Products February 22, 2024

Hub Launches Retirement Select PEP

The new PEP is designed for clients with fewer than 100 employees.  

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Hub Retirement and Private Wealth, a division of Hub International Ltd., on Wednesday announced the launch of HUB Retirement Select PEP, a pooled employer plan designed for clients with fewer than 100 employees seeking to offer 401(k) retirement plans. Sallus Retirement, the independent pooled plan provider, will serve as the lead fiduciary and Ubiquity Retirement + Savings will be the recordkeeper/administrator, according to the announcement.

The PEP will be a new option for Hub’s national network of retirement plan and wealth advisers, a footprint it is continuing to grow through acquisitions, including a recent high-profile deal in December to bring on AFS 401(k)’s retirement and wealth advisories.

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“Expanding the ability for employees at small businesses to save for retirement through their employer is part of our overall mission,” says Patrick Rieck, director of financial services at Hub. “The Hub Retirement Select PEP powered by Sallus is one more option that we make available to Hub International clients as part of our Hub Retirement Select small business program. We educate wealth advisers about how this program can help them effectively and efficiently meet the needs of their small business owner.”

Businesses participating in Hub Retirement Select PEP unite with other employers, eliminating the need for a distinct retirement plan sponsorship and enabling quick access to scaled pricing and services, according to the Chicago-based Hub. Similar to large plan sponsors, the firms can benefit from dedicated investment professionals overseeing employee investment choices.

Hub Retirement Select joins Hub’s Retirement Select 100+ PEP, launched last year for employers with more than 100 employees. The advisory also offers a single employer Hub Retirement Select retirement plans for small businesses.

HUB’s latest PEP comes as advisers and providers see potential for continued PEP growth in 2024. On Tuesday, The Standard announced the company has surpassed $1 billion in pooled employer retirement plan assets under administration.

“Our PEP strategy is a natural extension of our approach to standalone plans, which is based on our strong customer service proposition, industry-leading fiduciary responsibility programs and emphasis on providing easy-to-implement solutions for employers,” Ted Schmelzle, second vice president of retirement plan services at The Standard, said in a statement.

Compliance February 21, 2024

Regulation Best Interest and Individual Retirement Accounts

Reg BI requires advisers to consider leaving the client’s assets in their original retirement account.

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The retirement security proposal, proposed by the Department of Labor in October, would apply fiduciary duties under the Employee Retirement Income Security Act to rollovers to individual retirement accounts, among other transactions. Opponents of this proposal say that the Security and Exchange Commission’s Regulation Best Interest has been regulating these transactions since June 2020, and the DOL proposal is therefore unnecessary.

What does Reg BI require when it comes to rollovers?

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Reg BI is a broad regulation enforced by the SEC that requires brokers and advisers to only recommend securities or strategies involving securities that are in the best interest of the customer. This does not require them to survey all securities available. They are required to tailor their advice to the needs of their client, mitigate and disclose conflicts of interest, and to be familiar with the products they recommend such that they have a reasonable basis to recommend it, among other requirements.

A staff bulletin published by the Securities and Exchange Commission in March 2022 noted that advisers must consider if a client would be better off keeping their assets in a retirement plan when recommending a rollover to an IRA: “it would be difficult to form a reasonable basis to believe that a rollover recommendation is in the retail investor’s best interest and does not place your or your firm’s interests ahead of the retail investor’s interest, if you do not consider the alternative of leaving the retail investor’s investments in their employer’s plan.”

The bulletin added that when recommending a rollover, “you would need to obtain information about the existing plan, including the costs associated with the options available in the investor’s current plan.”

Jay Gould, a special counsel with the law firm Baker Botts, says that he has not seen a lot of enforcement activity when it comes to Reg BI and rollovers, and adds that this is an “area that the regulators may want to provide additional scrutiny.”

The most recent enforcement action by the SEC under Reg BI was a $2.2 million fine imposed last week on a TIAA subsidiary for not disclosing lower-fee alternatives to clients investing in TIAA’s proprietary products. This action was not related to retirement plan rollovers.

Gould says that while the SEC regulates most rollover transactions it “could be a good idea to have a regulator come at the issue from the account side and not the investment side,” that is an approach that focuses on IRAs as such, and not the investments in them, because it could help mitigate conflicts in IRA-related transactions, especially when it comes to IRA providers that have proprietary products.

An adviser recommending a rollover under Reg BI would have to disclose fee structures within an IRA and the client’s existing retirement account and would need “to point out basic things,” such as expenses and available investments, Gould says.

Gould acknowledges, however, that examining these fee structures can be a labor-intensive process that might not be worth an adviser’s time if they fail to execute a rollover and earn a fee.

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