Retirement plan advisers increasingly need to stand out from the pack to win clients. This may seem obvious, but most advisers don't seem to be doing much to differentiate themselves. To get advisers started on the right path, here is a short list of ways I think retirement plan advisers can effectively demonstrate value beyond the services I'd consider typical.
Go deep on payroll
Arguably, the most important thing the payroll team will do is process payroll correctly. Employees will forgive an employer for many things, but getting payroll out late or incorrectly can have severe repercussions on employee morale.
Oftentimes we've found that payroll's integration with the 401(k) is still a manual process — and one that is fraught with potential errors. Work with your client's payroll people to understand how they go through the remittance process and understand what capabilities their payroll provider and record keeper have. We've worked with our clients to understand what they do currently to remit 401(k) deferrals.
Once we understand their process and the capabilities of their vendors, we'll come back to them with a solution to create better integrations that reduce the potential for errors. Sometimes this solution involves recommending a 3(16) administrative fiduciary to handle the payroll remittance.
Integrate HSA education into your curriculum
As the trend toward high-deductible health plans continues, employers need more help communicating to employees about the ways they can use a health savings account that goes along with these medical plan options. Retirement plan advisers are perfectly positioned to communicate the unique nature of HSAs.
Benefits brokers typically focus their communications about HSAs on the immediate use of the account money and the fact that HSAs aren't a use-it-or-lose-it type of account. In this vein, they are leaving out half the story. The fact that HSAs have a triple tax benefit and can be an additional retirement savings vehicle for employees is a great opportunity advisers should be communicating to their clients and their employees.
Understand compensation types
Most companies, as they get larger, will migrate to some type of payroll system that will have a specific code for each type of compensation that employees are eligible to receive. In our work with clients, we have learned that not all compensation should be eligible to be deferred into the 401(k), because of its potential to create problems for an employer.
For example, several clients of ours have had employees pay for their own short-term disability. The employer "grossed up" their compensation (meaning the employer contributes to the employee's base pay an amount to pay for the benefit) for the cost of this insurance and this grossed-up compensation came from a specific compensation code.
We've seen situations where the employer will calculate the match, but leave out the grossed-up compensation, which creates an issue when the auditor is reviewing the plan. Omitting the grossed-up compensation during the employer-match calculation will result in the employer having to make an additional employer contribution to the employees to make up the difference they should have received in employer match.
In situations like this, we've had to work with the plan sponsor to eliminate future issues when the audit comes around. Talk with your clients and understand the compensation codes they have and which ones may present issues as it relates to the retirement plan.
While our clients hired us primarily for fiduciary services for their 401(k), services like the ones mentioned above add the most value and are why they keep us around.
Aaron Pottichen is a senior vice president at Alliant Retirement Consulting.