Matrix Offering Expands ERISA Capabilities

Cetera Financial Group has debuted an unbundled, open architecture solution for advisers who serve as 3(21) fiduciaries to offer more customized advice to plan sponsors.

 

The platform is part of Cetera’s fee-based plan sponsor program. With the added capability, the program helps advisers differentiate themselves from other independent and wirehouse advisers, said Kian Rafia, vice president of wealth management at Cetera. “The notion of an open architecture, fee-based plan sponsor platform is somewhat unique and new in our industry,” Rafia said.

The open architecture solution utilizes Matrix Financial Solutions to provide custodial services, research and fund screening capabilities through its proprietary RetireTool(k)it, and allows for the choice of recordkeepers and local third-party administrators. It also enables advisers to choose from a wide range of investment vehicles such as exchange-traded products and mutual funds. Additionally Matrix U, the firm’s educational resource, provides access to industry experts and thought leaders to help advisers stay abreast of the latest trends and insights on how to leverage current market conditions to grow their businesses.

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Cetera’s ERISA plan sponsor program provides advisers with a range of tools and support to cultivate and manage employer’s 401(k) plans, including marketing and sales support, recordkeeping, trust and custody services, performance reporting, and adviser education.

For bundled options, Cetera leverages retirement platforms from Fidelity Investments, delivering a program that offers guidance on constructing Cetera-vetted plan menus (with choices spanning more than 2,500 funds and more than 50 families), monitoring investments and choosing qualified defined investment (QDIA) options.

Through a partnership with FI360, advisers can use Cetera’s program to achieve Accredited Investment Fiduciary (AIF) designation, which is necessary for all advisers who provide advice on ERISA accounts. Rafia called the AIF designation a near-prerequisite to getting in the door with plan sponsors, “so we felt strongly about adding that component to our program so our advisers could take full advantage.”

More information is at Cetera’s website.

403(b) Space Ripe for Advisers

Advisers have an untapped opportunity to help 403(b) plan sponsors, especially because these plans increasingly have features in common with 401(k)s. 

“You’re really starting to see these 403(b) plans look a lot like 401(k),” Tim Maher, senior vice president and national sales manager at Natixis Global Asset Management, said during a Matrix Financial Solutions webinar, “The Basics of 403(b) Plans.” This provides a great opportunity for advisers to educate plan sponsors about the nuts and bolts of their plans, he added.

Compliance in 403(b) plans, for example, is starting to take the shape of 401(k)s. The IRS now requires 403(b) plans to have written plan documents that include eligibility; benefits provided under the plan; contributions and limitations; descriptions of investment products available; distribution options, limitations and requirements; and loans, hardship withdrawals, catch-up contributions and Roth (optional).

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The IRS has estimated that only 56% of 403(b) plans have complied with this requirement, Sarah Simoneaux, president of Simoneaux & Stroud Consulting Services, said during the webinar. “The good news is, the IRS has really been focused on this, and they are looking to help in the 403(b) world,” she said.

Sponsors will need help from knowledgeable financial professionals in creating their written plan documents, she added. Simoneaux said she would highly recommend that advisers partner with third-party administrators (TPAs) who understand 403(b) regulations.

It is also important to keep in mind that not all of these plans are subject to the Employee Retirement Income Security Act (ERISA): Typical ERISA 403(b) plans can include institutions such as hospitals or higher education, while typical non-ERISA plans include K-12 schools and steeple churches.

Private higher education may not realize they are ERISA plans, so advisers have an opportunity to speak with them about this, Simoneaux said.

Advisers can also speak with colleges or universities about independent contractors, as some employees may be incorrectly excluded as independent contractors in 403(b) plans. Simoneaux said the IRS is particularly concerned about this. “The definition for independent contractor is very controversial,” she said.

In addition to eligibility mistakes, advisers can discuss other common violations the IRS has noted such as not following the terms of the plan document; excess contributions (including the pre-retirement catch-up rule); not following loan rules; and hardship distribution failures.

In general, 403(b) plans are moving toward a 401(k)-like world with fee transparency and open architecture (see “New Season for 403(b)s”), which also provides a great opportunity for advisers to discuss features with plan sponsors in this space, Simoneaux said.

Advisers who want to get into the 403(b) space will best succeed by understanding multiple plan types, she added.

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