Why phd

The Board Room vs Break Room

Board Room

With large retirement plans the focus is generally on the Board Room ONLY. If a consultant is involved they are most likely only delivering trustee or fiduciary services, not offering personalized employee meetings or guidance for those in the plan. This is the original Pension Model or Defined Benefit model, applying a DB model to large Defined Contribution plans (401k and 403b plans).

The benefits of following the Pension Model are obvious. It’s generally more cost-effective for the employer and it’s definitely “safer” for the plan’s fiduciaries because this conservative approach emphasizes plan compliance and trustee services. Unfortunately, when the plan participants receive little if any help or attention it yields the least effective results for healthy participant outcomes, according to the Allianz Center for Behavioral Finance. With any plan we believe in a balanced focus on both the Board Room and the Break Room, regardless of size.

Break Room

With smaller retirement plans the focus is generally on the Break Room ONLY. The advisor may be in the Board Room occasionally to deliver an investment meeting but focus is on the Break Room, offering personalized employee meetings. This is the Insurance Model, building a profitable service model for smaller retirement plans where the plan assets are not as great. It’s always profitable for the advisor and the insurance company but not necessarily beneficial for the retirement plan.

While the Insurance Model may yield better individual results with individualized assistance it may also cost the company and the employees a great deal more. Sometimes the “individualized assistance” comes with a big price tag in the form of a “Managed Accounts” program that could add an additional drag on returns, or sometimes the advice is offered in violation of Department of Labour, Advisory opinion letter 2001-09A.

According to the U.S. Government Accountability Office, even a 1% difference in fees can reduce retirement benefits by nearly 20% over the course of an employee’s career. And in addition to managed portfolio solutions, “individualized assistance” can often mean an opportunity for the advisor to sell additional insurance products to the employees which could violate ERISA 406(a) and AO 2001-09A. Unleashing insurance agents on the employees increases the fiduciary liability for the employer and may compromise the plan’s compliance. But the “Break Room focus” may not be concerned with the fiduciary risk of those in the Board Room.
With any plan we believe in a balanced focus on both the Board Room and the Break Room.

Why this is Important

We believe that Healthy Plans and Healthy Outcomes are just as dependent as the Board Room and Break Room conversations. At PHD. Retirement Consulting we adhere to the Independent Consultants Model, a Fee-only focus rather than a commission sales approach, where we will take responsibility in writing for our co-fiduciary role with the plan.

Our goal when working with the employer is to make their job easier (“No Worries”), to design a plan that works, and to help the employer keep the plan in compliance. Our goal when working with the employees is to provide robust education and guidance that supports the decisions in the Board Room, to make sure that participants have access to the individualized assistance that they need, but never to make clients out of the individual employees. We will not sell any products to your employees. In fact, we believe that this is a violation of ERISA 406(b), defined as a “conflict of interest.”

Guidelines under ERISA, which continue to be supported from the Department of Labor, suggest that it is not possible to be a fiduciary to the plan and to the plan’s participants. In other words, it’s a conflict of interest to advise on the investment lineup and then also direct individual participants into those same investments when some investments may compensate the advisor better than others, in fact, according to the Department of Labor Advisory opinion letter 2001-09A, the investment recommendations need to be under control of an independent financial expert, independent, that is, from the professional retirement plan consultant serving the plan. Similarly it’s a conflict of interest when the same retirement plan yields multiple streams of revenue to the same advisor, such as commissions or plan level fees, plus managed account fees, plus commission revenue from retail sales to individual employees. Best Practices suggest that the two services (to the employer and the employee) be delineated, at least that the compensation for each be separate.

Healthy Retirement Plans

At PHD. Retirement Consultants we believe the process starts with designing and building a healthy retirement plan. Just as a company’s medical benefits are supported with a Wellness Plan, we believe that a company’s retirement benefits should be undergirded with a Health and Wellness System that supports compliance, due diligence and proper fiduciary oversight while also producing healthy outcomes. The ingredients of a healthy retirement plan include adherence to Best Practices under ERISA (Employee Retirement Income Security Act).

  • Quarterly Investment Monitoring and Quarterly Trustee Meetings –ERISA 3(21)
  • Ongoing and proactive Investment Monitoring – ERISA 3(38)
  • Plan Design Optimization –ERISA 402(a)(1)
  • Fiduciary Training for trustees as part of the PHD. Fiduciary Process – ERISA 404(a)(1)(B)
  • Annual evaluation of the Plan Health – Is it producing healthy outcomes with healthy account balances?
  • Regular benchmarking of the fees and service providers. We recommend that a plan should disclose fees no less than annually and be benchmarked every 3 years at minimum. –ERISA 408(b)(2)
  • Compliance with the Employee Retirement Income Security Act – ERISA 406(a)(1)(D)
  • Investment Policy Statement – it should be reviewed and approved annually, and an executed, signed copy should provide the guidance for ongoing investment monitoring.
  • Education Policy Statement – it should be reviewed and approved annually, should include guidance for participant education, and should help protect plan fiduciaries by prohibiting the sale of ancillary financial products like insurance and annuities to the plan’s participants.
  • Disclosure Policy Statement™ – it should be reviewed and approved annually with a signed copy retained as part of the annual service agreement, include guidance for the content and means of disclosures to the trustees and plan participants, and support adherence with federal regulations concerning fee disclosures and the disclosures of fiduciary services.
Healthy Retirement Outcomes

At PHD. Retirement Consultants we believe that a healthy retirement plan produces healthy retirement outcomes. After all, if the plan itself is functioning properly and legally and everything is in compliance and yet the plan participants don’t have enough money to retire on time, what’s the point? We focus on measurable outcomes and utilize third-party benchmarking studies to reference our scorecards and demonstrate that the plan is always working towards improvements in health. The goal of our client-focused, participant-centric model is producing happy and healthy employees who understand, appreciate and participate in the company retirement plan. One of our objectives is to build employee morale around the benefits that the company offers as savings increase. The ingredients of healthy retirement plan outcomes starts with a focus on your company’s most valuable resources, your Human Resources.

  • Holding quarterly trustee meetings focused on plan health dynamics, fiduciary training, and supporting the role of your HR professional, not just a quarterly investment committee meeting that examines the same “Watch List” every quarter.
  • Ongoing and proactive Investment Monitoring – ERISA 3(38)
  • Plan Design Optimization Reports™
  • Focus on Retirement Readiness and closing the Retirement Gap
  • Annual Evaluation of Plan Health
  • Education that builds confidence in the program, working to increase deferrals
  • Retirement education to optimize investment diversification – ERISA 404(a)(1)(C)
  • Customized glide path models built for each participant as part of a managed account option.
  • Financial Wellness – education modules customized for each client group to help employees take control of their personal finances .
  • We do not sell products to your employees (not life insurance or disability and certainly not individual annuities). Our employee meetings are education and guidance to help them retire better, not a sales opportunity for us to sell additional stuff to your people.
  • We help every employee with their retirement planning, regardless of their account balance, and we can introduce you to an Endorsed Hometown Provider (EHP) to provide more in-depth financial planning for those employees who want this service.
  • Any revenue generated by an EHP is NOT shared with PHD. Retirement Consulting so our referrals are always objective and unencumbered by hidden fees. Basically that means that we work for you, not the EHP and not the service provider, and the EHP relationship is independent.
  • The retirement plan’s fees are disclosed and explained to participants with education from PHD., in keeping with the Disclosure Policy Statement™ – ERISA 404(a)(5)