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10 Ways to Manage Responsibilities with Terminated Vested Participants

Manage Responsibilities

As many plan sponsors already know...

This article originally written for and appeared in Benefits Magazine.

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What Individual Mandate Repeal Means for Employers

Why Outsource Benefit Programs Administration

Zane Dalal, executive vice president of BPA, was quoted in the article “What Individual Mandate Repeal Means for Employers” on the Society for Human Resource Management’s (SHRM) website. He weighed in on how the repeal of the ACA mandate requiring individuals pay a penalty for opting out of health care coverage may impact employers – highlighting how it is likely to affect premiums.

"If healthy individuals opt out of coverage without penalty, employer premiums are likely to spike, and overall, this is an unsustainable option," said Dalal. He continued to explain that many in the benefits community believe repeal of the employer mandate is not far behind.

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Why Outsource Benefit Programs Administration?

Why Outsource Benefit Programs Administration

Outsourcing benefit programs administration to competent third party administrators (TPAs) is an increasingly common and prudent option for single and multi-employer trust funds for a host of reasons.

Foremost among them, the specialized skills needed to administer benefit programs – everything from books and records as well as cash management services to health and retirement services – are essential given today's challenging and risk-averse business climate.

The varied nature of benefit programs requires expert professionals who are trained and adept at managing them. TPAs serving many clients amass a depth of knowledge to support even the most complex programs. With the outsourced administration model, funds essentially purchase the business acumen of the TPA along with the cost benefits of services that are shared across the provider’s client base. Outsourcing avails a broader subject matter knowledge than trustees typically have in-house.

Equally compelling is the drive to contain the costs associated with benefit programs management. A TPA that serves several plans can pass along to clients the cost benefits of the shared service model along with the expertise earned over years or even decades of focusing exclusively on service provision.

Benefits Derived as a New Model Emerges

The outsourced administration model has gained momentum in recent years as trustees aim to contain costs while improving service levels. Indeed, a primary driver for outsourcing to a third party is the economic benefit. By outsourcing, funds can avoid the cost of hiring qualified personnel in-house as well as purchasing software, systems and other resources needed to administer plan benefits.

Ongoing cost benefits include the ability to gain access to the outsourcer’s skilled professionals and continuously updated software and systems. Leading outsourcers continually train their personnel and update their service platforms to maintain a competitive edge—at no cost to their clients. By relying on a TPA's specialized staff, services and solutions, program trustees can stay focused on core client-facing issues instead of the nuts and bolts of administering benefits programs.

Flexibility of Scope and Scale

By outsourcing, clients can also add or remove services much more easily as their needs evolve. TPAs serving a variegated client base offer a wide range of services. This gives clients the flexibility to scale to different service packages without having to invest directly in new infrastructure or staffing support.

Especially for small or medium sized entities, making such direct investments is a costly and inefficient commitment. On the contrary, any and all services a TPA offers are available to clients as their needs change, providing a more effective model that is flexible enough to fit benefit programs of any size.

Alignment of Business Drivers and Long-term Motivators

By leveraging a TPA’s expertise and solutions, clients can reduce their investment in technology, operations and product development while enhancing service since leading outsourcers offer an array of solutions that are continually enhanced. In addition to the benefits of service scalability and cost-containment, TPA’s long-term business drivers are fundamentally aligned with their clients. TPAs that meet service level standards and commitments are rewarded with client loyalty and referral.

TPAs and clients are equally motivated to derive increased levels of cost-efficiency and service excellence.

The best TPAs understand the value of client trust, and they take every measure to retain that trust. This includes maintaining the dedicated staff, intellectual capital, technological fortitude, and vision to stay focused on delivering the highest possible levels of service.

The Federal Government and Legal Compliance

Because of the way benefit plans must be devised, legally written and operated, they are the purview of the Federal Government. Multiple Federal Statutes that safeguard members and their access to benefits have been enacted over several decades. Participant and benefit protections under the Employee Retirement Income Security Act 1974 (ERISA), the Pension Protection Act 2006 (PPA), the Health Insurance Portability and Accountability Act 1996 (HIPAA), and a host of additional regulations, are constantly amended and updated – almost as often as Congress convenes.

The onus on compliance with these regulations is a heavy one. This presents a significant challenge to plan sponsors. A challenge they would prefer to delegate to professional administrators.

TPAs, because of their shared knowledge across the industry and their long chronological experience, are best suited to handle regulatory compliance, the multiple facets of which are present whether or not the plan is small or large. Many mid-size to smaller plans find themselves ‘snowed under’ with regulatory burdens, without expert TPA services. The outsourced model is a win-win business model because the TPA continues to hone its capabilities to remain competitive while clients reap the benefits of cost-reduction and the provider's expertise.

Article originally appeared in SHRM

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Age of Anxiety

Age of Anxiety - Benefits Plan Administration

Stereotypes notwithstanding, millennial workers are actively saving for retirement. But many still struggle with fear and ignorance in managing their 401(k) accounts. Experts -- and millennials themselves -- say employers can help.
by Jack Robinson

Fred Thiele recalls a 22-year-old employee approaching him about a problem with her 401(k) account. She had hit the IRS annual limit for contributions, which currently is $18,000. Though her retirement was at least four decades away, she worried that she still wasn't saving enough.

"I was stunned by the question," says Thiele, who is general manager of global benefits at Microsoft Corp.

Employees at the Redmond, Wash.-based tech giant, where salaries are high and benefits generous, are hardly typical. But Thiele tells the story to illustrate a point that experts make about millennial workers in general: Despite old stereotypes painting them as entitled and disengaged, millennials, on average, are responsible, even diligent, about saving for retirement. Though some millennials struggle with fear and ignorance about managing their 401(k) accounts, these workers are eager for financial education, experts say.

The 17th annual Transamerica Retirement Survey of Workers, published in August 2016, found that millennial workers started saving at a median age of 22 -- earlier than Generation X or baby-boom workers, who began saving at median ages of 28 and 35, respectively. The survey also found millennials are deferring a median of 7 percent of their income -- barely lower than the 8 percent median for all workers surveyed, despite their relatively lower incomes and long retirement horizons.

Moreover, the survey found, millennials outpaced older generations in the growth of their retirement savings from 2007 to 2016 -- by 244 percent over those nine years, compared to 116 percent for Gen X workers and 96 percent for boomers.

The 2017 Plan Wellness Scorecard, an August 2017 study by Bank of America Merrill Lynch, found that 82 percent of millennial employees enrolled in the 401(k) plans it administers made contributions in 2016 -- well ahead of the rate for Gen X workers (77 percent) and boomers (75 percent).

Getting Started

For all their willingness to save, millennials certainly face financial challenges -- including, for some, relatively low incomes and high student-loan balances. Fear and lack of knowledge about investing also may be barriers, experts and employers say.

For many young workers, getting started is the hard part. Their household budgets usually are slim, and investing for the far-off future is a difficult commitment to make -- especially for young workers unfamiliar with the nuts and bolts of investing, such as understanding the difference between mutual funds and ETFs or evaluating investment fees and rates of return.

Kat Bulger sees the issue from two perspectives. As the resident HR professional in a national home healthcare company's Central California office, part of her job is encouraging the organization's 125 employees to participate in the company 401(k) plan. And at 33, she's squarely in the millennial generation herself.

Bulger says she was excited to start saving after working at smaller companies that lacked retirement plans. "As soon as I started at a company with a 401(k), I signed up as soon as I could," she says.

But Bulger finds that some other millennial workers balk at enrolling out of concern about taking home a smaller paycheck. "For younger employees, [the deduction] seems really large," she says.

Bulger has had some success getting younger workers to participate in their 401(k) plans by emphasizing how small the deduction often is. These workers may make so little that "typically, it's only $20" withheld each pay period, she says. Once they realize it won't affect their daily life, they just leave it and continue to contribute a set percentage of their pay, she says.

Employers can help millennials get over the initial hurdle by adopting an auto-enrollment feature in their 401(k) plans, experts say.

With student loans burdening many millennials, "there's only so many dollars to go around," says Martha Hayward, a vice president for marketing at Boston-based Fidelity Investments, a major provider of employer-sponsored 401(k) plans. To get young workers saving early, she says, "auto-enrollment is crucial."

A new report by investment giant Vanguard, How America Saves 2017, found that the average participation rate in its 401(k) plans with auto enrollment was 90 percent, compared to an average of 81 percent for all plans.

When it comes to designing retirement plans that suit millennial employees, auto enrollment is just the beginning. Other "autopilot" plan features that employers can choose to simplify retirement saving for employees are rapidly gaining popularity. These include automatic contribution increases and the inclusion of "target date" mutual funds that rebalance their investment mixes over time to better fit the likely risk tolerance of account holders as they age.

By 2016, 90 percent of the 401(k) plans that Vanguard administers offered target-date funds and 72 percent of all participants invested in them, according to the firm's 2017 report. In addition, Vanguard reports that 45 percent of the plans it administers have adopted automatic enrollment, up from 27 percent in 2010.

Betterment is among a handful of investment firms that have taken the autopilot idea a step or two further, offering "robo-investing" services to retirement savers. The New York-based company is courting millennials by offering a combination of automated and human advice. In July, the company announced it also will allow account holders to ask questions of a human financial adviser through a secure messaging tool. (Unlike many other robo-advisors, it also offers 401(k) plans to employers.)

The average age of Betterment's customers is 37, says Nick Holeman, a certified financial planner with the company. Holeman believes employers should look for "subtle nudges" to help steer millennials on to a safe path to retirement. Enabling auto-enrollment and setting appropriate default choices in their plans goes a long way in helping them achieve this objective, he says.

Closing the Knowledge Gap

Bulger says a lack of financial knowledge amplifies the fear many of her millennial workers have about retirement saving. "A lot of them don't have a grasp" of financial basics like the power of compounding, Bulger says. "They don't know how the stock market works."

A 2015 study by George Washington University's Global Financial Literacy Excellence Center and PwC found that many millennials know little about money and investing. Only 24 percent of those surveyed demonstrated basic financial knowledge, according to a report on the findings.

The Transamerica survey, meanwhile, suggests millennial workers would like to see their employers come to their aid as far as financial education is concerned: Of those surveyed, 75 percent agreed they "would like to receive more information and advice from my company on how to achieve my retirement goals." Only 55 percent of baby boomers said the same.

One way to keep millennials engaged in planning and saving for retirement is reframing the goal to make it more compelling for a young worker, says Shane Bartling, a senior consultant with Willis Towers Watson in the San Francisco Bay Area. Being young, millennials naturally may see retirement as more theoretical than real, he notes.

"It comes down to making it more tangible," Bartling says. He recommends that employers make the point that saving for retirement also can be seen as saving to become financially independent, free to pursue hobbies or other nonprofessional passions. "It's really just rebranding retirement," he explains. "It's a much more compelling value proposition."

This approach has successfully improved millennial retirement-plan engagement, he says.

Further evidence that millennials are more motivated by the prospect of financial freedom than by simply ceasing to work for a paycheck can be found in Merrill Edge Report, released in May. The study revealed that 63 percent of millennials agreed with the statement, "I am saving to live my desired lifestyle." Only 37 percent agreed with the statement, "I am saving to leave the workforce."

Lack of knowledge isn't the only reason millennials are leery about investing. Many experts link it to a formative experience common among this demographic: As teenagers or young adults from 2007 to 2009, they watched their parents' generation struggle financially, or even fail, during the Great Recession. Some experts say that has shaped how many of them think about money.

"The 2008 recession left an indelible mark on an entire generation," Rosell says. While boomers could trust that living below their means would be enough to build a secure financial future, "that's not necessarily true today," particularly with high levels of student debt among millennials, says Rosell, whose latest book, Keep Climbing: A Millennial's Guide to Financial Planning, aims to engage millennials in financial planning by comparing saving to scaling a mountain.

Holeman agrees. People who lived through the financial crash are "naturally more cautious," he says, adding that "many are still affected by it eight years later."

Among those still affected is Bulger, the millennial HR practitioner in California. "Just as we were becoming adults, that's when it all hit the fan," Bulger says. As a result, "I'm a little paranoid" about finances, she says.

Zoë Fox has a similar attitude. Now a 29-year-old realtor in Philadelphia, Fox remembers a college friend who had to drop out after her parents suffered a foreclosure during the financial crisis. Does that memory affect her philosophy about retirement savings? "Absolutely -- I'm super conservative about money," she says.

Modifying the Match

Employers have another simple, yet powerful method that can help encourage cash-strapped millennials, or employees of any generation, to overcome their investment fears and participate in the 401(k) plan: increase the employer match.

That's what Microsoft did last year, when it began matching half of each participant's contribution, up from half of an employee's first 6 percent of pay deferred. Now, about 90 percent of Microsoft workers participate in the company's 401(k) plan.

Not every company has the cash to contribute as much as Microsoft does to employee retirement savings. Other effective strategies, however, are well within the reach of any organization.

How an employer structures its match also can make a difference, say the authors of the Transamerica report. They recommend that employers encourage employees to save more by matching half of the first 6 percent a worker contributes, for example, rather than the first 3 percent.

Another relatively easy approach, Thiele says, is to tailor communications to different segments of the workforce -- a step that could be particularly effective with millennial workers who have little experience with saving for retirement.

At Microsoft, employees are allocated into 13 "buckets" based on factors such as how -- and how much -- they save, with each "bucket" getting its own stream of communication. That way, millennials who may not be as engaged in their 401(k)s as other demographic groups are able to receive messages that are more tailored to their situation and needs.

Thiele's advice: "If you don't have resources to increase your match, get rid of your old, tired communications campaign."

It's also true that millennials are generally more comfortable with technology than most older workers. Experts, therefore, recommend choosing a plan administrator that offers participants mobile access to their accounts.

The Transamerica survey found 80 percent of millennial workers preferred 401(k) providers that offer mobile access.

At Vanguard, mobile devices now represent 22 percent of all client contacts (compared to 17 percent through telephone calls to a Vanguard representative), as millennials become the workforce's largest generation. The company did not break out figures for mobile access in previous annual reports.

"Millennials are different," says Zane Dalal, executive vice president of Benefit Program Administration, a Los Angeles-based company that manages benefits programs for employers and trade unions. "They're used to doing everything with two thumbs" on a smartphone, he says.

Experts agree that employers are going to need to do a better job recognizing and addressing those differences if they hope to successfully engage millennials in saving for the future.

Zane Dalal is Executive Vice President at Benefit Programs Administration, a third party administrator based in Los Angeles.

This article originally appeared on Human Resource Executive

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Benefit Plan Sponsors Need TPAs
Why DIY plan administration is usually not a great idea

Benefit Plan Sponsors Need TPAs

A third party administrator isn’t, necessarily, a necessity for every business with a self-insured health plan or a retirement plan, but, for many businesses and business owners, using a TPA can be a cost-effective solution.

When a business owner client is considering whether to use a TPA for a self-insured health plan, for example, the client should consider these three areas:

1. Analytics: Is the employer getting good data on enrollee health care trends?

2. Pharmacy costs: Is the employer doing a good job of containing specialty drug costs?

3. Wellness: Does the employer have a good program for preventing problems, and treating small problems, before small problems turn into big problems?

TPAs may not always have the answers themselves, but they have connections with the experts and vendors that do.

Another factor to keep in mind is whether an employer’s internal systems can handle the administration of a plan, and the tailoring need to meet the needs of each employee.

Going off some ‘one-size-fits-all’ software might initially relieve office stress, but, ultimately, that approach will probably fail to serve the best interests of the business.

A good TPA can customize a plan’s fit. A good TPA can also change the plan as the employer grows and changes, to make sure any employer or employee needs that develop will be taken care of.

A good TPA will also use customizable, adaptable technology, and work to keep the data secure from external threats and data breaches.

Finally, businesses and business owners must consider fiduciary responsibility, which TPAs are uniquely equipped to handle.

Complying with state and federal benefits administration requirements can be time-consuming at best, and the penalties for improper implementation can be hard on an employer’s bottom line. Now, Congress is working on a new round of legislation that threatens to turn everything on its head. Using a TPA is a good way for an employer to handle the uncertainty.

Zane Dalal is Executive Vice President at Benefit Programs Administration, a third party administrator based in Los Angeles.

This article originally appeared on ThinkAdvisor

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Why Unions are important! A historical perspective – then and now.

Zane Dalal

The Future of the ACA

For more than a thousand years, as populations migrated from a scant rural existence to congregate in large city centers, there has been the very natural and necessary need to organize trade and commerce.   The larger the field of competition the more it became necessary for laborers to band together so their earning power and their individual position in the marketplace allowed them a stable way to provide for themselves and their families. The medieval period flourished with extraordinary ‘guilds’, or confraternities. The idea of student guilds led to the three illustrious universities of Oxford, La Sorbonne and Bologna. The great cathedral builders of the period established themselves as master masons, then freemasons extending a huge mantle of influence long after cathedral building was done. Name a trade and it developed its ‘guild’, then its ‘worshipful company’ and then transitioned into a ‘livery company’.   The word ‘company’, in common usage today, is a trade based, labor based term that refers to the organized grouping of a labor force. The remarkable story of apprentice and journeyman is an equally important part of this ancient construct. Leaf through a Summary Plan Description (SPD) of a modern union benefit trust fund and this age-old tradition leaps off the page at you.   It is the story of pride in a special skill well executed and well passed on for the next generation.   It is the story of communal success.  It is the story of burgeoning trade and commerce that drives society, and in its American context it is the living realization of ‘e pluribus unum’.

The rise of the Labor Unions, especially in the United States, was tied strongly to the social need to organize. As the industry changed from household craftsmen to mechanized factories, the market expanded beyond local boundaries.  From the multiple factory trades culminating in the great port cities of the Eastern seaboard to the bakers of New York, society was coming to terms with new levers of supply and demand.  Regulation was non-existent and many labor related disputes that arose were underscoring specific problems for the first time. I mention the bakers of New York, because it was the landmark Supreme Court Case Lochner v. New York (1905) that is often cited as ‘what not to do’ when trying to decide the merits of a specific labor related case. The final opinion construed the Fourteenth amendment’s ‘due process’ clause to contain a ‘freedom of contract’ right, holding that limits imposed on working hours in any given day violated that right. Justice Oliver Wendel Holmes and Justice John Marshall Harlan’s dissents are shining pieces of jurisprudential history. The bakers of New York, might have relied on weird, 'wee morning hours' to manage their industry, many employees sleeping on the floor in their warm bakeries to be able to facilitate an early start. Quite apart from the unsanitary health concerns, it was not a good model to validate long work hours with almost no regulation. Lochner was controlling case precedent that cut deeply into labor rights and only found partial reversal in the 1937 case West Coast Hotel Co. v. Parrish. The unions that developed in strength from the 1890’s to the 1930’s did so precisely because, left to congress and the courts, a workforce could not be reliably protected.

Union Chart

The rise of the Unions and the stability of its members’ earnings allowed the emergence of a middle class in the United States, which in turn drove a factory based, economic machine as never seen before on the planet. The global spread of American influence is deeply rooted in that economic power which allows for a direct and unambiguous link between Union strength and America’s rise as a world super power. The workforce and its cohesive ability to make miracles is the great story of military production during World War II.   With war time exigencies over, management expected production to continue at breakneck speed, without the inspiration of a common goal, improved working conditions or pay.   The ensuing labor disputes of 1946 which brought many industries to a standstill resulted in The Labor Management Relations Act (1947) or Taft-Hartley as it’s generally known. Passed by congress over President Truman’s veto, it’s another example of a congressional quick fix to problems that were wide ranging and complex. Taft-Hartley was passed primarily for its executive power to force people in protest back to work, than for its equally balanced boards of negotiated governance.  Just at a time when unions might have been strengthened, they found themselves curbed by federal law driven by the political and partisan swing in Washington, D.C.

Fifty years ago, almost one third of the American workforce were members of a union.  Now the number is closer to one tenth. Income inequality, not only in the United States but in other developed nations across the globe, is a byproduct of a disappearing middle class. Wage earnings for non-union workers have historically always followed the trends indicated and initiated by unions. The benefits arranged by bargained agreements, set the standard for not just the workforce, but for life, family, community and society. The decline of the middle class and the rapid rise of income inequality are directly linked with some of today’s hot button issues such as homelessness, uninsured healthcare, overpopulated prisons, addiction, and the mental health crisis. Two years ago a Pew Research survey conducted in forty-four countries placed inequality as one of the ‘greatest threats to the world.’

We stand at a crucial crossroads. A new, inspired, quick-to-move, upcoming workforce is in play. The millennial group – anyone 35 years of age and below – will be the driving force of a new American age.   They have the same natural and instinctive yearning to belong to a group – a club – rich in resources and beneficial to their common goals, just as their forebears from earlier generations.  It is time to offer them not what we have, but what they want. A surge in union strength might be more than a rescue of the middle class, it might be a moral imperative.


Zane Dalal is Executive Vice President at Benefit Programs Administration (BPA)
An experienced So. Cal. TPA serving the Taft-Hartley Industry since 1948

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The Future of the ACA

The Future of the ACA


For more than 70 years, Benefit Programs Administration (BPA) has been entrusted with the administration of benefits plans for American workers through single- or multi-employer trust funds. As the health care sector has grown and changed over the last seven decades, so has BPA. Now, Congress is contemplating the second major health care overhaul in a decade. Keep reading for a high-level explanation of the current state of health care and where health care legislation may be headed.

The Affordable Care Act (ACA) is a federal health care bill that passed in 2010. The bill was the largest overhaul of the health care industry since the creation of Medicare and Medicaid in the 1960s. The ACA expanded insurance coverage and mandated that every American must have health insurance. Provisions in the ACA included expanded mental health coverage and outlined “essential benefits” that all insurance companies must cover.

Despite the entire ACA structure being dependent upon employer-centric insurance coverage, the law did not address the specific needs of the Taft-Hartley fund model. Typically, before and after initial passage of a law there is a customary review period and exchange of briefs and papers before statutes are enforced. For the ACA, this period led to considerable back and forth between the industry and Washington, D.C., ending in a stop gap resolution that effectively allowed each individual fund under the Taft-Hartley model to operate as if it was a health care exchange under ACA. Rules for “grandfathered” status were introduced to allow certain funds time to transition to new benefit packages.

Current and future status of health care

Currently, the ACA is the health care law of the land. New legislation, the American Health Care Act (AHCA), has been proposed to replace the ACA. The AHCA has passed in the House but not the Senate. If and when the bill passes in the Senate, the two versions of the bill would need to be reconciled before going to the president’s desk.

The crafters of the AHCA consider it a relief on undue taxation. Opponents of the new legislation say that the bill’s sweeping, deep cuts do not address health care, deny the benefits of recently acquired health insurance and create consequential problems from which it may be difficult to recover. Both sides are rightly concerned by passing measures in haste for partisan or procedural reasons that will affect the lives of millions of Americans.


The complexities of health care ensure that whatever the changes, tensions will run high as the country adapts to a second round of federally mandated provisions. Just as with the ACA, state legislators may opt in or out of various provisions as they choose how to serve their constituents. A changing landscape is not new to the Taft-Hartley industry and the professionals that serve it. Benefit Programs Administration stands ready, as it has done for almost 70 years, to partner with trustees, professionals and participants to make sure that understanding, compliance and implementation is a smooth and seamless process.

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PLANSPONSOR: A Closer Look at Plan Health


By Javier Simon
As defined benefit (DB) plans shrink in number and the future of Social Security benefits dips further into uncertainty, defined contribution (DC) plans and individual retirement accounts (IRAs) are becoming the primary tools driving America’s retirement security.

However, many Americans are behind on retirement readiness. More than half (52%) of households are at risk of not being able to maintain their standard of living in retirement, according to a recent study by Prudential and the Center for Retirement Research at Boston College (CRR).

And with a heightened scrutiny on fees and fiduciary responsibility, it’s becoming increasingly important for plan sponsors to ensure their participants’ retirement readiness and maintain a healthy plan.

Sean McLaughlin, senior vice president, head of client relations and business development, Prudential Retirement, tells PLANSPONSOR that a major component to any healthy plan is “the right plan design for your participants.”

Features such as auto-enrollment have been among the biggest drivers of higher participation, according to Wells Fargo’s study “Driving Plan Health 2016.” Still, the Plan Sponsor Council of America (PSCA) found that the most common auto-enrollment salary deferral rate is 3% of pay. “We recommend closer to 6%,” says McLaughlin.

While some sponsors may fear this would reduce participation rates, volumes of evidence suggests otherwise.

Wells Fargo’s data indicates that plans which have auto-enrolled participants at a deferral rate of 6% averaged 87% participation rates. The figure is 83% for those that auto-enrolled at 3%. The firm also notes that opt-out rates “do not vary substantially from lower to higher default deferral rates,” and that plans with lower default deferral rates naturally have overall lower average deferral rates.

NEXT: Plan design and plan health

Furthermore, the PSCA found only 65% of plans with auto-enrollment utilize auto-escalation. McLaughlin suggests auto-escalation of 1% annually up to 10%, “or more if the employee population can save more.”

Auto features are so important to a healthy plan because otherwise a whole lot of people will never take the necessary action to enroll themselves, even if they like the idea of saving, warns Zane Dalal, executive vice president at Benefit Programs Administration (BPA). “Let’s say you get into a 401(k) in your 20s, and by the time you’re ready to retire, you can have $1 million. If you were not clear about this in your 20s and decide to start contributing in your 30s, you’d only have about $630,000. It’s a huge disadvantage.”

McLaughlin suggests plan sponsors “auto-enroll until people give up and they’re in the plan. Do it on an annual basis, reenrolling the entire eligible population.”

A company match can also go a long way, even without auto-enrollment. The Wells Fargo’s data indicates that for plans without auto-enrollment, the average participation rates were higher for those with the larger matches. Plans with matches up to 3% averaged 48.7% participation. Plans with matches between 6% and 9% averaged 64.6% participation.

But regardless of how much money employees defer, what matters most is where that money goes.

NEXT: choosing the right investments

Alleged excessive fees have been central to plenty of the current litigation surrounding the DC space. Thus, to have a healthy plan, sponsors have to maintain a cautious eye when selecting investments for their qualified default invest alternatives (QDIAs), and understand the different share classes available across the entire core menu.

This decision can and should rely heavily on employee demographics. Target-date funds (TDFs) and managed accounts offer the advantage of letting participants hand over investment management to professionals. And while TDFs currently dominate the DC space, they can vary widely based on provider.

Prudential’s paper notes that “sponsors should consider how well a target-date fund’s characteristics align with the demographics of the plan. The glide path design should address the right risks at the right time—target date funds need to be aggressive enough to address longevity challenges while not over-exposing participants to market risk near retirement.”

And while basic demographics tell a sponsor a lot about participants’ risk tolerance, other factors should also be used to dig deeper. The job itself can play a significant role in how an employee saves.

“Different industries have different expected return and profit levels, which makes more or less money available to invest in a retirement program for employees,” says McLaughlin. “Industry matters a lot, and it has to be factored into plan design. Sponsors need to speak specifically with advisers, providers and stakeholders to discuss their needs as an organization and where they are in their lifecycle, whether it be a start up with limited cash or a large and very successful firm.”

This, along with fund performance and costs, are some of the main points to consider when selecting a fund lineup. Choosing the right options could not only attract and retain the best talent, but also provide the right amount of turnover.

NEXT: Helping participants retire on time

“One of the challenges that has been much more common since the financial crisis has been workers not retiring at a ‘normal’ retirement age, and sticking out longer than employers may have planned,” explains McLaughlin. Research sponsored by Prudential notes that a one-year delay in retirement may result in incremental workforce costs of 1% to 1.5% annually.

McLaughlin suggests that one way to address this issue, along with the fear among participants of outliving their assets, is to incorporate an in-plan guaranteed lifetime income (GLI) product.

He alludes that even if a participant has enough assets to feel retirement ready by the time he reaches that milestone, the drawdown phase poses another challenge. “How does he take that money as income? Most folks don’t have expertise around that. So, having an in-plan income option is really helpful.”

Prudential also notes that GLI may serve as a backdrop for participants in the event that a severe market downturn impedes retirement readiness. One of the firm’s recent surveys finds that 53% of financial executives believe participants will engage in less risky behavior—like getting out of investments at the wrong time—if they are invested in some kind of GLI product.

“The biggest mistake you can make is jumping in and out of the market,” says BPA’s Dalal. “It’s the biggest killer in the investment world.”

Choosing the best fund lineup would help plan sponsors meet their fiduciary responsibilities and comply with various regulators in the DC space. In this realm, it’s also important to leverage support from all parties involved in the plan.

“Consultative regulatory services can help plan sponsors navigate the complexity of having a DC plan,” McLaughlin concludes. “They can look at plan documents, plan design and all of the different elements that tie back to regulation before making a set of recommendations.”

But even solid plan design and a strong investment lineup will fail to reach the plans’ full potential if participants aren’t utilizing the plan properly. Education is key to driving engagement. Many tools can boost engagement and help participants think of retirement as a piece to overall financial wellness. And these can be integrated with the existing benefits package to control costs.

This article originally appeared in PLANSPONSOR.

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PLANSPONSOR: Multiemployer Plans Have Hope and a Future


By Rebecca Moore
We’ve all seen the headlines: The Pension Benefit Guaranty Corporation (PBGC) multiemployer plan program is running out of money because it is helping so many plans, and a number of multiemployer plans have asked the Treasury for permission to reduce benefits under the Multiemployer Pension Reform Act (MPRA).

But, according to Zane Dalal, executive vice president of Benefit Programs Administration (BPA), who is based in Los Angeles, the industry needs to take a balanced view.

First of all, the multiemployer (or Taft-Hartley) plan market is large. Dalal notes that as of 2014, there were 2,671 multiemployer plans—1,403 defined benefit (DB) and 1,268 defined contribution (DC). Taft-Hartley plans not only include a DB plan, but many times also a health plan, and Dalal says, in many cases a DC plan is offered as a supplement to the DB plan, not as a replacement.

In 2014, there were 15,280,000 participants and beneficiaries in multiemployer plans—10,703,000 in DB and 4,577,000 in DC. Also, $703 billion in assets were held by multiemployer plans—$500 billion in DB and $203 billion in DC.

David Brenner, national director of multiemployer consulting with Segal Consulting, who is based in Boston, says the reason there isn't more current information is it comes from Form 5500 data. “By the time we get information, it is 12 to 18 months out of date,” he says.

SVP and actuary Diane Gleave with Segal Consulting, who is based in New York City, says the number of plans can decline because some plans terminate and some plans merge. But, Taft-Hartley plans are not going the way of the dinosaur. “We are seeing some new plans being created in some instances. For example, pieces of plans can be transferred out of a current plan to a new plan, subject to regulatory requirements that have to be satisfied,” she notes.

Brenner adds that new plans are being created in the building and construction industries.

And most plans are doing well. The latest Survey of Plans’ Zone Status from Segal Consulting shows that a majority of multiemployer plans are still in the green zone. The survey found 64% of plans are in the green zone, while the percentage of plans in the yellow zone and red zone remained stable at 11% and 25%, respectively. These numbers are virtually unchanged compared to data for the previous 12-month period.

Gleave says many plans are even thriving, so multiemployer plans’ situation is not as dire as reports indicate, though she concedes there are a significant number of participants in distressed plans.

“The majority of plans we work with are in the yellow or green zone, and funding is improving,” Brenner says. “The boards of trustees for these plans look at the big picture and look at their world and have begun to ask questions about alternatives to what they are doing. The majority of plans out there are stable and well-run and have tremendous futures. They are challenged with the legacy of bad market returns and for the most part are stepping up to deal with it. They are working with investment consultants to see if there are new and different ways to invest; working with actuaries and consultants to think about costs; considering subsidies they provide now whether to reduce them; and whether they should shift from only a DB plan to that plus a companion DC plan.”

NEXT: Multiemployer plan struggles

As with any retirement plan type, multiemployer plans are subject to market volatility. According to a report from Horizon Actuarial Services, LLC, at the height of the financial collapse in 2008, the median investment return for multiemployer DB plans was -23.5%. However, the median annualized return was about 5.6% over the 10-year period from 2005 through 2014, and the 2014 median investment return was 6.3%.

According to Dalal, there are two other struggles multiemployer plans face. One is a change in the workforce. “Millennials’ representation in this old, union model is not as good as it should be,” he notes. In addition, the Pension Protection Act’s multiemployer plan provisions were meant to create more transparency and more policing. “But, when the government is involved, good people doing the right thing have a load of reporting placed on them. Instead of making things transparent, the PPA created an extra costly burden coming out of retirement funds,” Dalal says.

“The Taft-Hartley model is not dissimilar to Social Security. The idea of having enough actives contributing what will be required by retirees is not something we have control of,” Dalal adds. And, he notes that the whole populous is living longer—the amount retirees will continue to collect is something multiemployer plans need to consider.

For Brenner and Gleave, it’s all about the economy. Brenner says for some plans in critical and declining status, it’s not that their being badly managed or making bad investment decisions, it’s about the economy. He notes that many construction companies in the Midwest haven’t recovered from a downturn in the economy. Many have not seen a resurgence in the particular industries in which they work. Other industries have fled the United States, and for others, deregulation, such as for teamster plans, have hurt them. He explains that back in the 1980s, the trucking industry was highly regulated. The government began the process of deregulating, which introduced much more competition and growth of a non-union trucking sector, which has penalized historic, legacy trucking firms.

"It's hardly surprising that plans covering workers in hard-hit industries, like coal, are facing challenges," Brenner adds.

NEXT: The future for multiemployer plans

For plans going forward, Gleave says there are three levers: asset allocation; plan management of what benefits are being provided and the costs and how to manage that; and a look at plan design provisions to see if a shared-risk design is better able to withstand volatility.

She explains that shared risk is a broad category with a lot of different options. It could be something as simple as if the plan meets certain targets, participants will have a benefit accrual of ‘x’ dollars, but if not, they will have an accrual of ‘y’ dollars. On the other extreme is truly variable plan design; benefits that have been accrued can vary based on certain metrics.

Gleave notes that the National Coordinating Committee for Multiemployer Plans (NCCMP) has proposed a composite plan, viewed as shared-risk design that could be used if enacted. It is a concept of shared risk between the plan, participants and employer members.

Dalal says the multiemployer plan market has solutions to take care of administration and investments, new rules and legal compliance, research on demographics, participant services, and cybersecurity. “We’re already there, unions just need to be willing to change and add components such as health savings accounts (HSAs), health reimbursement arrangements (HRAs), multiemployer welfare arrangements (MEWAs), and financial wellness. The idea is to get people to come in to a rich, resource-ready club.

Unions need to tweak plans so Millennials say ‘That’s a good deal to me.’ “For some reason, in the modern world the word ‘union’ seems to have a negative connotation. It’s up to unions to change that; to show they are not adversarial to employers, but are about participants having resources to do things for themselves. Millennials are people that will need this and expect it for a long retirement,” Dalal says.

“Millions will retire well with these plans, and the plans are not going away. The industry doesn’t want to lose sight of that,” Brenner concludes.

This article originally appeared in PLANSPONSOR.

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We’ll See You at the IFEBP Conference this October


What happens in Vegas ... will be brought back to BPA HQ to better serve you! This October, BPA will host an exhibit at the 63rd annual Conference of the International Foundation of Employee Benefit Plans (IFEBP) at the Mandalay Bay Convention Center in Las Vegas, Nevada, and we’d love to see you there.

In a year when significant changes to our health care system and retirement structure are all but guaranteed, it’s never been so important to stay abreast of industry trends and connected with our colleagues. The IFEBP offers more than 100 sessions designed to give our experts a deeper understanding of pension strategy, plan design options, risks, legislation and security, so that we can find effective solutions and bring hard-dollar cost savings to our clients.

We look forward to congregating with more than 5,000 of our colleagues and introducing new insights into our collaborative headquarters. Our team has been attending the IFEBP’s annual conference for many years to provide information about BPA’s industry-leading offerings. So if you’re planning to attend, please stop by our exhibitor’s booth.

What: Conference of the International Foundation of Employee Benefit Plans (IFEBP)
Where: 3950 S Las Vegas Blvd, Las Vegas, NV 89119
When: October 22-25, 2017

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Movin’ On Up

BPA has a new address!

Our new office space on the fifth floor of 1200 Wilshire Boulevard has expansive windows overlooking downtown Los Angeles, designed to flood the spacious common areas with natural light. The modern, open layout encourages the BPA team to communicate and collaborate, which has given a significant boost to teamwork and morale. Staff and clients alike love the new look.

This strategic move is reflective of BPA’s dynamic new direction, and positions us to continue to provide excellent service to our clients and promotes a new, integrated and vibrant office for our personnel.

The freshly renovated building is located in the central downtown Los Angeles area, putting us at the center of a premier business hotspot. Our clients appreciate the conveniences and take advantage of our ample, meticulously designed meeting spaces to host quarterly and annual meetings.

Please update your address books, and don’t hesitate to pay us a visit in our brand new space!

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Welcoming Teamsters Local 572 to BPA


Benefit Programs Administration is proud to announce a new partnership with the Teamsters Local 572. We look forward to a close and long lasting relationship as we serve the participants of the Teamsters Multi-Benefit Trust & Local Union No. 572 Retirement Benefit Plan.

Chartered by the International Brotherhood of Teamsters in 1937, Teamsters 572 is currently one of the largest locals in the state of California. The union currently represents more than 150 different employers in a wide array of industries including bakery, graphic communications, retail, soft drink, transportation, grocery and specialty businesses.

BPA will administer both the Teamsters’ Local Union No. 572 Retirement Benefit Plan, a defined contribution plan originally adopted in Sept. 1994; and the Multi-Benefit Trust, a multi-employer plan formed under a collective bargaining agreement with participating employers and the International Brotherhood of Teamsters located within the Jurisdiction of Joint Council of Teamsters No. 42.

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