Closing the Coverage Gap

Barbara Delaney, SSRBA, a division of HUB International

Pearl River, New York

Barbara Delaney, SSRBA, a division of HUB InternationalBarbara Delaney, SSRBA, a division of HUB International

Business at a Glance as of 12/31/21

  • Plan assets under advisement: $4.2 billion
  • Median plan size (in assets): $6.8 million
  • Plans under administration: 79
  • Total participants served: 50,451

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

Delaney: I have been working with plan sponsors and participants for over 4 decades now. Our firm was one of the first to bring 401(k)s to market in 1988. At that point in time, we were manually filling out enrollment forms for each individual person with a choice of four funds and quarterly valuations. As the 401(k) market grew, we began to promote coverage for Americans by introducing automatic enrollment, even before PPA. Then the PPA guidance came out endorsing Auto Enrollment. I would like to share one short story of my battle with the challenges with partners to embrace change and get more Americans in plans. This industry is ever evolving, and we need to continue to transform along with it, even as we get tremendous resistance. I take my role as a fiduciary to participants and plan sponsors as my overarching responsibility. Increasing coverage through MEP’s, PEP’s and other models and better plan design features is imperative.

In 2002 I had a manufacturing client challenge me to increase enrollment in order to pass non-discrimination testing. Participation was at 50%. Back then, plan sponsors focused more on Compliance Testing results rather than focusing on getting employees in the plan to achieve a successful retirement. The plan I had back in the early 2000s was with MassMutual (MM) (formerly Connecticut Mutual but merged with MM). MM did not want to do automatic enrollment. Their first concern was the administrative burden was too much and it would create too many small account balances. We pressured MM to move forward and were successful in accomplishing our objective, despite the resistance. At that time, the participant-level investment default was either a money market or a guaranteed account.

Intuitively I knew that was not the best option, but we went with it as it was the only option offered. Fast forward to the PPA of 2006 where the Department of Labor gave guidance directing that the default fund for participants who do not provide investment direction should be a balanced fund and/or risked-based funds. Note there were no target date funds then. When we instructed MM to move the assets to the more appropriate fund, they were going to impose a market value adjustment against the participants since it was a plan sponsor directive, not an employee directive. After many battles they did what was right and, in fact, changed their MVA factors because of this battle. So, the story here is getting more coverage and employees enrolled has been on-going for decades.

 

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

Delaney: Our team is unique in the way we keep a boutique type model, yet we now have the scope of a much larger organization through HUB International. As demonstrated above, we continue to be pioneers in our approach and never leave a participant behind. All clients still receive the same amount of attention while addressing industry needs.

 

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

Delaney: We are proud of our success with our clients which average a participation rate of 95%+, with average deferrals of over 10%. We are also proud of our client retention rate. Many of our clients partnered with us in the 1980s and continue to rely on us for their retirement planning needs.

 

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

Delaney: Now, here we sit in 2022 in a world that has totally changed due to Covid, the great resignation, and in my view, a total reset of values where employees are more focused on work/life balance. The industry’s biggest challenge is now providing access to a retirement plan through the work force. Since the start of 401(k) plans in the late 1980s, early 1990s, our industry now offers only approximately 600,000 401(k) plans, yet 6 million employers nationwide could offer a plan. In other words, we have only covered 10% of the employer market in the last 45 years. Our industry simply shuffles around the same 600,000 plans and we leave so many behind.

Recognizing this huge gap, in February 2020 we initiated a feasibility study to increase coverage by analyzing the opportunity of forming a MEP for manufacturing companies through the National Association of Manufacturers (NAM). The NAM engaged a consultant and our firm to form a working group of their member manufacturers to get better coverage for the 30,000 association members, 40% of which have no plan at all. With the ambitious goal of providing coverage to all, in January 2022 we rolled out the National Association of Manufacturers Multiple Employer Retirement Plan that will be offered to over 30,000 manufacturers, furthering our goal to leave no employee behind!

Additionally, we have a MEP in progress with the German American Chamber of commerce that will offer start up plans for new and existing Chamber members on a national level. We are also collaborating with outside advisor partners, and we just launched a startup for 12 McDonald’s franchisees who do not currently sponsor a plan.

In summary, our goal is to solve the coverage problem over the next five years.

 

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

There are several challenges the industry faces to provide broad coverage to all Americans:

  1. Simplify Governance.
  2. Reduce and/or relax timing for testing requirements.
  3. Provide seamless start up strategies using digital services.
  4. Reduce costs for startup plans.
  5. Getting Washington to collaborate with us to accomplish all the above.

The role our firm plays is being involved in NAPA in many ways. I have served on the Steering Committee, the Leadership Council, and the Government Affairs Committee.

In addition, our firm has challenged the industry to re-engage with participants to get better outcomes and enrollment.

 

PLANADVISER: Why do you feel that retirement plan advisers should get involved in the expansion of the DC retirement plan system to cover more types of employers and employees?

Delaney: If the advisor does not get involved and assist in getting this done, the government will do it for us. Need I say more?

What are the biggest challenges preventing the broader delivery of tax-advantaged retirement savings opportunities in the workplace, and how might these be solved?

Challenges include costs, ease in complexity and ease in plan administration using digital resources and/or third parties. The way to meet this challenge is to get advisors to focus and commit time to this as part of their normal business plan.

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