Role of a Retirement Plan Consultant
The retirement plan industry can be very complex dealing with various sections of the Internal Revenue Code (IRC) and a multitude of rules and regulations issued by the Internal Revenue Service Department of Labor, Pension Benefit Guaranty Corporation, etc.
Under Section 401(a) of the IRC, a qualified plan established by an organization affords a tax deferred vehicle under which employer contributions are not taxable to participants and the earnings of the tax-exempt trust fund accumulate on a tax deferred basis. In addition, employer contributions are deductible business expenses. Under plans which permit employee contributions, an employee may make contributions known as deferrals on a pre-tax or post-tax (Roth) basis.
Those professionals who practice in this industry and provide services for retirement plans must be able to simplify the IRC sections and regulations so that our clients can understand what is involved in implementing and maintaining a retirement plan. It can be more difficult depending upon the type of organization that is sponsoring the plan, e.g., corporation, sole proprietor, partnership, LLC or LLP and whether or not more than one organization is involved.
Nothing is more important in establishing a retirement plan than to have the plan sponsor understand the type of retirement plan that the organization will adopt and how the plan is to operate. Depending upon the needs and the financial stability of the organization, a plan sponsor may choose a defined benefit or cash balance plan which have funding obligations versus a defined contribution type plan, e.g., profit sharing, 401(k) plans that can have discretionary (profit sharing and match) or required (safe harbor) employer contributions and may allow for employee pre-tax or post-tax (Roth) deferral contributions.
Plan sponsors need to understand their role and responsibilities in maintaining the plan and providing information that is needed to determine eligibility, contributions, perform nondiscrimination tests, and prepare annual disclosure filings and communication to participants. If a plan permits employee contributions, it is very important that the consultant convey the importance and requirement for the plan sponsor to withhold and deposit the employee contributions on a timely basis into the plan’s investment vehicle.
When a prospective new client is referred, my first step is to find out if the organization has a retirement plan or has had a plan is the past. If a plan exists, I ask about the type of plan and try to get the client to express what he/she thinks about the plan and the services that are being provided for the plan. From the start, I want to know if the individual understands what type of plan is being offered and if there are any perceived problems. Quite often I find that a client or advisor does not have an understanding about the plan that the organization has let alone the responsibilities of the plan’s operation.
A client may feel that a problem exists because of poor communication or lack of understanding when, in fact, there is no operational or compliance issue with the plan.
As a consultant, I believe that it is important to listen to a client tell his story, review documentation, prior valuations and disclosure filings and identify any possible problems that should be addressed or tell the client that the plan design suits the organization’s needs and the plan is being operated well. Quite often perceived problems arise from miscommunication. If problems are revealed during the initial discovery phase, providing a clear explanation to the client along with options and an evaluation of the options will allow the client to make an informed decision about what action will be taken. You are making the client a partner in the decision process and keeping the client involved. It is a great feeling when you have gotten a client through a difficult situation and the client appreciates the value you bring to the relationship.
Explaining technical Code sections and regulations will demonstrate your knowledge, but building a relationship as a trusted advisor will go a long way toward nourishing the relationship through the years. Getting a new client is difficult, but keeping a client in a competitive world can be just as challenging. In the end, it is all about the relationship that you develop and nurture with clients and their advisors.
Jo-Ann Massanova
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