplace, and the trend will be to provide family-based financial literacy to both parents and the children in the home as well, helping to ameliorate the financial futures of the next generation. Financial education will also be delivered in the school system, as many advisers like us are teaming up in the Retirement Adviser Council to volunteer in local schools providing financial literacy education to children in 7th-12th grades. Managed accounts will gradually supplant target-date funds as the default investment strategy du jour, since employees are continuing to ask for more support and advice on how to manage their money. I also believe the convergence between health and wealth will continue. Our initiatives in HSA management will be coupled with educating employees on how to handle the effects of reference-based pricing, the risks of balance billing that may ensue and how to effectively utilize your HSA to manage part of the costs. ESG investing will become the standard, and most companies will be looking at risk-adjusted metrics that also account for environmental and governance factors that reduce investment risk, while also trying to look qualitatively at the social impact our investments have on employees, the environment and the community at large. Offering multiple in-plan income solutions, both annuity and non-annuity based, will likely become the standard, and we’ll be spending time educating employees on which one better fits their future objectives. As for QPA Houston, I imagine we’ll have reached the $10 billion asset milestone, and we’ll be reminiscing about having won the adviser of the year award in 2023.

PLANADVISER: As a retirement plan adviser, what do you take the most pride in?

Massa: I take the most pride in developing successful professionals. There is nothing like watching a team member learn, grow and excel. In my career, one of the biggest challenges I faced was the lack of a mentor for so many years. When I finally found one, I’d already taught myself most of the lessons I needed to learn.

In my experience, too many managers are worried about losing their jobs. They view their staff as expendable, as long as they keep their job. I promised myself that whenever I got the chance to lead, I would treat my team members differently. When I built the advisory practice in 2010, the first thing I did was establish the mindset. I told them we were the best advisory shop in the country; we just had to show it to everyone else. I believed then and still do now that if you and your team don’t believe you’re the best, why would anyone else? Next, I made it a point to teach them everything I knew and how to apply that knowledge. I tried to figure out what certain people excelled at and what functions they enjoyed doing and tried to expose them to more of it whenever possible. I knew that this was the single most important thing I could do. I wasn’t going to worry about my job. It’s always been my belief that if I’m irreplaceable, I also can’t be promoted. So I always strive to make myself obsolete. I was certain that, if I helped make great team members, it would translate into great client service, and that belief has translated into a very happy client base. Over the years, I’ve watched so many people learn and grow in front of my eyes. It is the most satisfying feeling you can have to help someone better themselves and outgrow you as a professional.

PLANADVISER: How do you grow your business? What changes to your practice or service model are you planning for 2022 or 2023?

Massa: As I mentioned earlier, our business is grown almost completely via referrals from clients, CPAs, lawyers and health care consultants. We also spend time in the community volunteering, as well as speaking at conferences. We’ve never needed to expend resources cold-calling or doing direct mail campaigns. However, we do have ongoing email campaigns through which we share our materials and insights with the people we meet along the way. For 2023 and 2024, we will spend more time focusing on the Secure 2.0 Act and the new opportunities it offers to improve not just an employer’s retirement plan, but its entire benefits offering.

Student loan debt programs

Everyone knows that the cost of higher education has risen tremendously. I was doing research recently on Texas A&M tuition, and the cost has risen 56% since 2012 and more than doubled over the last 20 years. Student loan debt in the US now totals $1.75 trillion as of April 2022. Forty-three million (one in eight) Americans have student loan debt, according to the U.S. Census. Plan sponsors that can find a way to help Millennials and Gen Z employees with a way to manage that debt are the most likely ones to attract and retain employees. QPA Houston is helping employers today in the following ways:

• Launching programs like SoFi and Candidly along with 401(k) vendor proprietary programs to assist employees in loan debt aggregation and consolidation.
• Providing budgeting education to employees with student loan debt to help them pay down their debt and learn to live within their means.
• Discussing student loan debt payment assistance programs with employers, both inside the ERISA plan and non-ERISA benefit program strategies.

Emergency savings programs

We are working closely with all of our clients to find the most effective way to encourage employees to start saving money to prepare for emergencies. We have been discussing with clients both the in-plan function now offered under Secure 2.0 Act, as well as programs outside the retirement plan. Then during employee education sessions on budgeting and debt management, we teach employees what tools are available and how easier they are to use and access. We also help employees construct a series of savings goals. First, we establish a goal to save $1,000. Then we move to $2,500. Next, we move to one month of expenses; then gradually to three and six months of expenses. This helps employees achieve milestones they can celebrate, while still having longer-term goals in mind.

Pre-retiree education and consulting

We plan to spend more time working with and educating employees who are within 10 years of retirement about the financial challenges of transitioning to a life without a regular paycheck and employer-provided benefits. Explaining how Medicare works, when to claim Social Security benefits, how to utilize your pretax, Roth and HSA dollars in retirement and whether you should consider an annuity to provide a guaranteed income stream are a few of the many subjects we will be covering with participants near retirement.

Adviser-Managed Accounts

Participants have made it clear that they want advice on how to plan and invest toward their retirement. We believe managed accounts are a critical component in helping employees construct a viable plan that will also adapt as their needs and life circumstances change.

Health Savings Accounts

HSAs represent an incredible opportunity for employees to save for both their current and future health care costs. A married couple age 65 in 2021 will spend approximately $300,000 in out-of-pocket health care costs throughout their remaining lifetime. Yet that cost would increase significantly if those dollars were funded from pre-tax 401(k) savings because of the taxes on withdrawals. Even if Roth dollars are used, you still paid income taxes and FICA/FUTA on the contributions, making them less efficient than HSAs to fund these costs. Plus, using pre-tax dollars also risks increasing the couple’s income, which has the added penalty of causing them to pay a surcharge for Medicare Part B and D coverage. Education around how to effectively utilize HSAs as part of your retirement strategy is sorely needed by plan participants.

ESG research and policy development

We are working closely with employers to help them look at the risks of offering or not offering some ESG-compliant investment options in their plan. We also help them craft IPS language that enables them to evaluate some of the non-financial criteria involved in ESG selection and monitoring, as well as pick out the funds that have an ESG integration philosophy that uses ESG factors to seek improved returns by identifying risks. We believe this is the most prudent fiduciary method of implementing an ESG strategy.

Fiduciary liability insurance (“FLI”) review

As the number of fiduciary lawsuits has increased over the last several years, we are seeing higher premiums, higher cost retentions (i.e., higher deductibles), more use of subrogation and more exculpatory provisions. However, many times the people who authorize and execute FLI policies at the company aren’t fiduciaries to the plan or aren’t familiar with the risks. In contrast, the insurance companies issuing the policies are trying to limit their exposure at every turn, and the property and casualty brokers, while well-meaning, don’t fully understand the fiduciary risk exposures to provide the necessary counsel to their clients on how to balance coverage terms versus cost. QPA Houston has stepped in for our clients to review the policy coverage terms and determine if there are holes in the policies and risks to the fiduciaries that need to be reviewed with their property and casualty insurance professionals. We then provide our findings to our clients, enabling them to have an informed conversation with their property and casualty brokers.

Cybersecurity

Cybercrime is on the rise, and we are seeing more lawsuits involving stolen retirement account balances. There is a big question in these lawsuits as to who is responsible and at what level. Never has there been a greater risk to participants than those who are automatically enrolled. These accounts are often never accessed by the participants, and the proper security protocols (e.g., custom passwords, two-factor authentication, etc.) aren’t set up, placing these accounts at high risk of theft. We are educating employers about the need to dovetail their corporate cyber policies with their retirement plan fiduciary duties. Employee education needs to be given at both the corporate and personal levels, as they are often related. Employees don’t realize that how they treat security on their personal accounts can affect both the company and their retirement assets. Failure by the participant to secure their retirement accounts may end up costing them all of their assets with no one at fault but themselves.

PLANADVISER: What challenges do you think the retirement plan industry faces and what role do you have in addressing and confronting those challenges?

Massa: Retirement income has long been a problem without a tangible solution in retirement plans. Should the plan sponsor offer a long-term income solution, or should they empower employees to handle this themselves at retirement? Helping employers create policies that are custom to the needs and demographics of their employee population will be a critical change and something QPA Houston is committed to helping solve. I serve on the policy committee for the national Retirement Adviser Council, where we just released a new white paper on retirement income as a first step in helping the industry to help solve this challenge.

Delivering financial literacy education to employees and their families is a critical challenge that must be met by plan advisers. Too many Americans live paycheck-to-paycheck and are not prepared for financial emergencies. Today we are faced with yet another banking crisis, and we are on the cusp of another recession. But how many Americans are prepared for the possibility of layoffs from their jobs? If they lose their primary source of income, what will they do to pay the bills? Educating employees on the need to create a budget and build a nest egg that can cover their personal expenses for up to six months is actually more important than saving toward a retirement that won’t occur for 10, 20 or even 30 years from now. As advisers, we’ve become too focused on preparing for a long-term event that, while important, fails to ensure plan participants can keep the lights on in their homes today. We need to change that paradigm.

Cyber-crime continues to wreak havoc on Americans every day. As advisers, we need to spend more time teaching plan sponsors and participants about the risks and what they can do to mitigate them. This goes beyond the fiduciary risks and falls into a moral duty. Employees need to know that their money can be stolen and the simple changes they can make to prevent it from happening.

ESG will become the standard in how we evaluate investments and the risks they pose, as climate change has an increasing impact on business risk and ultimately financial performance. The U.S. is far behind Europe on ESG investing. But the DOL and the Biden administration have made it clear that they are committed to ESG investment strategies. Advisers will need to lead in this arena to help plan sponsors adjust accordingly.

As I mentioned in the previous question, student loan debt, HSAs and fiduciary liability insurance issues also make this list, and I would reference my previously mentioned reasoning.

PLANADVISER: Why do you feel it is important to work with plan sponsors and companies offering retirement benefits to their people?

Massa: I’ve been working with plan sponsors for more than 30 years, and in that time, I’ve discovered that 80% to 90% of the average employees simply aren’t well-versed in the concepts of saving and investing. In addition, we know factually that around 50% of Americans are unprepared to pay for an emergency expense of $1,000 or more. What this also means is that the majority of Americans are what we might refer to as disaffected investors. To be more succinct, the average wealth adviser finds these investors uninteresting and prefers to cater to those with assets greater than $500,000. The very people that need help with their finances are the ones who can’t get any. 401(k), 403(b) and 457 plans, along with financial wellness programs, are critical to helping the majority of Americans accumulate savings, build wealth and plan for their future. Many plan sponsors are well-intended, but company benefits are an alphabet soup of plans, services and features. HR and benefits professionals need help to quantify their value to the C-suite and rank their importance and get the most out of their benefits dollars. Advisers need to see the whole benefits picture from the employer’s perspective to better help sponsors, even if our focus is only on the retirement plan. We need to see what employers are trying to achieve and help them line up the retirement program within the corporate culture and the benefits strategy.

In contrast, participants need help trying to understand their employer-provided benefits and how to allocate their limited, precious resources to get the most value out of them. Employees likely have little else outside of their work benefits and maybe their homes as tangible assets. It’s our job to help them manage these resources effectively, improve their credit scores and budgets and get them addicted to saving instead of spending.

Many years ago, the role of the adviser was to help plan sponsors manage their fiduciary duties under ERISA. Today, our role is more of a sherpa, helping employers and employees navigate their challenges side-by-side as they navigate the peaks and valleys of the retirement plan climb. Helping employees reduce their debt and save for the future reduces their stress and makes them better employees. Helping employers build better wellness programs along with retirement plans that meet the fiduciary standard translates into providing employees with the best tools to help them reduce their debt and save. One simply cannot exist effectively without the other.

PLANADVISER: What are the most important issues that your plan sponsor clients face with their company retirement plans, and what particularly effective or unique actions do you take to assist them in overcoming those issues?

Massa: While I’ve already discussed many of these above (financial literacy, retirement income, ESG, HSAs, cyber, liability insurance, student loan debt, etc.), I’d like to talk about a few of the services we provide our clients to help them with some of the other challenges they face that we haven’t covered yet:

Compliance support

One of the unique services we provide to our clients is plan compliance support:

• EPCRS and VFCP support. Clients that encounter operational failures often look to their recordkeeping vendors for support. Sometimes, the vendors are either unavailable to help due to time and resource constraints or the costs for support are exorbitant. QPA Houston often steps in and provides correction support where possible to help clients resolve a compliance issue and even file with the IRS or DOL, as needed, to get the plan back into compliance.
• True-up calculations. Many plans offer an annual employer match true-up to ensure employees receive the maximum match, regardless of the speed or frequency of when deferrals were funded throughout the year. We noticed clients were being quoted fees ranging from $1,000 to $20,000 to perform what is a very simple calculation. We solved that problem by offering this service at no cost.
• Compensation ratio testing. When employers elect to exclude certain elements of compensation, we often provide a review of their compensation to determine whether the proposed exclusions may be discriminatory.
• General testing calculations under 401(a)(4). For clients that have unique designs and need to know if the provisions may be discriminatory, QPA Houston can provide rate group testing, nondiscriminatory classification and average benefits testing to illustrate whether the plan may pass or fail.
• Coverage testing. Running hand in hand with general testing, plan coverage issues under 410(b)(1) (ratio percentage) and or 410(b)(2) (average benefits) can illustrate if the exclusion of a group or groups of employees will result in a coverage failure and require remediation. QPA Houston can provide this testing as needed.
• Controlled group review. We commonly come across plans that have common ownership, and yet some of the commonly owned groups aren’t covered under the plan or plans sponsored by other common employers. We have often provided controlled group testing to evaluate if there is a controlled group and a compliance issue that needs to be addressed. However, we do refer affiliated service group evaluations to legal counsel.
• Merger and acquisition reviews. Plan sponsors often engage us to conduct M&A due diligence on retirement plans that may be acquired as part of a transaction. It is common for QPA Houston to be provided access to the deal room and make recommendations to the acquirer or acquiree on the steps to consider before the merger.
• 5500 and ADP/ACP testing review. QPA Houston also takes the time to review the work of the recordkeeper or TPA to ensure the 5500 data is accurate and matches the auditor’s report. We also review the ADP/ACP testing results to ensure they are correct and will look to see if there are ways to reduce or eliminate the refunds of a failed test result.
• Corporate resolutions. Most advisers take for granted the importance of having employers execute a corporate resolution. However, these can be critical tools in helping document the intent of an employer, especially when drafting a plan amendment is not yet an option, such as in implementing Secure 2.0 Act plan provisions. Used alongside the committee minutes, signed resolutions help create an irrefutable document and audit trail and provide help to plan administrators in understanding how a plan is being administered in the absence of other written rules and procedures. QPA Houston drafts these resolutions for all of our clients.

Code of Ethics

Never has a document been more critical in helping fiduciaries truly understand their roles as fiduciaries yet used so infrequently. For some of our clients, we’ve been implemented a written code of ethics for each committee member to read and sign once they have undergone our fiduciary training program. It helps them understand exactly what is expected of them and to full grasp the concept of conflicts of interest.

Plan design consulting

I believe our plan design is superior to most because of our knowledge of the tax code and the treasury regulations. We often consult employers on the differences between W-2, 3401(a) and the includible compensation definitions to help them choose which one might be best for them. We also look for unique needs, such as leveraging new comparability designs to help create a student debt matching benefit, eliminating safe harbor matching for plans that pass so we can maximize a backdoor Roth benefit, and opening after-tax sources to help employees build an emergency savings account. If an employer is failing the ADP/ACP test and safe harbor or automatic enrollment aren’t practical options, we can examine whether it is feasible to exclude a classification of employees from the plan, which, if it passes, might ameliorate the situation.

Benchmarking versus corporate comparators

While most advisers benchmark plans against national data (e.g., PLANSPONSOR Magazine’s annual survey), leveraging tools like Fiduciary Benchmarks and even obtaining custom quotes to benchmark fees, we take benchmarking a step further. We ask our clients to name several companies that they compete against for employee talent. We then scour 5500 reports and the internet to find out as much about the plans of those companies on that list as we can. We use that data to help our clients compare their plan designs versus their comparator group. This provides them with unique intelligence that they can then use to customize their plans and help the company stand out from the competition.

Health and welfare coordination

QPA Houston makes it a point to try and partner with our clients’ health and welfare vendors to provide a cohesive benefits guide and strategy. Knowing what health and welfare benefits are offered and the costs committed to those help us better understand the company’s benefits policy and the challenges they face in meeting it.

Adviser-managed accounts

Providing customized participant contribution and investment advice is critical in helping employees meet their own personal retirement goals. While target-date funds are helpful in getting employees invested more efficiently, they are not terribly accurate in how they solve the investment equation. The chosen target date glide path simply doesn’t fit every employee’s needs. It also doesn’t guide employees to a customized financial goal or help them map out how to get there. It lacks the dynamic data inputs that create a custom plan. Managed accounts are great ways to collect more than 12 unique data points and build a custom plan for each employee.

Disclosure

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Everyone in the QPA Houston office takes our role as the trusted fiduciary advisers of our clients very seriously. We believe that clients need tangible insights from trusted professionals on all manner of retirement plan issues. While fees and investments are important, they are only the beginning of the role advisers must play in the servicing of ERISA and non-ERISA retirement plans. As the leader of our team and the mentor of so many others in my career, I have always believed that our role is not limited to showing up every 90 days at a client’s office to tell them about the stock market and their investment performance. The role of a plan fiduciary is a 365-day-per-year job. The fiduciary duty never sleeps, never takes a day off and doesn’t shut down or even get a reprieve during a pandemic. Instead, fiduciaries must understand that when they know of an issue or potential breach, they have a responsibility to address the problem, regardless of what their advisory contract may say their role is. As fiduciary advisers, we also know that most human resources and benefits professionals, as well as most of the plan’s fiduciaries, are often overworked, under-resourced and not well versed in retirement plan fiduciary issues. They need guidance they can rely on from someone they can trust. If not us, then who? As I always tell my clients, “I will always tell you what you need to know, even if it isn’t what you want to hear.” But we also need to be MORE than retirement professionals. We need to be trusted consultants that understand the larger benefit picture an employer is trying to complete and adapt the plan to that picture. It is also critical that we are well-versed in ERISA compliance, helping employers understand controlled group issues, mergers and acquisitions challenges and ECPRS corrections solutions for when things don’t go according to plan.