Benjamin Hall, vice president and managing director of JKJ Retirement Services in Newtown, Pa., and Susan Diehl, QPA, CPC, ERPA, president of PenServ Plan Services Inc. in Horsham, Pa., discuss adding value to client relationships in the world of employee benefit plans. Both Hall and Diehl were joined by Melissa Kurtzman of Littler Mendelson and Jill Gilbert, CPA, of RKL LLP to discuss this topic at greater length at PICPA’s 2019 Employee Benefit Plans Conference on May 21 in Malvern.

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By: Jim DeLuccia, PICPA Communications Manager

Podcast Transcript

Much is happening in the area of employee benefit plans, and an issue that deserves attention is adding value to client relationships. This topic will be discussed at greater length at PICPA's 2019 Employee Benefit Plans Conference on May 21 at Penn State Great Valley in Malvern. But, I'm joined today by two of the panelists to provide a preview on what this idea entails. My guests are Benjamin Hall, vice president and managing director of JKJ Retirement Services in Newtown, and Susan Diehl, QPA, CPC, ERPA, president of PenServ Plan Services Incorporated in Horsham.

I want to start with Sue first. Why is it necessary to add value to client relationships in employee benefit plans in today's environment?

[Diehl] Well, when we look out into the marketplace, it's obvious, I think, to all of us as professionals how many moving parts there are that are involved in employee benefit plans. And, you think about that and imagine how intimidating this is to the average employer, even those with a proficient human resource staff. We think that fostering earnest and deep-rooted client relationships can be your value proposition with your clients. Use what you genuinely currently have in your arsenal and be the expert you already are.

In particular, when I look today at the 403(b) market, now that we're entrenched in the plan restatement process and that's right around the corner. Very technically oriented. As you're probably all aware, 403(b) plan audits are not widespread, both in the large and the small plan sectors. The IRS audits currently involve more than just balancing the participants' investment statement. They require a stronger understanding of the more technical aspects of the plan design options, and of regulatory requirements that drive the plan operations. Does this mean that you need to become an ERISA attorney, or an expert? Well, some of you may already have those credentials. But for those of you that don't, partnering with experts in the field can be your gateway to added success.

Make your core expertise the cornerstone of their retirement structure by pushing the boundaries of how you typically fit into the plans’ daily operations. And, I think that's, all in all, adding that value. Number one, it helps your client understand better, knows that you are in the relationship to assist that client, and it goes hand-in-hand and works well.

Ben, how about your thoughts?

[Hall] My thoughts on this are, in some respects, pretty simple and straightforward. Why is it necessary to add value to client relationships in today's environment? And, the answer's kind of very simply, if you don't, someone else will. And it's really, I think, increasingly important to show clients that you get it, that you have an awareness of kind of the total picture, broadly, of what they're dealing with, beyond just the very narrow area that they may have sort of specifically asked a question, or be engaging you to specifically look at. To sort of have the pulse on everything else going on around you so that you're sort of able to think of the question that they're not thinking of, that they would think of if they knew everything you know, again, about sort of the broader context and things.

And again, why is that important? Well, because if you're not doing that, you can bet that somebody else is going to be reaching out to the organizations you're working with who does. And, I think in some respects it's really that simple.

You all plan and discuss ways to add value to your client relationships, and obviously you both gave an overview here to start. But, could both of you just briefly explain one idea you are particularly partial to in this area? Maybe it's frequent communication. Maybe it's understanding and communicating current trends. Sue, I'll start with you on that and get your thoughts first.

[Diehl] Frequent communication is one of the things that I really have our employees focus on, as well as direct communication. I really get upset when I see a lot of organizations focused on emailing only. The value of just holding knowledge where you can very simply and understandably walk your client through an issue or lead them to an appropriate resource. It may not always be you. That shouldn't be underestimated. You should have, in your arsenal, the referral business that you can send people to as well, if they need to go somewhere else. Every day I think we all encounter an employer who can't express enough their appreciation just to be talked through a situation that involves their plan, instead of having to go back and forth in email. I think the personal touch, frequent communication, is critical to a happy employer, a happy client.

That makes sense. Ben, how about you? What is something that you're particularly partial to?

[Hall] It's funny, because it's not going to sound terribly different from what Sue just said. And, we didn't compare notes before this. We didn't collude on our answers. But, something that I had jotted down here is really – Sue was saying sort of direct communication, frequency of communication – and the thing I was going to add to that, that I had jotted down in my mind, was clarity of communication. And what I really mean by that, is translating things into English that the person on the other side can understand. The amount of time that we find ourselves, in our role as a plan fiduciary consultant and investment adviser, taking what I'm going to call sort of industry speak that often is sort of prevalent in the record keeping and administration world, which is all technically accurate, but which needs a translator into, "Hey, plan sponsor. Here's what this means to you in terms you can understand, in a way that's relatable." And, just acting as that translator sounds so basic and elementary, and yet it's something that we find often doesn't take place unless we're the ones doing it.

Piling onto what Sue said, the theme is communication, right? She noted frequency and directness, and I would say clarity. Clarity and simple, plain English that's relatable. And, "Here's what this really means to you in layman's terms that you can understand enough to make an intelligent, formed decision."

Well Sue, I'm gonna start with you again here. That's the thing. You're our lead-off hitter here as we go through this. But, can you briefly describe a common plan correction example?

[Diehl] Yes. And actually, I'm going to start with one that we are currently seeing a lot of good and bad corrections on, only because, again, going back to 403(b), every 403(b) employer has to restate between now and the end of March of 2020. We're getting down to the nitty gritty here. And, it's unique to 403(b)s, referred to as the paperclip rule. And if you can imagine, it's with respect to an employer, any employer, ERISA or non-ERISA, and of course, we're focusing here more on ERISA plans, that cannot find or doesn't have a plan document that was executed back in 2009.

We know at that point everyone had to execute a valid plan document. If they didn't, then the restatement will not give them reliance back to 2009, which is what these employers need. Paperclip rule, very basically – and, this is why IRS kind of nicknamed it that – you go back to 2009, and you collect everything. And, I mean everything you can find. You look at board resolutions, minutes of board meetings. You gather all of the underlying investment vehicles you might have. An annuity contract, a 403(b) custodial agreement where the investments were mutual funds, any kind of employee enrollment booklet, summary plan descriptions, or descriptions of the plan. Anything you can find that describe what that 403(b) was supposed to be in 2009.

And then, you take a big, huge paperclip, and you put all those papers together. I always say it's a binder clip, because a paperclip would never fit these documents. And then, you memorialize it on a plan that is effective 1/1/2009 with a current signature date. And then, you can go forward and restate for the new requirements.

We'll talk more about this at the session, but it basically, by doing this, will then give the employer reliance back to 2009. They can also do corrections, any correction that wasn't in a document from 2009 through the current date. We're looking at about 10 years of potential corrections that can be made now. This is the only time they can do that. Critical, very critical.

In this digital world that we live in, a paperclip is still a vital piece of the workplace, I guess?

[Diehl] There you go.

Ben, how about you? What common plan correction example, or maybe something in the area, I guess?

[Hall] This isn't a sort of a technical correction, right? That term often conjures up in the context of employee benefit plans, late deposits, and there's formal IRS correction programs, and DOL corrections programs. That's really not what I'm thinking about here. But rather, I'll say a common error we see, because of a consistent lack of understanding, relates to the multitude of regulatory notices that retirement plan participants are supposed to get. And, we see plan sponsors with very great lack of understanding on this because it is confusing. And, they're unclear as to which notices need to go to folks when they're initially becoming eligible, how can those notices go to people, what has to go on an annual recurring basis, what are notices that are driven by changes in the plan, such as adjustments to fees and or funds, how can those be delivered to whom, what can be electronic, what has to be hard copy, what about your terminated participants who still have money in the plan? All of these sorts of things, we find ourselves spending a lot of time. Even plans that are well run, where there is a diligent plan sponsor running the plan, even they struggle with keeping all of this straight.

While things of this nature often don't conjure up a true corrections, in the sense of a corrective filing, folks need coaching to correct processes that they didn't have spot on, simply because they didn't understand. Because some of these things, as I said, they can be quite convoluted, unfortunately so. But, that's an area where we spend a lot of time talking to our clients about, making sure they know what they're supposed to do. And, it gets even more confusing because some of the notices are prepared by the TPA, some are prepared by the plan's record keeper, some are sent directly to participants, some are not, some the sponsor has to ... Again, it's just all of these moving parts where we often see some slippage and continued need for reminding and refinement.

Sue, what is one area, in your opinion, that may be overlooked but should be addressed with clients as a best practice?

[Diehl] Well, I may have to piggyback on what Ben just said, because I think my head is spinning now, Ben. But, so true. And I think when you look at, maybe, the administrative notices or information that has to be done at the establishment of the plan annually, I think it is overwhelming to employers. And there are, in many cases, too many people that kind of were involved with the plan, with the lack of one organization, or one individual, really looking at it all.

And, I think as a best practice, that's what needs to be done. Whether it's the third-party administrator, the record keeper, the employer. Unless you have hired an entity that is taking on that responsibility. You may have a third-party administrator, or you may have a third-party administrator that considers themselves a 316 fiduciary where they are in fact taking on the fiduciary role for making sure all these things are done. I'm spanning a little bit more than one area. But, I think there needs to be plan governance, which is part of what IRS looks to now when they do audit employer plans, is to find out who's responsible for which moving piece, who collects the information, where is it housed, and who has the responsibility of going through the various notification requirements to make sure they're done timely, accurately, etc.

There is a ton of other examples on various corrections, very common things we're starting to see. But, I think the beginning part of best practices is to look at governance.

Ben, how about you, as we wind down our conversation here?

[Hall] I'll just piggyback really quickly on what Sue said about governance, and then I'll share sort of my broader comment of – or, my more specific comment – excuse me. Just governance in general. Writing down what your process is ... And, not just what your process is, but writing down that you followed your process. And that's just simply, when decision are made, documenting those decisions, post-meeting minutes. It's amazing how many folks don't keep those.

The more specific thing, where we just see as best practice ... And, this ties to the litigation that has been out there in the marketplace, that there have been headlines about. What's interesting is, almost none of that litigation revolves around quality of investments. Which, I would like to say that the folks in my shoes as investment advisers and consultants are doing such a great job. And, of course, I think we do. But, a lot of the litigation is around fees, and share classes, and costs. And, are the costs reasonable, and so on and so forth.

And, I think the point there is that this ties to the governance and the documentation. Documenting that costs were evaluated, and that they were determined to be reasonable, and here's how we determined that they were reasonable. At least now, we live in an era where we have fee disclosure, right? We have for many years. Now, if only it were that easy, right? Because, having disclosures is not as easy as truly understanding what the costs actually are. Because, all these disclosures, they can be convoluted, they have legalese, they have terminology. Every service provider has a different format, and they have different ways of assessing their costs, and so on and so forth.

The takeaway there is sort of, don't just get your disclosures because you have to have your disclosures if you're a plan sponsor. But rather, understand what they actually say. What am I actually, truly paying, and to whom, and how? And even that's not enough, because if you truly understand what you're paying, then the thing you really need to truly understand is, is that reasonable, right? And, there's a number of different ways for potentially determining reasonability.

And, so many folks focus on low cost. And in code section 408, the regulations that speak to these fee disclosures, nowhere in there is the words "low cost" used. But, the words "reasonable," "reasonableness," "reasonability," or variations thereon, are used tens of times. Just over, and over, and over again in those regulations, that terminology is used. But, you got to have a process and document, tying to the comment about minutes, of the process you followed to get your disclosures, truly understand what they say, and then truly understand what those mean in the context of whether what you're paying, and what you're getting for what you're paying. It's okay to pay more to get more. But for what you're getting, is what you're paying reasonable?