Kevin Kidwell, VP, National Tax Exempt SalesThe 403(b) plan industry was changed dramatically in the last decade with the passing of regulations that required nearly all plan sponsors to make significant changes to their plans. There are still many plans that have not yet conformed to the new regulations. Kevin Kidwell, Vice President, National Tax Exempt Sales at OneAmerica®, spoke to PLANADVISER about the challenges facing these plans and how retirement plan advisers can get help.
PA: It’s amazing how much evolution there’s been in the 403(b) industry in the last 10 years. What is the OneAmerica perspective about the 403(b) market?
Kevin Kidwell: We look at it as a large, yet underserved, market that has much catching up to do. Years after regulations were made final, roughly 85 percent of the 403(b) plans we see are operationally noncompliant. Common issues are: universal availability, issues around loans, and documenting hardship distributions properly. These issues can spiral into a mistake that’s costly for an employer to fix. So the payoff for voluntary intervention is savings, course correction, and avoidance of wasting resources that distract from the organization’s mission and the objective of the retirement plan, which is to enable workers to retire with dignity.
PA: Do you find that there are enough advisers out there to properly serve this market, or is there still opportunity for advisers who want to specialize?
Kidwell: Yes, plenty of opportunity exists for advisers who are looking to build their practice with a client base that is sustainable over the long term. Currently, only about 50 percent of plans in this market have an adviser. The caveat is that the retirement plan decisionmaking process in this market typically takes longer versus the traditional 401(k) market. In a nutshell, if you are looking for a quick win, this may not be the best market for you, but if you are looking to build a client base that will stick around for the long term, this may be the right market. Many tax exempt plans today need guidance on things like plan documents, nondiscrimination testing and universal availability rules. This can translate into big opportunities for advisers.
PA: What does the OneAmerica client base look like; how are you serving the tax exempt market?
Kidwell: Traditionally 32 percent of our book of business has been tax exempt. We have the luxury of being tax code neutral. It doesn’t matter to us whether an organization has a 401(k), 403(b), 457 plan, or some combination; we can help design, support, and provide an optimized tailored retirement plan.
PA: As you look to the market as a whole, where does the experience that OneAmerica brings come into play? How do you help plan sponsors and advisers cope with this ever-evolving market?
Kidwell: The first priority is plan design, which means evaluating what the employer is trying to accomplish—through matching contribution discussions and automatic features, for example. Second is the creation and execution of an employee communication and education program. Too often, in the tax exempt space, plan communication is lacking or nonexistent. Third is the administration or compliance piece, which is critical to prevent financial penalties to the employer and to the employee. Lastly are the investment options, which drive the growth of the plan.
Recordkeepers and advisers have to be able to cover and be conversant in all of those areas to excel in this market. Our job is to work with the adviser and plan sponsor to tie all four together with the goal of truly optimizing a plan. We know a comprehensive strategy such as this works—one of our clients was the 2016 Plan Sponsor of the Year in the 403(b) category.
Understanding the subtle nuances in the tax exempt space can save the day for the employer. At OneAmerica, we bring 52 years of tax exempt experience to the table. Our knowledge, skill set, and plan evaluation process have allowed us to help thousands of tax exempt plans and their participants retire with dignity. From our perspective, true success occurs when all objectives are aligned.
OneAmerica is the marketing name for the companies of OneAmerica.
Group annuity contracts are issued by American United Life Insurance Company® (AUL) and registered variable annuity products are distributed by OneAmerica Securities, Inc., Member FINRA, SIPC, a Registered Investment Advisor, 433 N. Capitol Ave., Indianapolis, IN 46204, 1-877-285-3863. McCready and Keene, Inc. and OneAmerica Retirement Services LLC provide administrative and record keeping services and are not broker/dealers or investment advisors. None of these companies nor their representatives provide tax, legal or investment advice. For answers to specific questions, please contact a qualified attorney or tax adviser.