UBS Advisor Explains Why He Likes Multi-employer Plans
Source: FA-IQ, Sep. 27, 2018
RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FINANCIAL ADVISOR IQ: Hi, I'm Rita Raagas De Ramos from Financial Advisor IQ, and with me is John Ellis, senior retirement financial consultant at UBS Financial Services. President Donald Trump issued a executive order calling for the review of the rules governing retirement plans and small businesses' 401k plans. How do you feel about this review?
JOHN ELLIS, SENIOR RETIREMENT PLAN CONSULTANT/FINANCIAL ADVISOR, UBS FINANCIAL SERVICES: I believe that anything that allows plans to expand, particularly in that underserved market, smaller companies who don't currently have a plan if there was truly a simplification that went about and came about as a result of additional legislation making it easier for smaller employers to set up 401k plans, to manage them, to file the required documentation to the IRS and the DOL, I think that's a good thing.
I don't know that necessarily it's going to simplify the needs of individuals, small employers who are trying to institute plans. Any time you have additional government legislation that tends to complicate matters and part of the fear is that having another type of plan, be it a multiple employer plan, where they would aggregate various companies together and have them have one 401k plan, or to make it simpler for smaller companies to have 401k plans, I think is a great idea.
Large companies, almost 100% of large companies, have 401k plans in place. Most small companies struggle with the idea of 401k plans and the paying for those plans as part of their ongoing profitability.
RITA RAAGAS DE RAMOS: What would it mean for advisors? What would be the negative and the positive that could come out of these changes?
JOHN ELLIS: Sure. I would say that there are positives and negatives. The positives for advisors would be that, again, there will be opportunities to consolidate plans to gather multiple types of employers working together with a single plan design, with a single fund lineup, with provisions and a plan design that is as broad as possible that would cover as many different companies that belong to these multiple employer MIPS.
RITA RAAGAS DE RAMOS: What about the negatives?
JOHN ELLIS: Negatives, again, additional legislation and oversight by the government. I think that by boxing a multiple employer, many different companies into one plan might not take into account the differences between each company. Each company is going to have a different population that works at that company, that has different risk tolerance, has different longevity tracks in the company. So I don't know that one particular plan design is going to solve all issues.
There might be additional fiduciary responsibility on the director or the committee that handles that multiple employer plan, 401k, in that they are taking on a much larger scope of responsibility, more companies, more decisions, more decision makers, more types of employees, all of those things tend to complicate what is already a fairly complicated beast anyway.
RITA RAAGAS DE RAMOS: What about for a plan participants? How would this impact them?
JOHN ELLIS: I believe that anything that helps people participate in 401k plans is a good thing. If this results truly in that then I absolutely am in favor of it. I do believe that employees should be able to make the decision on where they want to work not based on whether there is a 401k or not a 401k but rather what that 401k looks like and what the other provisions of their employment look like.
So I think anything that gets more people saving for retirement, we Americans are woefully under-saved as you know. So I believe that including small employers, making it easy for them to institute a 401k plan is going to have tremendous benefits for the population.
RITA RAAGAS DE RAMOS: Thank you, John.
JOHN ELLIS: Thank you.