Client Service April 1, 2024

Tackling Cumbersome ‘Bac(k)’ Office Tasks

Former recordkeeper executive Shane Hanson launches Freedom 360 suite aimed at streamlining retirement services and boosting participant engagement.

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Shane Hanson launched Freedom Fiduciaries LLC in 2023 with the goal of providing “fiduciary freedom” to plan sponsors while also providing back-office support to plan advisers. On Monday, the company launched a set of capabilities aimed at furthering those goals.

Freedom 360, backed by machine learning, is a proprietary retirement plan management system designed to automate “cumbersome and repetitive tasks that have traditionally undermined efficiency and accuracy in service delivery,” according to an announcement from Freedom Fiduciaries. “This automation enables advisers to focus on strategic decision-making, enhance client service, and boost participant engagement.”

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Shane Hanson

Advisers who partner with Freedom Fiduciaries on its Bac(k) Office platform will have access to Freedom 360, including integration of plan participants if the adviser works directly on participant engagement. Fees are based on the “selected options and the scale of business,” according to Hanson. The firm is currently collaborating with more than 24 adviser firms, as well as financial services firms such as banks and credit unions.

Hanson founded Freedom Fiduciaries after stints as a regional sales director at Empower and Voya Financial. Those roles partially shaped his desire to create a firm that would tackle 401(k) back-office tasks so advisers could focus on plan sponsors and participants.

“I have spent nearly 13 years collaborating with thousands of advisers, ranging from specialists to brand new generalists,” Hanson says. “I saw a gap in the market for a solution that could solve real problems. This gap prompted the creation of a solution aimed at addressing the shortage of specialists within the industry.”

A recurring issue, according to Hanson, occurs when generalist advisers bring in a retirement plan wholesaler to sell the plan, often adding an institutional 3(38) provider without “addressing key challenges faced by plan sponsors, such as 3(16) administration, resolution of issues like payroll discrepancies, understanding regulatory updates like SECURE 2.0 and fulfilling fiduciary duties.”

Bac(k) Office, he says, is designed to solve some of the issue, while offering 3(38) services, but not making them mandatory.

Tech-Enabled

The new Freedom 360 comes in a few parts. At its “heart,” according to the release, is Participant (k)onnect, a participant engagement engine that relies on artificial intelligence to assist in areas ranging from personalized communication to a participant’s separation from the plan.

Another part of the offering is Kaleó, a proprietary bot with the goal of reducing administrative workloads related to retirement plan servicing. The bot will automate areas such as “quarterly reporting, investment data compilation, meeting minutes, educational presentations, plan highlights, and the generation of plan sponsor reports,” according to the announcement. It is also designed to both monitor service tasks by client and track service activity according to agreements, as well as schedule benchmarking, trustee and educational meetings.

A third aspect of the offering is the Fiduciary Freedom Center, a central repository for plan sponsors and partner advisers to access documents such as plan agreements, open cases, regulatory reminders, plan details and fiduciary training materials.

“This eliminates the inefficiency of using multiple, uncoordinated portals,” according to the firm. “Additionally, Kaleó integrates with the center, automatically archiving meeting minutes, investment reviews, quarterly reports, benchmarking results, and more, further enhancing the system’s efficiency and ease of use.”

The center also automates comparative tools for the adviser for fee tracking and benchmarking, as well as requests for proposal for service providers, prompting current providers to submit information and then creating a presentation for the client, according to Freedom Fiduciaries.

Finally, the new offering provides a simple, one-click tool for sending educational material to participants, which can also be sent via the Participant (k)onnect tool, according to the firm.

Enhanced Capabilities

Cristina Hansen, vice president of client services, joined the firm after working at advisories including Pensionmark Financial Group LLC.

“With the deployment of Freedom 360, we’re not just enhancing our capabilities; we’re revolutionizing the way we service retirement plans,” Hansen said in a statement with the launch. “By automating routine tasks and integrating cutting-edge technology, we’re now able to focus our energies more on being proactive and solving complex problems for our clients.“

The firm currently serves nearly 100 plans and is in the process of onboarding more books of business and partnerships, according to Hanson. A persistent pain point, however, is “accessing information” from recordkeepers, he notes.

“Most recordkeepers are reluctant to provide an API or disclose email and phone numbers for participants, a matter that requires industry-wide attention,” he says. “To tackle this issue, we have dedicated a full-time individual to manage census information, and we are developing additional tools to streamline the process of data integration from recordkeepers into our system.”

Products & Services April 1, 2024

Father of the 401(k) Is Planting a New Workplace Savings Idea

Ted Benna has designed a new tax-advantaged workplace incentive program in which workers automatically earn ‘grains of wheat’ that can be harvested at a later date.

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Ted Benna, dubbed the father of the 401(k), has developed a new tax-advantaged employee incentive plan designed largely to help workers who have trouble contributing to a retirement plan.

Benna calls his new idea the Wheat Grain Incentive Plan, or WGIP, with the metaphorical grains of wheat representing cash contributions from an employer based simply on an employee consistently showing up for work or meeting performance goals.

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The program, he says, is designed to help the many people in America’s workforce who do not make enough to save sufficiently in a 401(k), missing out on both the tax advantages and potential employer matches.

Ted Benna

“One major Wheat Plan objective is to help lower-paid employees save who are not likely to be able to do so on their own,” Benna says. “A 401(k) is a great savings plan for employees to save for retirement if they can afford to do so; however, these plans are subject to strict rules.”

Benna, who has authored a version of “401(k)s and IRAs for Dummies,” notes problems with the 401(k), including that employer matching programs do not vary for years of service. Meanwhile, he notes, lower wage workers often do not save unless through automatic enrollment because they cannot afford to, and even then they may withdraw early or repeatedly to meet daily needs. In addition, college graduates with student loans may be torn between paying off debt and saving for retirement.

Benna says his program skirts these issues while still helping people build savings in a tax-deferred program. “Most reward systems other than those that provide de minimis benefits must be included as compensation, which is subject to federal, state, city and local income/wage taxes,” he says. “The wheat grains are also not subject to FICA, unemployment taxes and [workers’] compensation.”

The Wagner Law Group, with attorneys specializing in the Employee Retirement Income Security Act, has agreed to provide legal support for the offering; Benna says the fees would be determined once he has the program set up with a recordkeeper.

Harvesting Ideas

Benna has long been associated with the 401(k) after initially discovering the tax-advantaged savings potential and championing it for workplaces in the early 1980s. But even as the 401(k) has grown into the most popular workplace savings vehicle in America, its creator has been critical of both its value for low-income workers and its ability to offer steady income in retirement.

One key to his WGIP program, Benna says, is that employees of all income situations will be able to see grains accumulate and be motivated to keep earning more, with the amount and setup at the discretion of the employer.

“The employer will convert the wheat grains at the end of each month to make a tax-deductible contribution to the WGIP,” Benna says. “The wheat grains should be invested in short-term fixed-income investments such as money market funds, because many participants may want to access the money for short-term needs. Such investments currently earn approximately 5%.”

Employees in the program may also choose to transfer their account balances into another plan, such as a 401(k) or individual retirement account, Benna says.

Benna suggests one use case in which the minimum withdrawal would be $500, and only one withdrawal would be permitted per year. There would be a service charge for each withdrawal to be paid by either the employer or the employee.

Attraction and Retention

If done right, Benna believes, WGIPs will help employers attract and retain employees, which in turn would reduce costs associated with turnover and rehiring—enabling funds that could further fuel the wheat grains earned by employees.

Eligible employees may only be non-highly-compensated workers, and the program could kick in only after a set number of months of employment to promote retention, Benna says.

Meanwhile, wheat grains could be defined as a percentage of a person’s salary or as a flat fee and could also be used with a bonus program. They may also be tied to company profitability and even meeting safety standards.

“A WGIP will enable these employees to receive additional value for their service that will be investments in their future,” Benna says. “Employers will be helping some employees do something that they have not been able to do on their own.”

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