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BPA in the News

Marijuana in the Workplace - December 2018

Benefits Plans, Third Party Administrators and Security

Support for marijuana legalization reached new highs in 2017, showing that 64 percent of Americans favor legalization, and a whopping 83 percent approve of legalizing medical marijuana.

As a growing number of states legalize and tolerate marijuana use, employers are finding it increasingly difficult to reconcile their traditional zero-tolerance drug policies with new laws permitting the use of marijuana. Some have even expressed concern with violating disability discrimination laws by prohibiting such use in the workplace. For example, the Americans with Disabilities Act (ADA) prohibits covered employers from discriminating against individuals based on a disability – it even requires those employers to provide reasonable accommodations to employees with disabilities so they can perform the essential functions of their job.

Medical marijuana is often prescribed to individuals whose disabilities are typically recognized by courts under the ADA, including seizure disorders, Crohn’s disease and permanent nerve-related disorders, and in some cases, the use of medical marijuana can have a significantly positive effect on individuals’ abilities to perform major life activities. In other words, the use of medical marijuana can be essential to an employee’s ability to perform his or her job and may be the only workable accommodation for the employee.

The statute seems clear. Employers must provide reasonable accommodations for employees with disabilities to perform essential functions of their jobs.

Benefits Plans, Third Party Administrators and Security

However – Section 12114(a) of the Americans with Disabilities Act also states that “a qualified individual with a disability shall not include any employee or applicant who is currently engaging in the illegal use of drugs.” Because marijuana remains a prohibited Schedule 1 substance, courts have historically ruled that

employers are not required to accommodate the use of medical marijuana under the Americans with Disabilities Act.

Though marijuana prescribed by a doctor is still considered an illegal use of drugs and not covered by the Americans with Disabilities Act, that may not be the case in all states. Some have enacted anti-discrimination statutes that require employers to provide accommodations to the employee with the disability, without posing a direct threat to the health and safety of other individuals. States such as New York, Arizona, Delaware, Minnesota and Nevada prohibit employers from taking adverse action against an employee prescribed marijuana by a doctor, unless not doing so violates federal law. Even courts in Rhode Island and Massachusetts have decided that employers must in the very least attempt to accommodate those with prescriptions for medical marijuana.

This is undoubtedly a large shift from the past. Even the most progressive states – California, Oregon and Colorado – have previously held that employers do not have to accommodate medical marijuana use even if it is state law. It has become important for employers to carefully review the anti-discrimination laws in their states as it relates to medical marijuana in the workplace and consider revising their company policies. At the very least, it has become clear that many employers are not taking adverse employment action based on a positive test for marijuana should the employee have a prescription and is used in accordance with the law.

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Unions Serve as Advocates for Expecting Mothers - November 2018

Benefits Plans, Third Party Administrators and Security

In addition to the physical stressors brought on by pregnancy, expecting mothers also face a wide array of tough questions before giving birth. Can she afford to take maternity leave? How much? Will, if any, of that leave be paid? Will the government help stabilize her pay during the first months of her child’s life?

The United States is the only industrialized country lacking federal law requiring a woman to be paid on maternity leave. The Family and Medical Leave Act protects a woman’s job while she’s away but does not ensure pay. Even so, this law only applies to public agencies, private sector companies with 50 or more employees, or a public or private school. Eligible employees must work for a covered employer for at least 12 months, have 1,250 hours of services in that 12-month period and work at a location where the employer has 50 employees within 75 miles.

A large part of the American population is not covered by this law – and that part is disproportionately low-income. The American Public Health Association cites that just one in four mothers take maternity leave because lack of affordability limits them from doing so. Even when employers are required by law to provide paid maternity leave, as is the case in six states and the District of Columbia, many women still choose to forego maternity leave because they cannot afford to miss out on overtime and bonus pay, or do not even realize these policies exist.

Unions, once only associated with blue-collar workers, have recently stepped in to solve the problem eluded by the U.S. government. A Vanderbilt University study found that union-represented women in the United States are 17 percent more likely to take maternity leave than women not represented by a union. The study hypothesized that a working woman’s decision to take maternity leave depends on four factors: availability, awareness, affordability, and assurance. In other words, if a woman has a paid-maternity-leave benefit available to her, she also has to be aware that the leave exists, be able to afford to take it, and be assured that she won’t risk losing hours, pay, or promotion opportunities in the long term.

Researchers also found that women with union representation tend to take leave more often than their nonunionized counterparts simply due to the presence of union representatives, workplace educators and advocates, as well as union meetings and newsletters. Simply offering a benefit does not necessarily mean it will be utilized. While the decision to take extended leave is very complex, unions help their members better understand their benefits and the options they have available. According to the Department of Labor, union-represented workers are more likely to have access to retirement plans, life and disability insurance, child-care subsidies, and health-care benefits. And in addition to helping moms take maternity leave, unions can assist workers in more understated ways: A 2014 study by the Nevada Law Journal found that when workers participate in union activities such as meetings and campaigns, they develop communication and self-advocacy skills that can pay off on the job.

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The Changing Landscape for Benefits Plans

Benefits Plans, Third Party Administrators and Security

Recent actions by the Administration and Congress are changing the benefits landscape and affecting a majority of America’s workforce.

Retirement: Relaxing regulation on Multiple Employer Plans (MEPs)

Commonality and “bad apple” are two regulations that the current administration seeks to reverse, viewed by many as making MEPs difficult and expensive to manage and inaccessible for small employers, the removal of these two potential safeguards suggests a period of booming expansion in this sector, since participating employers simply need to belong to the same Chamber of Commerce. The DOL has been asked to remove the commonality requirement and explore raising the age cap for required minimum distribution of retirement accounts from 70 ½ to 72 ½, to address a workforce retiring later in life.

Another legislative action potentially affecting retirement benefits revives the Pooled Employer Plan (PEP). The Senate recently reintroduced The Retirement Enhancement and Savings Act of 2018 (RESA). Like the Executive Order, the RESA also removes the commonality rules and includes additional benefits:

  • Allows for electronic delivery of plan information – not allowed for MEPs or other plan types.
  • Allows earnings on elective deferrals, qualified non-elective contributions and qualified matching contributions under a 401(k) plan to be distributed on account of hardship.
  • Creating a new fiduciary “safe harbor” for employers who opt to include a lifetime income investment option in their defined contribution plan.
  • Permitting participants to make direct trustee-to-trustee transfers (or transfer annuity contracts) of “lifetime income investments” that are no longer authorized to be held as investment options under a qualified defined contribution plan.
  • Requiring employers to provide defined contribution plan participants with an estimate of the amount of monthly annuity income that their accounts, if annuitized, would generate during retirement. The estimate would be included on participants’ annual plan statements.
  • With changes underway, the future of employee retirement benefits is rapidly shifting.

    Healthcare: Recent Developments in Multiple Employer Welfare Arrangement (MEWA) and Association Health Plans (AHP)

    The passing of the Affordable Care Act (ACA) laid the groundwork for further regulation of Multiple Employer Welfare Arrangements (MEWAs) and provided uniformity across state lines. To further dismantle the ACA, the Administration’s executive order exempts MEWAs and Association Health Plans (AHPs) from a few certain ACA regulations requiring them to provide basic essential coverage.

    On the other hand, the order implements new guidelines requiring AHPs to comply with the pre-existing nondiscrimination rules currently established by the ACA. These requirements would prohibit AHPs from withholding membership based on an employee’s health, nor could the AHP require an employer or employee to pay a different premium based on health reasons. The executive order also expands AHP participation now allowing formation across state lines and through various industries

    It’s evident that regulations surrounding traditional benefits programs are changing. People are continuing to work later in life and employers’ benefit plans must remain competitive and appealing. BPA will continue to dive deeper into these changes and bring members the latest updates.

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    Unions Lead the Charge against Opioid Addiction

    Benefits Plans, Third Party Administrators and Security

    The opioid epidemic continues to pummel America, taking the lives of more than 115 people in our country each day, according to the National Institute on Drug Abuse – and organized labor sits at the center of the crisis.

    Though the debate rages on over the source of the opioid epidemic, which was recently declared as a national health emergency, many attribute economic despair as the driving force. Proponents of this argument include economists Anne Case and Angus Deaton at Princeton University. In a recent study, Case and Deaton credit the sharp increase in drug overdoses between 1999 and 2015 to “deaths of despair” rather than to the increased ease of obtaining opioids. According to their research, these rising rates of abuse and suicide are directly correlated with social and economic factors, including the prolonged economic decline in many regions of the U.S.

    Unions Key to Economic Prosperity

    Nearly every time wages have gone up in the private sector, it was because wages went up in the public sectors as a direct result of collective bargaining agreements led by unions. We’ve seen stagnation in wages since union membership began to drop in the 80’s drop. This stagnation has led to erosion of the middle class and contributed to the widening of the wage gap, which in turn is the source of many social and economic crises we’re facing in the U.S.

    Unfortunately, the “deunionization” trend that started 40 years ago seems to be picking up steam, with the Supreme Court's ruling against unions’ right to collect fair share fees in Janus v. AFSCME being the latest testament of this. If the trend continues, we expect economic turmoil in this country will only worsen, therefore fueling the opioid epidemic. In fact, a study released by the Illinois Economic Policy Institute estimates that annual economic activity in the U.S. will drop between $11.7 billion and $33.4 as a result of the ruling in Janus.

    Unions Fight for Workers’ Wellbeing Unions’ pivotal role in the conversation surrounding opioid abuse extends far beyond improving wages and economic conditions. Unions have witnessed the detriment and destruction of opioid abuse and the toll it has taken on members and their families – and they’re not standing down as an estimated 2.4 million Americans suffer from opioid-use disorder. Rather than remaining idle, labor unions throughout the country are fighting for the wellbeing of our workforce.

    Below is a glimpse into how unions are fighting back against opioid addiction:

  • The North America’s Building Trades Union found that for workers in the construction industry, the overdose rate is seven times greater than for the general population. This led NABTU to create a task force focused on establishing a framework of prevention education to address member needs. According to a recent Bloomberg BNA interview with NABTU representatives, many local unions are going a step further by implementing initiatives aimed at educating workers on pain management alternatives to opiates, such as acupuncture and physical therapy.

    In fact, the Allied Trades Assistance Program in Philadelphia, established by the Philadelphia Building Trades, provides addiction treatment programs that have proven highly successful. As part of this program, the union even plans to develop an online course designed to help union apprentices learn about substance abuse in the workplace, enabling them to better understand addiction and the related programs offered by the union.

  • Teamsters has taken aim at pharmacy benefit managers and several opioid drug manufacturers and distributors. In April, a lawsuit was filed on behalf of Teamsters’ Health and Welfare Funds in West Virginia and Ohio demanding accountability for the detriment the opioid crisis has caused Teamsters.

  • The Philadelphia Federation of Teachers Health and Welfare Fund filed a potential class action in November 2017 against an opioid manufacturer. The lawsuit includes allegations of fraudulent marketing based on the manufacturers claim that its opioid painkillers were “safe” and effective for chronic pain.

  • Labor unions are woven into the fabric of our society, playing an essential role when it comes to ensuring the health and welfare of our nation’s workforce. If the battle against unions continues, we may find ourselves facing social and economic crises unlike anything we’ve experienced to-date.

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    Millennials Hold the Key to Union Revitalization

    Benefits Plans, Third Party Administrators and Security

    Organized labor took a major hit in June when the Supreme Court ruled against mandatory ‘fair share’ fees, which prior to Janus v. AFSCME, allowed public sector unions to collect fees from non-members who reaped the benefits of collective bargaining. This ruling was in line the union-busting trend that continues to gain momentum, despite fears of economic instability that could ignite if unions were to dissolve. Despite the onslaught of actions against unions, this is not the end. Unions now stand face a pivotal moment in history – and millennials stand at the center of the crossroads.

    Millennials comprise an estimated 35 percent of American labor force participants, making them the largest generation in the U.S. labor force, according to data from the Pew Research Center. More than 55 million Millennials were employed or seeking employment in 2017, which leads the 53 million in Generation X and the 41 million Baby Boomers.

    The Economic Policy Institute has found that “historically, younger workers have been less likely than older workers to be a member of union,” presenting a significant challenge. In the face of the Janus aftermath, the survival of organized labor in America now hangs on unions’ ability to recruit and retain millennial members.

    We’re confident that despite the myriad of recent setbacks, unions CAN and WILL adjust.

    The millennial workforce needs a collective voice, but this generation places emphasis on an entirely new set of concerns in comparison to their predecessors. If unions take note of the unique wants and needs of this rapidly evolving workforce, organized labor will thrive for decades to come.

    The “Traditional” Workplace Becomes Obsolete

    The millennial workforce has made the single job, single employer workforce of our parent’s generation obsolete. According to a survey spearheaded by economists Lawrence Katz of Harvard University and Alan Krueger at Princeton University, the percentage of Americans workers with “alternative” work arrangements leapt from 10.7 percent in 2005 to nearly 16 percent by 2015. The proportion of workers engaged in alternative work – which encompasses the “gig economy,” contract labor and freelancing, as well as other non-conventional work arrangements – will continue to climb.

    Participation in Taft-Hartley Plans Depend on Younger Population of ‘Actives’

    It is crucial that unions appeal to and enroll as many millennials as possible. This will likely require ‘out of the box’ thinking when engaging in the collective bargaining process with employers in order to make benefits and enrollment opportunities relevant to a younger demographic. Millennials aren’t just thinking about investment, they’re concerned with homeownership, raising a family and everything in between. These things must come under consideration when entering into collective bargaining negotiations and remembering to take a holistic approach is imperative.

  • Flexibility: Millennials rely on flexible hours and workplaces. Additionally, they demand a greater focus on work-life balance. Today’s younger, flexible, multidirectional workforce treats a job as a means to an end. That job must fit in to a flexible lifestyle, flexible hours, flexible location, and above all, flexible financial planning. Additionally, the family unit has dramatically changed and reflects numerous social, lifestyle and demographic variants.

    For example, a millennial worker in today’s modern world is likely facing high student debt, all while looking to purchase a home and save for retirement. To fulfill this need, potential benefits may include tuition repayment programs or home buying assistance. On the other side of things, many millennial women are focusing more heavily on career development and in turn postponing building a family until later in life. To appease this growing trend, some progressive companies are choosing to offer elective fertility preservation as an optional benefit.

  • Expenses and retirement: The role of unions is undergoing a noticeable shift, as millennial union members’ concerns focus more on immediate needs and expenses, the cost of healthcare and the availability of training, and less on retirement and savings. Programs to help this generation respond to immediate financial needs without allowing retirement savings to drop off.

    It's not just about providing options for retirement saving. It’s about analyzing the current environment and catering to the broad needs of a generation. Their retirement planning must reflect these needs and give them a one stop shop to plan, invest, monitor and control their whole financial picture at the click of a button. A comprehensive approach to money management, as well as placing a heightened focus on incorporating financial education programs is key.

  • Technology: Millennials want everything at their fingertips and taken care of in one place. They want to be able to log in to one platform and manage everything. Technology has never played such a critical role in the execution of benefits for unions, employers and their members/participants.

    Unions should take note of and consider turning to the latest benefits technology, which now allows:

  • Users to access their benefits and services on the go -- whether they are at work, home or traveling.
  • Claims to be customized and filed at the touch of a button
  • All documentation to be managed electronically. This not only simplifies processes, but also cuts down on time and paper for fund managers, employers and more.
  • Beyond the software, unions must turn to technology for communicating with current and potential members. Leveraging social media platforms and using them to engage with prospective members is certainly a necessity in recruiting new members in today’s environment.

    A new, inspired, quick-to-move workforce is in play. The millennial group – anyone 36 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 only 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.

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    BPA Talks with NPR's Nina Totenberg on Impact of SCOTUS Decision on Fair Share Fees

    Benefits Plans, Third Party Administrators and Security

    Shortly after the Supreme Court issued its 5-4 decision in Janus v. AFSCME, BPA Executive Vice President Zane Dalal spoke with NPR's legal affairs correspondent Nina Totenberg. Nina is an award-winning journalist who has covered the Supreme Court for NPR’s “All Things Considered” throughout the past four decades.

    Nina reached out to several experts for commentary on this ruling. She was particularly interested in hearing from BPA’s leadership team based on the company’s 70 years of experience partnering with union trustees to administer the Retirement and Health & Welfare benefits of Southern Californians.

    This NPR interview focused on four key themes: first amendment rights, the strength of collective bargaining, potential ripple effects of the case, and hope for the future of organized labor.

    Here’s a recap of the commentary Zane shared with NPR, as well as a few added insights reserved for our valued newsletter subscribers.

    1. 1. The heart of the case: First amendment rights
    2. NPR Commentary
      On mandatory fair share fees and nonmembers: “In the public sector, irrespective of if they (employees) pay a fee or not, they still get the benefits,” said Zane. That’s the law in most states where the ‘fair share’ fee exists. He continues to say that nonmembers who do not pay the union ‘fair share’ fee are “not paying a fair fee for services rendered.”

      Additional Insights from BPA
      Not paying ‘fair share’ fees for these services rendered based on first amendment principles is flawed. The same logic would allow you to refuse to pay your federal taxes because you feel your first amendment rights are violated during an administration that you didn’t vote for, and/or with whose policies you don’t agree.

      As some have pointed out – not least of all the attorney for AFSCME – by ruling on this as a first amendment issue, the decision has propelled the right to collectively bargain from an adjunct construct of labor law to a constitutional right. Many on the GOP side would have preferred not to have opened this particular Pandora’s Box.

    3. 2. Ripple effect on social and economic landscape
    4. NPR commentary
      On the ruling’s implications for employee benefit plans: “We must connect benefits with wider issues at play – erosion of the middle class leads to pervasive societal problems of homelessness, drug addiction, the opioid crisis, the skyrocketing cost of healthcare and a myriad other issues ripping at the fabric of who we are as a nation,” said Zane. “If we don’t see these trends as connected, we are misunderstanding the root causes of the problems we wish to address, and whatever we do will be ‘lip service.’”

      Additional Insights from BPA
      The ‘union made’ middle class that was once the bulwarks of a manufacturing-based economy supported our country’s ‘economic engine,’ which played an integral role in distinguishing America’s superpower status.

      Within the past two decades, this middle class has been steadily eroded, resulting in the widening wealth gap and the dismantling of fair labor practices. This is connected to the loss of fair paying jobs, which is directly correlated with a drop in organized labor activity. It is vital we recognize the root of these problems in order to respond appropriately.

    5. 3. Strength of collective bargaining
    6. NPR commentary
      "Wherever there’s a collective voice, we see a stronger workforce,” said Zane. He continued the conversation by emphasizing the power of a collective voice – alluding to the case filed by 17 States Attorneys General against the administration, precisely because there is strength in numbers.

      Additional Insights from BPA
      A historical view of our society and the American economy brings into stark relief the insidious nature of dismantling the strength of the unions. Historically, wage increases that result from unions’ collective bargaining activity ripple down to the private sector. Without public sector increases initiated by unions, wage stagnation in the private sector would prevail. The recent Public Teachers protests in several states, typically led by those without the ‘fair fee’ arrangement, point to this unfair wage discrimination – this ruling now heightens their plight.

    7. 4. Hope for revitalization of labor unions
    8. NPR Recap
      When asked what’s next for unions, Zane delivered a powerful message: “Unions will adjust.” He communicated to Nina his belief that unions will prevail. He highlights the vital role unions play in our society and their perseverance. What will lead the change? According to Zane the “millennial workforce may need a collective voice to face an entirely new set of challenges” and “unions may give them this collective voice.” He goes on to highlight potential benefits including tuition repayment programs or home buying assistance.

      Additional Insights from BPA
      Reversing Abood v. Detroit will nullify 41 years of established labor law and alter the governance of our workforce, potentially invalidating thousands of regulations. Therefore, the damage to the collective voice of millions of hardworking Americans will take not only some adjustment, but a reorganization of will and strength to fight back. However, organized labor is an ancient construct – from stonemasons of medieval cathedral building to the mercantile guilds of the renaissance. The idea of a collective voice has been a part of the work force for over a thousand years, and it is here to stay.

    We have been following Janus v. ASFME since the Court agreed to take the case. If you are interested in learning more, follow the links below to read more BPA coverage of the case.

  • BPA Tells SHRM ‘Deunionization’ to Blame for Wage Stagnation
  • Part I: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor
  • Part II: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor
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    BPA Tells SHRM ‘Deunionization’ to Blame for Wage Stagnation

    Benefits Plans, Third Party Administrators and Security

    This week, the Society for Human Resource Management (SHRM) posed the question: "Where’s the Wage Growth?" Jobs reports show we’re in a tight labor market, which according to economists should mean wage gains. When SHRM’s Stephen Miller reviewed recent pay data, he found that actual wage increases are far from reaching economists’ expectations for the current labor market and turned to the experts for answers.

    BPA Executive Vice President Zane Dalal attributes today’s wage stagnation to the declining of unions. "We've seen stagnation in wages since union membership began to drop in the 1980s," Zane told SHRM.He continued to state that Wednesday’s Supreme Court ruling in Janus v. ASFME – which overturned the long-standing precedent allowing unions to collect fees from nonmembers who benefit from collective bargaining activity (such as in the form of higher wages and better benefits) – may further hinder wage growth. "Nearly every time wages have gone up in the private sector, it was because wages went up in the public sector as a direct result of collective bargaining agreements led by unions," Zane stated.

    Click here to read the full article, “Where's the Wage Growth?” in SHRM’s online edition.

    BPA is disappointed in the Supreme Court’s decision in the Janus case and fear it will have profound ramifications, from both an economic and social standpoint. Unions are designed to give a voice to the American working class and have been the glue holding together the US economy for more than 70 years. This watershed ruling plays into the union-busting trend gaining momentum throughout the country and has the potential to disrupt the future of the American workforce and create economic instability.

    To learn more about BPA’s take on Janus v. ASFME, you can read our recap of Zane’s interview with NPR following the ruling. For background on this case, we encourage you to check out Part I and Part II of our blog series “Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor.”

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    Benefits Plans, Third Party Administrators and Security

    Benefits Plans, Third Party Administrators and Security

    BPA’s CFO, Hormazd Dalal, recently authored the article “Benefit Plans and Cybersecurity Threats,” which will be included in the May edition of Benefits Magazine, the official publication of the International Foundation of Employee Benefit Plans. Within the article there is a brief overview of audits and controls for third party benefits administrators. Here we are taking a deeper dive into the history of these standards and the importance of undergoing audits and exams.

    Regulatory Evolution of Audits and Controls

    For decades the American Institute of Certified Public Accountants (AICPA) has been the country’s leading authority on controls and served as an independent auditor to ensure third parties involved the financial reporting of their customers are fulfilling their obligation to protect sensitive information.

    Since its initial Statement on Auditing Procedure (SAP) in 1939, the AICPA has issued a slew of statements and standards relating to internal controls, impact of information technology on a statement audit, and on service organizations.

      Below are a few relatively recent issuances:

      • Statement on Auditing Standards 70 (SAS 70) 1992: A widely recognized standard that helps service organizations to evaluate their control objectives and activities, including those pertaining to information technology and related processes. The Service Auditors Examination was used as a means of determining whether or not companies were meeting SAS 70 requirements, and was mandatory in generating an SAS Report.
      • SAS 70 audits have run their course, and though some firms still have these standards in place, they have largely been replaced by the recent SSAE 16 and 18.

      • Statement on Standards for Attestation Engagements 16 (SSAE 16), 2011: One of the most important factors of the SSAE process is that it requires an organization to provide a “management assertion of its procedures” in advance of controls and audits being conducted. This ensures that the auditors check the actual efficacy of working protocols and don’t get diverted into a grey area that may fail to provide real results. Do not short change this procedure. It is recommended to subject every internal procedure – no matter how small – to an external audit. If you are undertaking these audits for the first time, it is better to fix a problem than to get a shining report.
      • Introduction of SSAE brought the audit standard in line with the international protocols set in the ISAE 3402. SSAE 16 is the standard used for System and Organization Controls 1 (SOC 1) reports and examinations.

        There are many benefits and improvements to the new standards and, typical of how quickly this area is changing and redefining itself, SSAE 16 introduced in 2011 is already superseded by SSAE 18 – the standard since May 2017.

      • Statement on Standards for Attestation Engagements 18 (SSAE 18), 2017: The SSAE 18 standard expands on the SSAE to require that sub services organizations be identified, described and monitored regularly. Additionally it requires a risk assessment, and in turn, requires regular review of the controls. SSAE 18 is the standard used for System and Organization Controls 2 (SOC 2) reports and examinations.

      In contrast to SOC 1, SOC 2 attestations exercise vigilance over a wider area of controls and over a prescribed period of time to ensure fidelity. When going through the SOC 2 controls audit period, don’t forget to share the goals and aspirations with your workforce. Your staff are the first and last stand in a controlled environment, and therefore in meeting high standards of security.

      Remember to keep the end goal in mind in terms of AICPA standards and reports – don’t consider them publicity ventures. This provides a real way to judge whether the procedures and protocols you believe to be tried and true are actually effective. Adjudicating one’s own systems is a critical endeavor and the overall value of the organization depends upon it.

        Why undergo a SSAE/SOC examination?

        • If your firm is directly involved with transacting monies on behalf of clients, even if indirect, you have a duty to ensure the policies and controls you have in place are effective and secure.
        • It is better to be proactive than reactive. Rather than wait for a client to inquire into the firm’s sureness and security, undergo an external evaluation so you know the firm is properly conducting business – and if there’s a problem, you can get out ahead of it.
        • If you participate in the SOC certification program, you can rest assured in knowing your firm’s controls are under review on an ongoing basis – this is not a one-time event.
        • The SOC certification distinguishes the firm from competitors, as you can confidently assure current and former clients you are upholding your fiduciary responsibilities.

        If you have any questions regarding these audits and controls, please send us an email. Our email address is

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    Benefit Plans and Cybersecurity Threats: Controls Outweigh Technology

    Manage Responsibilities

    The risk of cyberattack strikes fear into organizations around the world...

    The article also can be found here on IFEBP's website.

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    Part II: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor

    Part II: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor

    The Supreme Court’s impending decision in Janus v. AFSCME is top-of-mind for unions, employers with an organized workforce and the third-parties serving unionized workers – including our team at BPA.

    In Part I of this blog series, we provided background information key to understanding the case brought to the Supreme Court on behalf of Mark Janus, a public employee in Illinois. But understanding the history of the case and past precedent is only the first step in understanding the potential impact of the ruling.

    The death of Justice Scalia resulted in a deadlock when the High Court reviewed a similar case involving non-unionized public school teachers in California who argued mandatory union fees violated their First Amendment rights (Friedrichs v. California Teachers Association, 2016). However, the confirmation of President Trump’s conservative Supreme Court nominee, Neil Gorsuch, is largely expected to tip the scale in the Janus case – many experts anticipate Mark Janus will prevail in a 5-4 decision.

    Union Membership Set to Drop if Janus Prevails

    If fair-share fees are not required, union membership is expected to drop as workers become less incentivized to join. This would lead to a drastic decline in union revenue, and therefore result in shrinking budgets. Though the Janus case focuses on organized labor within the public sector, its ripple effects will likely have profound repercussions in the private sector as well – already facing historical lows in terms of membership.

    Unions were created to serve the working class and represent their best interests at the negotiating table with employers. The primary function of unions is to give a voice to workers whose voices would not likely be heard otherwise. Historically, the effects of these talks result in wage increases, improvement in working conditions, and more robust benefits packages, which include healthcare coverage, retirement plans and more.

    The effects of the Janus case are numerous. If the Supreme Court rules in favor of Janus, it will be much harder for the public sector to unionize, recruit new members and retain existing members.

    BPA is here to help our clients navigate the complexities of benefits plans as the regulatory landscape evolves.

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    Part I: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor

    Part I: Supreme Court Ruling in Janus v. AFSCME to Impact Organized Labor

    Labor unions and employers with an organized labor force anxiously await the Supreme Court’s ruling in Janus v. American Federation of State, County and Municipal Employees, set to come down early this summer. If Janus prevails, which many believe to be the likely outcome, this ruling is set to have wide-spread implications for union membership, and therefore collective bargaining at large.

    However, before we dive into the potential impact of the ruling, it is important to understand the premise of the case, past precedent and who may be affected when the ruling comes down.

    For those of you familiar with the case, jump to Part II of this blog series for our analysis of how Janus v. AFSCME Council 31 may impact unions, employers and the American workforce.

    Background on Janus v. AFSCME

    Mark Janus, a child support specialist for the Illinois Department of Healthcare and Family Services who is not a union member, is arguing that mandatory union fees violated his First Amendment rights by requiring him to subsidize political views he does not support.

    Though Janus is not a union member, in Illinois and more than 21 other states, workers are required to pay “fair-share” fees, regardless of membership, as they still reap the benefits of union’s collective bargaining activities. This includes union negotiation on matters such as workplace conditions, pay and benefits. Workers who do not belong to unions are not required to contribute to a union's political lobbying, support of political candidates, or other political activities. However, Janus asserts that in paying these mandatory fees he is being forced to contribute to the union's political activities despite his opposing views, thus violating his First Amendment rights.

    This challenges precedent set in 1977 by the ruling of Abood v. Detroit Board of Education. In this 40-year-old case, the Court ruled in favor of forced dues, stating that workers who benefit from union representation should be required to pay their fair share.

    According to the Grant for Certiorari, Abood has been challenged twice in the past five years and the Court has contemplated whether or not “it is constitutional for a government to force its employees to pay agency fees to an exclusive representative for speaking and contracting with the government over policies that affect their profession.” It goes on to state the underlying question in this case: “Should Abood be overruled and public sector agency fee arrangements declared unconstitutional under the First Amendment?”

      Terms to understand

      • Fair-share fees: Mandatory fees from non-union workers that cover the costs of the union's collective bargaining activities
      • Free-rider: A worker who benefits from a union's collective bargaining agreements, but does not pay union fees
      • Right-to-work: The right for employees to decline union membership

      This case will directly impact public sector unions in right-to-work states, which represent an estimated five million employees in the public sector – ranging from teachers to civil servants.

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    2018 Regulation Part 2: Joint-Employment Ruling, Paid Leave and Overtime

    2018 Regulation Part 2: Health Care Reform on the Horizon

    Employers, union trustees and third party administrators have the best intentions when it comes to managing employee benefits, but many face challenges in terms of staying apprised of the latest legislation in today's complex and fast-paced regulatory landscape. With the new year in full swing, we are here to help guide employers and trustees through the latest developments.

    Here are the top three new developments you should know now to help you navigate the complexities of benefits management in 2018, while also maintaining a sustainable business model.

    Browning-Ferris decision determining the definition of joint-employment status reversed.

    In 2015, the National Labor Relations Board (NLRB or “the Board”) issued a decision in the Browning-Ferris Industries case that upended the long-standing standards of the joint-employment test, throwing many into a tailspin, most notably franchises and employers working with third-party.

    Upon issuance of the decision, the Board mandated that any party with indirect control over an employee was responsible for ensuring proper pay and workplace conditions and could held liable for any wrongdoing, as well as subject to negotiations with labor unions, regardless of whether they played part in such practices. For example, if a franchisee did not pay an employee overtime for hours worked in excess of 40, the corporate franchise could be held liable. The same was true of an employer who used a temp worker, despite not having knowledge of the temp agency's pay practices. This reversed the traditional standard in the joint-employment test, which mandated the entity must have direct control over an employee's workplace conditions and pay practices in order to be deemed an employer.

    However, in December 2017, the Board reinstated the status quo in its 3-2 decision in Hy-Brand Industrial Contractors. Returning to tradition, only entities with direct control over employees pay and workplace conditions may be deemed as “employers.”

    Paid-time off initiatives push forward.

    Federal Initiative

    Included in the new tax plan is a tax credit for companies that offer employees two or more weeks of paid family or medical leave a year. This is available if three requirements are met: 1. The employee must not earn more than $72,000 a year, 2. The company must cover 50 percent or more of employees' earnings, and 3. The employee has been with the company for at least a year. Companies can receive 12.5 percent of the amount paid in tax credits at the 50 percent level, which increases on a sliding scale if the company covers more than 50 percent of employees’ earnings.

    Currently, companies must allow employees up to 12 weeks of unpaid time off under the Family and Medical Leave Act (FMLA). This new program was designed to test the effectiveness of a paid time off approach and is set to end after 2019.

    State legislation

    On January 1, New York joined California, New Jersey and Rhode Island in requiring employers offer employees paid family leave. New York employers in the private sector must now provide up to eight weeks if paid leave to employees who need time off to care for a sick child or bond with a new baby, take care of a close relative with a serious illness or injury, or assist loved ones during a family member's military deployment.

    This is the country's most expansive legislation on family leave. This year, employers must provide up to eight weeks of paid leave, offering at least 50 percent of employees' average earnings, up to a weekly cap of $652. This is part of a multi-tiered phase in program, which, when complete, will require employers offer 12 weeks and pay at least two-thirds of employees' average weekly earnings.

    Washington state employers are required to offer paid sick leave to non-exempt employees covered by state minimum wage laws, as of January 1. Washington employees, including seasonal and part-time workers, are entitled to one hour of paid sick leave for every 40 worked. This must be provided to employees beginning on their 90th calendar day worked, and employers must allow employees to carry over up to 40 hours of unused leave into the next calendar year.

    As of February 11, many Maryland employers are now required to provide employees with paid sick leave. Employers with 15 or more employees must offer one hour of paid sick leave for every 30 worked – employers have the option of frontloading 40 hours at the beginning of the year or offering on an accrual basis. Maryland employers with fewer than 15 employees must provide the same amount of unpaid leave.

    In addition to state regulation, many municipalities around the country have enacted similar laws. Employers, unions and TPAs should review local and state legislation to ensure compliance.

    Department of Labor halts advancement of overtime rule, but revisions to current threshold expected in late-2018.

    Days before a drastic increase to the overtime pay requirement was set to take effect, a Texas judge hit the brakes and delayed the rule's December 1, 2016 implementation. The rule would have significantly increased the number of employees eligible for overtime pay by requiring employees make a minimum of $47,476 annually to be exempt from overtime, up from the current $23,660.

    The DOL originally planned to battle out all objections in court, but decided to drop its defense in 2017. However, a new and revised proposal to increase the current salary threshold is expected in October of this year, according to the DOL's fall regulatory agenda.

    Regulations impacting the benefits landscape are rapidly evolving, and those responsible for employee benefits programs must keep up or risk a cumbersome legal battle. When designing benefits packages, be sure to always research current and upcoming regulations on the federal, state and local levels.

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    2018 Regulation Part 1: Health Care Reform on the Horizon

    2018 Regulation Part 1: Health Care Reform on the Horizon

    Trump Administration Targets Obama-Era Regs

    It's no secret that the Trump administration opposes regulatory overreach. Completing a year in office, President Trump has already made good on his campaign pledge to dismantle hundreds of Obama-era regulations. As he often states, President Trump believes in shrinking the government's footprint while allowing more latitude for the private sector to organically boost the American business engine. Toward this end, his administration has halted or delayed a slew of regulations across industries – from energy and environmental protection to financial services and health care.

    Trump Administration Pushes for Sea of Change in Health Care, Lawmakers Divided

    Important areas impacted by the Administration’s deregulatory trend include lesser known rules as well as signature legislative changes under the prior administration, including the Affordable Care Act (ACA).

    On the health care front, Trump has proposed scrapping government-funded, cost-sharing reduction (CSR) payments to insurance companies. These payments help reduce employee insurance co-pays and deductibles for low-to-moderate income individuals. Nearly 60 percent of benefits plan enrollees qualified for CSRs this year, according to estimates from the Department of Health and Human Services.

    Eliminating these subsidies would significantly change the insurance landscape in terms of carriers' ability to compete in the ACA marketplace and workers’ access to coverage. Not only do critics contend the move would increase ACA premiums by as much as 20 percent, but some says it also would cause rates to soar, since many insurers plan to hike rates to compensate for eliminated subsidies. On the other hand, the White House views CSRs as an unlawful means of propping up the "broken" insurance industry with taxpayer dollars.

    Compromise Proposed

    Lawmakers from both parties have pushed back on a wholesale repeal of the payments amid lawsuits filed by state attorneys general and other involved parties — legal wrangling is expected to continue for some time. However, bipartisan constituents are poised to bring relief on the CSR issue sooner rather than later in order to help stabilize health insurance markets now rattled by the controversy.

    In late October, a compromise was proposed in the form of The Bipartisan Health Care Stabilization Act of 2017. The Congressional Budget Office (CBO) estimates the bill could cut the federal deficit by $3.8 billion in the coming decade. The bill protects CSR subsidies through 2019 and paves the way for a broader tier of plans exempt from the ACA requirements, such as pooled risk plans through associations of small employers, as well as greater use of short-term and "catastrophic coverage" plans.

    New Tax Bill Repeals ACA Individual Mandate

    President Trump signed the GOP tax bill into law before breaking for the holidays on December 22. The tax bill’s most significant regulatory change in terms of benefits is the repeal of the ACA’s individual mandate, meaning individuals will no longer be penalized if they choose not to have insurance. However, the tax bill does not repeal the employer mandate, which requires employers pay an assessed taxable penalty under the ACA for not providing fair market place health coverage to their workforce (more than 50 employees), thus spelling trouble for employers.

    The intent of the individual mandate was to increase the number of healthy individuals in the insurance marketplace, with the idea that the healthy could subsidize sick. Repealing the individual mandate without repealing the employer mandate likely will open a can of warms and cause trouble for employers. If healthy individuals opt out of coverage without penalty, employer premiums are likely to spike, which is not a sustainable option.

    With this in mind, we expect repeal of the employer mandate is not far behind. However, before making any changes to health plans, plan sponsors should keep in mind that the enforcement of the change may not take immediate effect. And further, it is important to look into local and state regulations prior to making modifications. It is very likely that states which a form of Exchanges were successfully put in operation, especially California, will close the gap to keep some form of Covered California functioning and viable.

    Additionally, it is important to remember that what is done by one administration can be undone by successive acts of Congress. Only time will tell what version of the health care plan will remain.

    The deregulatory trend under the Trump administration has myriad implications for benefits plans. Plan administrators are watching these developments closely to help keep benefits plan professionals, union representatives and workers informed.

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    Integrated Web-Based Content Facilitates Plan Participation


    by Lance Phillips | LinkedIn

    New technology-enabled enrollment systems are alleviating the administrative burden on employers while streamlining the election process for employees. Above and beyond these benefits, automated enrollment solutions help educate employees about the benefits to which they are entitled, and make the process less stressful. Doing so can go a long way to boosting benefits plan participation.

    A growing number of employers and plan administrators are investing in automated enrollment solutions to deliver a more engaging benefits plan service and support model. In the last five years, new technology-powered solutions have gained increased adoption. The more advanced solutions are tailored to the employer and its workforce. For instance, proprietary and carrier-provided auto-enrollment systems can be populated with employee enrollment data and plan selections.

    In the absence of these new enrollment platforms, employees easily can be overwhelmed in the benefits decision-making process given the plethora of available insurance and financial products, according to a 2008 study by Yale University. Employees also are often reluctant to go online to buy, particularly in the absence of a source of answers to questions they may have.

    An Educated Consumer: Your Best Benefits Plan Consumer

    Automated enrollment platforms make it easier to educate employees about the benefits available to them. For instance, they explain the benefits products offered by the employer in plain English. Especially valuable during open-enrollment times, automated platforms deliver answers to questions more efficiently than an employer could offer on a one-to-one basis. Indeed, technology eases the enrollment process by giving employees access to benefits information at their fingertips.

    Some carriers offer their rates, underwriting guidelines and benefits options online while employer-tailored health and welfare plan benefits instantly can be reviewed. Auto-enrollment can also encourage investment plan participation by delivering web-based access to information and automated re-enrollment reminders for plans that are selected for a specific workforce.

    To support employees who have questions about their unique circumstances, many employers supplement their online knowledge base with access to a live help desk or integrated chat tools. Such platforms can provide training and technical support on a range of topics, such as eligibility rules that can otherwise be dauntingly complex. Online communications can be simplified and personalized, enabling employers to interact with employees to promote loyalty and engagement.

    Instead of delivering generic benefits information to employees, companies can set up their platforms to deliver customized communications, including reminders employees can put on their calendars with the push of a button, automatically nudging them when open enrollment is approaching.

    Employers can also leverage automated enrollment systems to become "choice architects" — a term coined in the Yale study — effectively reducing the deluge of benefits options to a handful of those that match their employee needs and demographic profile. Science has shown that people can be paralyzed when presented with too many options. Enrollment platforms get around this problem by helping to simplify and streamline benefits plan decision-making for employees.

    Mining Data to Improve Employer Benefits Plans

    In addition, enrollment technologies gather data that allow employers to analyze which employees enroll in which benefits based on variables such as age, income, gender and location. Data tracking help reveal meaningful employee patterns. A graphical "heat map" based on such patterns enables employers to design and present plan choices that are suitable to their workforce.

    Employees appreciate other advantages that auto-enrollment solutions provide. According to a 2013 study by employee benefits products and services provider Unum, a lack of knowledge and awareness can curtail employee access to vital benefits like disability insurance; and fully 85 percent of respondents believe employers should automatically enroll new employees in disability insurance to help avoid inadvertent disruption or lack of such benefits, allowing them to opt out if they choose.

    Given advances in benefits plan technology, employers of all sizes have a range of options that are facilitating and improving enrollment benefits plan administration. By easing consumer decision-making, employers have more sophisticated tools to increase benefits plan participation. Enrollment technologies are a new means of encouraging employees to consider the benefits options that are right for their families while removing stress and complexity from the decision-making process.

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    Enrollment Technologies 101


    by Lance Phillips | LinkedIn

    Technology powered enrollment platforms are replacing manual methods to make it more efficient for businesses to enroll employees in retirement, health and welfare benefits plans. Along with other advantages, we have seen a drastic uptick in employee enrollment technologies used to facilitate employee participation in benefit plans.

    For instance, many plan sponsors are electing to shift from manual enrollment to auto-enrollment, meaning employees are automatically re-enrolled into coverage without needing to fill out any additional paperwork. However, auto-enrollment does come with an opt-out provision.

    Surveys show that employees increasingly trust employers to offer appropriate plan options for them, thus they are more open to auto-enrollment than ever before. In fact, according to a recent study conducted by the Consumer Federation of America on long term disability insurance, 85 percent of disability beneficiaries agreed that employers should auto-enroll all new employees in disability insurance. Employees understand that auto enrollment helps them avoid inadvertent disruption of vital benefits like disability insurance.

    These interrelated trends reverse the longstanding and purportedly less efficient alternative of manual employee elections, such as the selection of health care plans during open enrollment. Additionally, auto-enrollment may encourage plan participants to invest early and more often. Web-based technologies facilitate employees' retirement planning by delivering integrated investment plan information – specific to the employee – along with automated re-enrollment reminders.

    Technology not only eases the enrollment process for employees by ensuring they have all needed information at their fingertips, but it also benefits employers. Transitioning from pen and paper to electronic processes reduces the administrative burden on employers, while increasing accuracy and transparency during the enrollment process.

      Auto-Enrollment Benefits at a Glance

      • Expedites the enrollment process through use of technology, offloading the traditional administrative burdens
      • 24x7 connectivity enables fluid communication between employees and human resource departments, through tools such as autoresponders
      • Empowers data tracking and mining of information so employers can identify meaningful employee patterns
      • Improves quality of support through employer-specific services, maintenance and reporting
      • Increases processing accuracy via standardized rule-based processes and forms
      • Allows for secure online data imports and exports, providing a richer user experience

      As auto-enrollment continues to pick up speed, we are seeing the debut of more and more technologies focused on automation and employee engagement. Some systems even offer a tailored approach based on the needs of individual firms and their employees – including setting up carrier relationships with enrollment data, designing plan selections and integrating this data with enrollment platforms. Some systems even go a step further in offering ancillary web-based services connecting carriers to the platform, making for an even more robust employee experience.

      For instance, some carriers offer their rates, underwriting guidelines and benefits options online, reducing the need for employees to turn elsewhere to seek answers to questions about plans offered.

      Additionally, these tech-centric platforms can provide training and technical support on a range of topics, such as eligibility rules that can be complex and subject to change. Online communications can be personalized to employees, enabling employers to interact with their workforce in ways that promote loyalty, serving as tangible evidence that a business is invested in the wellbeing of its employees beyond the workday.

      An auto-enrollment system enables firms and their employees to derive all of these benefits without disrupting day-to-day operations. Added benefits offered on many of these systems include: system trainings; standardized enrollment forms and communications templates, such as email autoresponders; and best practices, tips and tools geared toward promoting user satisfaction.

      Enrolling in benefits plans can be stressful for employees – especially knowing that health care deductibles may soon be on the rise. Many employers are shifting from full-coverage to high-deductible plans, with employees absorbing more out-of-pocket expenses than ever before. The multitude of plan options and continuous changes combined with the transfer of more costs to employees can be overwhelming.

      Implementing automated-enrollment solutions demonstrates to the workforce that employers are actively working to remove some of that stress by prioritizing employees’ needs. Plan sponsors who adopt technology powered benefits platforms not only can facilitate and ease the plan selection process for employees, but they also have the ability to empower employee engagement at unprecedented rates.

      If you are interested in learning more on the topic, we will take a deeper dive into enrollment technologies in our next blog post. Stay tuned!

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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.

    Read the Full Article

    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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