Products July 12, 2018

Ladenburg Reveals Retirement Plan Consulting Platform

The underlying technology will be provided by Retirement Plan Advisory Group and delivered to advisers with the support of a centralized team of retirement specialist consultants.

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Ladenburg Thalmann, the parent company of five independent broker/dealer subsidiaries including Securities America, today announced the launch of a new retirement plan consulting platform.

The news comes amid a busy summer period for the broker/dealer and advisory marketplace. As retirement specialist advisers shift away from commissioned service and towards relationship-based wealth management and plan design consulting, providers of brokerage and investment management services are making their own changes to attract and retain skilled advice professionals—while protecting their own bottom line.

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According to the firm, the new platform will combine ongoing consulting support with enhanced software, training and resources to help the nearly 4,500 advisers across Ladenburg’s five subsidiaries grow their retirement plan businesses. The other subsidies are Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network.

Currently, about 1,800 advisers among these firms are retirement specialists, and the firm says it expects this group to accelerate their growth and better address sponsor clients’ evolving needs via the new platform. However, the firm is also encouraging advisers less familiar with the retirement plan space to check out the new capabilities.

The firm suggests its advisers will gain access to enhanced product selection, improved investment monitoring, fee and expense benchmarking reports, pre-approved marketing materials and a wide array of educational content. The platform will also give advisers “techniques to effectively prepare for meetings with plan sponsors, and enable them to provide plan participants with model portfolios, assistance in enrolling and explanations of fees and expenses.”

Asked for more detail about exactly how advisers will interact with the platform, a Ladenburg spokesperson highlighted the role of “centralized retirement plan consultants who provide assistance with general retirement plan education and knowledge for advisers, product selection, requests for proposal, fiduciary education, investment monitoring, fee and expense benchmarking and prospecting assistance.”

Richard Lampen, president and CEO of Ladenburg, says the new platform represents an expansion of Ladenburg’s existing resources for retirement plan-focused advisers, “demonstrating the firm’s continuing commitment to supporting the professional success of advisors in this vital segment of the financial advice space.”

Other features of the platform include FINRA-reviewed, pre-approved marketing materials and educational content. The firm says specialist advisers who have businesses that are substantially or completely focused on serving retirement plan sponsors will benefit from the platform’s enhancements. For intermediate advisers managing several plans while still focusing on traditional wealth management activities, the platform will provide coaching, best practices and ongoing consulting support, enabling them to grow the retirement side of their businesses. Finally, for generalist advisers overseeing one or two retirement plans in addition to their core wealth management practices, the platform will provide tools to help them gain expertise and expand their presence in the space.

Readers may be interested to learn that Ladenburg has selected Retirement Plan Advisory Group (RPAG) “to furnish the platform’s technology elements and certain of its practice management and training modules.” The leadership at RPAG and Ladenburg say the platform will be tailored “both from a client and asset retention standpoint and for advisers who require sophisticated support to aggressively grow their businesses.”

The Ladenburg Retirement Plan Consulting Platform will be rolled out in phases, with all Ladenburg subsidiaries and their advisers expected to have access to the platform by the end of 2018. More information is available at http://www.ladenburg.com/.

Compliance July 11, 2018

Student Debt Doesn’t Make Hardship, But Tuition Might

Two experienced ERISA attorneys at Drinker, Biddle and Reath warn against the idea of participants seeking a hardship withdrawal for the purpose of paying down student loan debt; requesting a hardship withdrawal for upcoming tuition expenses is another matter entirely.  

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A timely new Insights publication from the law firm of Drinker, Biddle and Reath looks back at an Internal Revenue Service (IRS) letter sent earlier this year to Representative Scott Perry, R-Pennsylvania, in response to his inquiry about whether individual taxpayers can use a qualified 401(k) plan hardship withdrawal for the purpose of paying down student loan debt.

Reviewing the IRS response—formally published as Information Letter 2018-1—Karen Gelula, counsel, and Betsy Olson, associate, point out how the IRS emphasized that a hardship distribution must, among other things, be necessary to satisfy “an immediate and heavy financial need.”

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As Gelula and Olson note, the letter does not directly address the plan provisions applicable to the specific constituent about whom Perry pinged the IRS, but instead notes that under the safe harbor standards for hardship distributions in the Internal Revenue Code Section 401(k) regulations, “education expenses” can in some cases be deemed a sufficiently immediate and heavy financial need, but only if they are for the “payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education.”

“The IRS confirmed in the letter that because a safe harbor hardship distribution may be made only for the prospective payment of education expenses, it cannot be made for the repayment of student loans,” Gelula and Olson write. “The IRS suggested that as an alternative to taking a hardship distribution, the participant may be able to get a loan from the plan.”

The attorneys further observe that 401(k) plans which permit non-safe harbor hardship distributions as described in the Internal Revenue Code Section 401(k) regulations could theoretically approve a participant’s hardship distribution request for the repayment of student loans, “provided that the loan repayment constitutes an immediate and heavy financial need based on all the relevant facts and circumstances.”

“Among other things, this includes the participant’s representation that the need cannot be relieved from other reasonably available resources such as insurance reimbursement, liquidation of the participant’s assets, cessation of plan contributions, other currently available distributions such as employee stock ownership plan dividends and non-taxable (at the time of the loan) plan loans, or borrowing from commercial sources,” the attorneys explain.

They also remind plan fiduciaries that the hardship distribution provisions will be changing in 2019, including the removal of the requirement in the safe harbor hardship distribution standards that a participant “take all available plan loans to demonstrate financial necessity.”

“In addition, the Treasury Secretary has been directed to remove from the safe harbor hardship distribution standards the requirement that the participant’s deferral contributions to all plans maintained by the employer must be suspended for six months following the withdrawal,” the attorneys point out.

The full IRS Information Letter 2018-01 is available here.

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