Compliance May 3, 2013

Notice-Filing Bill Passes Florida Senate

The bill, SB 814, affects financial services firms with affiliated financial advisers in Florida, regardless of where the firm’s headquarters are located. 

 

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Florida’s Senate Banking and Insurance Committee unanimously passed the bill in April. When signed into law, it will make Florida a “notice-filing state” for branch office applications. The legislation will place the filing system online and mandate that approval be automatic.

The Financial Services Institute (FSI), which was a strong advocate of the bill, points out that financial advisers have been forced to close down for extended periods of time, losing revenue and denying clients access to advice, because of applications not being approved in a timely manner.

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Several scenarios could mean that an adviser needs to file for the first time, or re-file, including:

  • An adviser changes broker/dealer affiliation;
  • An adviser moves a current office address to another address; or
  • A firm that operates in another state wants to open a branch office in Florida.

While FSI has been working with the Florida Office of Financial Regulation (OFR) for some time, and has cut the approval process from weeks to four to five days, the time frame is still unacceptable, the organization feels. After working with OFR to find common ground on the legislation language, FSI agreed to language that makes Florida a notice-filing state, but allows OFR to require broker/dealers to resolve deficiencies in their filing within 30 days.

“FSI members have united once again to affect positive change,” said Dale Brown, president and chief executive of FSI. “This is exactly how government/private partnerships should work to serve our mutual constituencies.”

The House Regulatory Affairs Committee unanimously passed the companion bill last month. The governor is expected to sign the bill into law in the next week or two. Details of SB814 can be read here. 

Compliance May 3, 2013

Budget Proposal Could Create Administrative Headache

President Obama’s proposal to cap individual retirement accounts (IRAs) not only has the potential to affect participants — it could also add administrative work for sponsors and advisers.
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The proposed fiscal year 2014 budget would place a cap on retirement savings, prohibiting employees from saving more than $3 million in IRAs and other tax-deferred retirement accounts. Analyses from the Employee Benefit Research Institute suggest that up to 5% of retirement plan participants could be affected by this cap (see “Savings Caps Could Affect 5% of Participants”).

“I don’t think it would have any impact on the bigger companies,” Richard Del Monte, president of Del Monte Group LLC, told PLANADVISER. “They just adjust and move forward.”

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He said, however, the impact on small businesses could be significant. Dentists and doctors with a staff of five people or fewer, for example, may stop offering a retirement plan altogether if the proposal passes, because their personal deductibility—which Del Monte said is huge for them—would be affected.

The proposed budget could mean that small-business employees will lose out on the opportunity to save at work, as well as contributions the owner would have made on the employee’s behalf to pass nondiscrimination rules, said Brian H. Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries (ASPPA) (see “Budget Proposals for Retirement Savings—A Deterrent or Not?”).  

As a result in a loss of benefits, employers could lose highly skilled workers to other companies with a more competitive offering, Del Monte added.

But some sources like Lee Topley, managing director of Unified Trust, do not think the budget provisions would encourage job switching because these restrictions would be everywhere. He thinks the $3 million cap will only affect a small percentage of participants, but it is too early in the proposal to make definitive conclusions.

Administrative Burden on Sponsors, Advisers  

The bigger potential problem with the $3 million cap, Topley said, is that it could burden advisers and sponsors alike with administrative hassles related to monitoring IRAs outside of a participant’s current plan.

If this burden falls on the plan sponsor, it could ultimately increase the cost of offering a defined contribution plan because of the added administrative expense, he said. “So I think there could be a negative impact [on sponsors],” Topley said. “It is going to add another level of complexity to what the adviser is doing, as well.”

Rather than placing a $3 million cap on IRAs and other tax-deferred retirement savings, Del Monte suggests eliminating the stretch provision in pensions for non-spouse beneficiaries. Instead of allowing these beneficiaries to take distributions from the inherited IRAs over their lifetime, the government could require them to take out the money within five years.

The $3 million cap proposal is flawed, Del Monte contends, because tracking down every IRA and the amount in it is difficult. “People have balances all over the place,” he said. “I really can’t imagine it would ever get enacted.”

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