Advisors: Use IRS Form 8955-SSA to your Advantage

Posted on February 7, 2013 by InspiraFS

While most Plans Sponsors, Third Party Administrators and Record Keepers know about an 8955-SSA, many Advisors aren’t aware of one of the most valuable forms/reports/tools to remove terminated retirement plan participants.  Simply asking a plan sponsor what they are doing with those names is a great step towards cleaning up a plan to reduce administrative burden and mitigate fiduciary liability.

So what is an 8955-SSA?  Per the IRS:

“Administrators of retirement plans that are subject to ERISA’s minimum vesting requirements must file Form 8955-SSA with the IRS to report deferred vested benefit information for participants who separate from service during the plan year.”

The form contains terminated participants along with their social security number and vested balances.  Unlike a Form 5500, the 8955-SSA is not public information due to the confidential nature.

Once reported, plan sponsors, TPAs, record keepers or advisors should address those names of participants listed on the 8955-SSA.  While the end result is the same for the plan sponsor, the strategies for each group are a little different.

In sports terms, Advisors can use an 8955-SSA on offense and defense. 

Let’s define “offense” as prospecting for new plans, thereby proving value up front.  Ask a plan sponsor “What are you doing with those individuals and balances listed on the most recent 8955-SSA?”  Is the current advisor asleep at the wheel?  If there are terminated balances of $5,000 or less, they are eligible to be forced out, so use an independent auto rollover record keeper to remove those participants and balances.  Present the cleaner plan with higher average balances to a provider for better pricing.  Advisors that do so have demonstrated value even before taking on a new plan.

Let’s define “defense” as cleaning out your existing plans, thereby insulating your business from other advisors telling your plans that you are asleep at the wheel.  Ask your plan sponsors about the recent terminated participants included on an 8955-SSA.  Force out the under $5,000 accounts to an auto rollover RK.  Decide what size rollovers you and your firm would like to try to retain.  If applicable, present the cleaner plan to the incumbent for re-pricing purposes.

Either way, Advisors could use an IRS Form 8955-SSA as a valuable resource.

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Legislators Threaten Existing Retirement System

Posted on November 29, 2012 by InspiraFS

With an almost insurmountable budget deficit and the threat of increasing almost everyone’s taxes if the “Fiscal Cliff” is not addressed, Congress is looking at all avenues to “grab” revenue. At $18.5 trillion in assets, the retirement plan marketplace looks like a tempting place to start.

SaveMy401k, joint effort by ASPPA and NAPA

The lure is there for Congress. But it’s a temptation they must resist to look at what is best for the country over the long haul.

Here are the facts:

  • To remain solvent, the current Social Security System needs to be altered to reduce benefit payments. If those payments are reduced and perhaps eliminated for some, you must take stress off that system by encouraging individual retirement savings.
  • Without tax deductions on contributions, historically individuals do not save for retirement.  Most of the individual retirement savings started when 401(k) plans became popular, and contributions to IRAs decreased when Congress limited the number of individuals that can take a deduction. According to a report from Hewitt in 2010, adoption rate on plans with a Roth contribution (no salary deferral) option for new employees was only 13%.
  • SaveMy401k.com, and ASPPA website, states that the last time Congress made major changes to the tax code, they cut 401(k) contributions by more than 70%.

There are a number of proposals in Congress that primarily attack the 401(k) plan.  These proposals range from eliminating the salary deferral on all individuals to lowering the annual contribution limit from $51,000 to $20,000 (mostly affecting self-employed individuals and the highest of income earners).

The American Benefits Council produced a whitepaper on these issues.  In that paper, they argue that these Congressional proposals are dangerous and harmful to the entire retirement savings system. I encourage everyone to read this paper.

If after you have done your research and feel that the current 401(k) system should be left intact, I encourage you to go to SaveMy401k.com and email Congress.  They are currently in “Fiscal Cliff” negotiations, so there is no time to waste in making your opinions known.

Lowell Smith | President
InspiraFS 

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Inspira’s Parent Company Receives an award

Posted on November 28, 2012 by InspiraFS

For the 6th time in the past 8 years, Inspira, as part of its parent company ABG Capital, has been recognized by the Pittsburgh Business Times as one of the Best Places to Work in Western Pennsylvania.

ABG Capital.

The Pittsburgh Business Times created this achievement status in 2005 as a way to honor the Pittsburgh region’s most outstanding workplaces.

“We’re extremely happy being a part of ABG Capital,” said Lowell Smith, Jr., President of Inspira. “They make a point to foster a family atmosphere here, and that approach allows companies, and individuals, to thrive.”

ABG Capital was previously honored with this prestigious award from 2005 through 2009. Most of ABG Capital’s attention is focused on growing its portfolio companies, including Inspira.

To do this, they consolidate services like accounting, legal, IT, software development, administration and HR to eliminate redundancy and increase efficiency. ABG Capital’s other portfolio companies include End User Services, GlobalPOPs, and VoIP Innovations.

ABG Capital and Inspira are located in Pittsburgh, PA. This summer marked ABG Capital’s 20th year in business. Inspira was founded in 2002 and is the retirement industry’s low-cost Automatic Rollover provider.

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Ascensus, ExpertPlan enter Definitive Merger Agreement

Posted on November 21, 2012 by InspiraFS

So, Ascensus is acquiring ExpertPlan. In a joint announcement Tuesday evening, the two companies decided to make the day before Thanksgiving an absolute nightmare for ExpertPlan’s relationship managers.

Here is the full text of the press release:

“Ascensus, a leading retirement plan solutions provider, is pleased to announce they have entered into a definitive merger agreement with ExpertPlan that is pending regulatory approval.

ExpertPlan, headquartered in East Windsor, New Jersey, is a leading provider of micro and small plan recordkeeping and administrative services for approximately 16,000 plans with a particular focus on providing web-enabled technology services.”

“Ascensus’ interest in ExpertPlan stems from the complementary open-architecture investment platform and the additional solutions offered in some key areas including micro plan web based  services, defined benefit, including cash balance plan services and non-traditional asset defined contribution plan recordkeeping and  administration. The ExpertPlan team also distributes through a broad network of intermediary partners which is very similar to the Ascensus approach. The transaction is expected to close by the end of 2012.”

“We are very excited to have the ExpertPlan associates join the Ascensus family,” said Bob Guillocheau, President and CEO, Ascensus. “This transaction really hits on all the key attributes we look for in an opportunity, expanding market share in growing markets, entering new growth markets and delivering solid margins. Being able to offer these new services to our existing relationships is something that will help our clients meet their business goals and that is one of our primary focuses as a high-quality service provider.”

“ExpertPlan is very proud and excited to join the family of Ascensus companies. The combination of two complimentary national firms will provide our clients, Private Label Partners and prospects with industry leading creative solutions,” stated Julian Onorato, CEO and Chairman of the Board, ExpertPlan.”

We’ll be interested to see what other developments come out of this acquisition.

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IRAs Remain Largest Pot of Retirement Assets

Posted on November 20, 2012 by InspiraFS

IRA assets encompassed 28% of all retirement assets at of the end of the second quarter, according to a November 2012 Investment Company Institute (ICI) research report.  The report also noted that assets in IRAs at the end of June 2012 totaled more than $5.1 trillion, a slight drop from $5.2 trillion at the end of the first quarter of 2012, but remain the largest single pot of retirement funds. The entire retirement marketplace was valued at $18.5 trillion.

Investment Company Institute Logo

ICI is the authority for retirement industry investment research.

This report confirms that the largest growth in the retirement industry continues to be in the IRA marketplace.  At the end of 2011, according to the ICI report, IRAs were 27% of the entire retirement plan marketplace.  The growth to the current 28% level can be attributed to not only high unemployment resulting from layoffs, but also the fact that baby boomers are retiring.According to the Pew Research Center, on January 1, 2011 the oldest baby boomers began to reach age 65.  At that time, the number of individuals per day reaching age 65 was approximately 10,000.  That same Pew study also showed that those 65-and-older, a group which currently constitutes 13% of the United States’ population, will represent 18% by 2030. 

Also, at the SPARK Conference in November, Bob Wuelfing of RG Wuelfing & Associates reported that net cash flows into IRAs from 2002 through 2011 were nearly double the cash flows into defined contributions plans ($1.55 trillion compared to $833 Billion).

This means that the IRA business will continue to grow.  So, organizations that are not focused on this business are missing out on revenue, particularly organizations that are involved in processing or servicing retirement plans.  Having an IRA strategy is simply good business and can help organizations replace revenue currently lost as a result of rollover distributions.

Firms that make IRAs a focal part of their businesses can utilize the power of the IRA to not only replace revenue, but enhance it as well.  Down the road, de-accumulation of IRA assets will play a larger role in retirement strategy, but that is a topic for another blog and another day.

Happy Thanksgiving everyone!

Lowell Smith | President
InspiraFS 

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Online Investment Advice Lacking for IRAs

Posted on November 13, 2012 by InspiraFS

During my nearly 30 years of retirement and financial services experience, I have come to the conclusion that there are 4 types of investors: Do-it-Yourselfers, Validators, Advice Seekers and Do-Nothings.

In the Individual Retirement Account (IRA) world, these four personalities act predictably:

  • Do-It-Yourselfers generally open brokerage accounts
  • The Validators want someone to essentially double check their decisions in whatever investment vehicle they choose
  • The Advice Seekers want to have someone manage the accounts for them
  • The Do-Nothings never open an IRA unless they are automatically rolled into one

Do-it-Yourselfers and Do-Nothings can easily find a solution.  The problem, however, is that the Validators and the Advice Seekers in particular may have difficulty getting the service they desire.

Why do the Validators and Advice Seekers have so much trouble?  One reason is that many Financial Advisors will only talk to individuals above a specific dollar threshold.  On the Advisor side that tends to be around $100,000 while on the Bank Trust Department side that minimum number is closer to $1,000,000.

Secondly, even if a lower-balance accountholder can actually talk to someone, most firms will not offer true advice; only education and guidance. That may work to a degree for the Validators, but not for the Advice Seekers.

Another reason could be that the questionnaires and tools that are readily available to investors online don’t do enough. While those resources may help you make decisions, they don’t typically help evaluate options fund-by-fund, but rather address what asset classes you might want to invest in.  And while retirement-plan participants may receive online advice in their plans and periodic enrollment meetings, that isn’t the case in IRAs.

So what’s my point?  Well, I believe this new GuidedChoice IRA will solve the Advice Seekers’ dilemma and potentially address some of the Validators’ needs.  Current retirement plan participants who utilize and like the GuidedChoice advice engine will be able to seamlessly rollover their old 401(k) funds into an IRA created and managed by GuidedChoice.

Even individual looking for an online and call center supported advice provider can sign-up for a GuidedChoice IRA.  This will be a unique offering in the marketplace and fills a void because the advice is available to any account size.

It will be interesting to see the progress of this new and inventive IRA product.

-Lowell Smith
President | InspiraFS

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