25 Years Later: Celebrating PCI’s Mission to Improve the Financial Security of American Workers

This year, Pension Consultants, Inc. (PCI) is celebrating 25 years in business! It’s been 25 years of powerful innovation, commitment, and hard work to succeed in our mission – improving the financial security of American workers. This has been our goal from the beginning, all while we continue to strive for excellence and provide Good Plans for our clients. Doing our job well for the fiduciary committees we serve affects hundreds of thousands of individuals and their livelihoods, a responsibility we do not take lightly. Through our industry changes, through our business changes, and through the world’s changes, we continue to focus on our mission, and drive results to improve the financial future of those we touch.

Let’s take a moment to look back at PCI’s history, so that we can understand where we are now, and where our future will lead us.

The Beginning – The State of it All

The year is 1994, and the retirement plan advisory industry was still in what we like to jokingly call the “Wild Wild West.” The Tax Reform Act of 1986, which established the first comprehensive 401(k) rules, was still in its infancy. The 1996 96-1 Interpretive Bulletin was just a twinkle in the Department of Labor’s (DOL) eye, and the term “fiduciary” didn’t pack the punch we know today.

Brian Allen, Founder and Chairman of PCI, saw disconnects between what the established industry rules and regulations were and how employer-sponsored retirement plans were being managed. He also saw a lack of transparency and accountability from advisers to their clients. With those ideas at the forefront of his mind, he set out to create a transparent, fair business model that would make a difference in the industry and bring accountability to those he served. And so, PCI was founded.

The Nineties – We’re Still Figuring It Out

Though said jokingly, the retirement plan advisory industry was still something like the Wild Wild West. Although rules, regulations, and compliance standards for 401(k)s were established, few were paying attention or understood the implications that came with them. Fiduciaries, who were unknowingly carrying the most liability, did not have resources available to them to understand the weight of the role, or provide guidance in how to execute it. In fact, at this time, fiduciary liability was almost laughable, with few industry experts taking it seriously.

Brian, however, was not laughing. He was acting. Alongside him was Chris Thixton, QPA, C(k)P®, who was taking on challenges for clients and the company. Chris was in the marketplace, providing critical observations and ideas that shaped PCI’s direction. They spent the first several years of our business keeping plans compliant and employers out of trouble. They also considered who was footing the bill, the participants. Advisers of the time were generally not concerned about who was paying, as everything was growing and everyone in the industry was making money.

Fiduciaries were happy because participants were getting advice and education about being in a retirement plan. Advisers were happy because they were getting paid excessively for unclear services. There was little transparency, and few ways for fiduciaries to know whether they were doing what was in the best interest of participants.

There was a large hole in the system, and the DOL’s radar had not yet locked onto it. PCI, with Brian’s and Chris’ driving force, worked tirelessly to fill this gap. As an adviser, Brian said, “No, we’re going to do it right and do the right thing.” He took it even further, establishing a fee based on assets, rejecting commissions and gifts, and set a maximum “capped” fee for PCI’s services. We provided clear, detailed service contracts and reports. Additionally, all PCI employees were, as they are today, salaried. These were very uncommon characteristics at the time. Advisers were still treating corporate plans like individual plans, while services were purposely lacking in both details and clarity.

 

 

The 2000s – The Burst and Its Effect

Then the dotcom bubble burst, and everyone stopped making money. This was the beginning of a new era of plan advising. The holes in the industry were becoming more prominent, and regulatory bodies started to really zero in on where the money was going. The approach of overcharging participants was not cutting it anymore. The song that advisers were singing was starting to change. This helped lead the industry to consider and implement compliance standards. For PCI’s clients, there wasn’t a shift. Our business model was already constructed that way!

In 2006, Jerry Schlicter of St. Louis law firm Schlichter Bogard & Denton, nicknamed “the 401(k) Lone Ranger,” filed 11 lawsuits for excessive fees and breach of fiduciary liability. This was the first significant event to bring nationwide awareness to how and where fees were being charged to plans and participants. The lawsuits started a chain of events that gave fiduciaries a sense of urgency to pay attention. The word “fiduciary” started to pack its intended punch, and many advisers were unprepared.

In 2017, the DOL Fiduciary Rule was introduced, which would force fiduciaries to act in the best interest of plan participants, including advisers acting in a fiduciary capacity. The Fiduciary Rule was one of the most hotly debated topics in finance, with many brokers and investment firms doing all they could to keep it from being enacted. However, once again the fiduciaries that work with PCI slept easily. PCI was already living the Fiduciary Rule and always has been – we were established that way! Thinking ahead and having a strong vision of the future for retirees has been the foundation of PCI for our entire 25 years.

 

Today – Having a Compliant Plan is Not Enough

There have been significant improvements in plan advising because of the events of the last 25 years. We have seen an alignment with compliance and how plans are being managed. The industry is buckling down and finally starting to follow the guidelines laid out years ago. However, no one is asking the very simple question, “Do I oversee a Good Plan?” One might assume the answer is yes – that simply having a compliant plan, and offering retirement plan benefits, equals overseeing a Good Plan, right? Wrong.

Offering a compliant plan and offering a Good Plan are not synonymous. Now that fiduciaries have a wealth of resources available to them about their liability and meeting regulatory standards, it’s time to focus on the areas of a plan that matter most to participants. At PCI, we believe in a Good Plan. We define that as a plan where the investment lineup outperforms, the fees paid by the plan are low, and employees are on track to retire.

PCI is always looking towards the future and working to stay ahead of the curve. We offer a disciplined and exceptional solution with performance-driven plan management and transparent accountability. We provide the fiduciaries we serve with the opportunity to bring their employees and companies a Good Plan. For us, that means rewarding retirement and succeeding in our mission to improve the financial security of American workers. Many years later, Cody Mendenhall, CFP®, PCI’s Executive Director, continues to carry forward PCI’s original philosophies. They permeate every facet of our business, from how we serve our clients, to our employees, and most importantly, to American workers. We look forward to continuing our work into the next 25 years!

Does the retirement plan you oversee achieve meaningful results for your employees?

 

Download Fiduciary’s Intro to a Good Plan. A performance-driven retirement plan focuses on results as the way to improve your employees’ financial security.

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How will the DOL’s Proposed Fiduciary Rule Change Affect You as a Plan Sponsor?

In order to understand how the DOL’s proposed redefinition of the term “fiduciary” under ERISA will affect you as a plan sponsor, you must first understand the relationship you have with the current plan service providers.  Continue reading

A Guide to Fiduciary Prudence, Part 4: Establishing and Operating a Committee Meeting To Ensure ERISA Compliance

In continuation of our fiduciary prudence series, the next issue of importance in complying with one’s duties as a plan fiduciary should be establishing and maintaining a retirement plan committee. The following questions will be answered in this blog post:

1. How can a retirement plan committee help manage the fiduciary oversight of a plan?
2. Who makes a good retirement plan committee member?
3. What should a committee meeting agenda be comprised of and how should committee meetings be properly memorialized?

So let the fiduciary governance discussions begin!

How can a Retirement Plan Committee help manage the fiduciary oversight of the plan?

As you may know, serving as a plan fiduciary can be a daunting task, one with a lot of risks and requirements. In fact, there are so many requirements and such a concern of risk, that one common way to reduce the fiduciary burden on one individual is by spreading the wealth of duties to other qualified individuals through the formation of a retirement plan committee.Continue reading

Pension Consultants’ Clients Review Its Services

To support our 6th guiding principle “Get Better. Get Better. Get Better.” we listened to the “voice of the client” in two ways in 2012: a focus group and an online survey. The focus group was conducted in May with a small group of clients that represented a broad spectrum of our client population: long-term and brand new clients, public and private companies, over $60 million and under $10 million in plan asset size, plan administrators and plan fiduciaries. In October, we sent an online survey to all of our plan sponsor clients. What they shared with us was reaffirming to our business model and guiding principles and it provided valuable insight into what our clients’ needs are so that we can continue to provide valuable services with the utmost professionalism. Here are the results:Continue reading

How Thought Leadership Leads to Innovation in the Retirement Planning Industry

It is part of the mission of Pension Consultants to be a thought leader in the retirement planning industry.  In this writing, I’d like to discuss what we mean by the phrase, “thought leader”, and also explain why we believe thought leadership is important to our clients.

To lead the thoughts of our industry, our consultants and analysts must be at the forefront of ideas, trends, opportunities and obstacles in their respective discipline.   To quote Wayne Gretzky, arguably the greatest hockey player ever, “A good hockey player playsContinue reading

Regulations bring transparency – and that’s a good thing in the retirement industry

To be opaque is to be in opposition to free enterprise.  Why is it then that transparency is so often abandoned by the marketplace?

Consumers of all sorts need transparency to make good decisions; however, even with perfect transparency, not all will.  Without it though, consumers are deprived of the resources needed to decide which products and services serve their best interest.

The retirement plan community is not immune from these natural forces.  In fact, our industry, our chosen profession, is awash with examples of blurring meaningful information from those who are our consumers.  Plan sponsors and fiduciaries have often had trouble understandingContinue reading

An ERISA Foundation Q&A Part 2

After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 2” of what he had to say.

Question: Can you give me some examples of what a settlor function is?

Chase:  A settlor function is one that is distinct from a fiduciary function. In other words, it’s a decision or a function that’s performed “above the plan,” and is not subject to fiduciary scrutiny because it’s a decision or an act that’s being made while the employer and the individuals who represent the employer are wearing their corporate hats. Some settler function examples include the decision to execute a merger, sell the company or acquire another company. Even though that decision is going to profoundly impact the retirement plan, the decision is still insulated from a business fiduciary standard.

So if a merger or acquisition has an incidental adverse impact to plan participants, plan participants would not be able to bring a cause of action against the employer or the plan sponsor for that merger or business transaction because the act was performed as a settlor, not as a fiduciary.

Other examples of settlor functions would be tweaking the design of the plan, removing certain benefits and features, adding a Roth feature and eliminating a match. As long as certain requirements are met because of their settlor functions, there’s not going to be fiduciary exposure for those actions.

Question:   How do I know if my trustee is directed or discretionary?

Chase:  This should be a relatively easy issue to determine. The first place to look is in the Continue reading

An ERISA Foundation Q&A Part 1

After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 1” of what he had to say.

Question: From the webinar, I learned that employees’ benefits plan provided by the state, such as a state-funded community college, are exempt from ERISA. But what about the 403(b) plans that are offered as an alternative to the employees, do they have to follow the ERISA standards?

Chase:  That’s a good question, and the short answer is, no. The 403(b) plans that are sponsored by governmental employers are exempt from ERISA’s requirements. Some types of 403(b) plans are subject to ERISA. The determining factor in whether or not ERISA is going to apply to one of these special types of plans, such as a 403(b) plan, hinges on the status of the employer. Two types of employers can sponsor a 403(b) plan, governmental plans and certain private organizations that qualify as 501(c)(3)s, charitable organizations. The charitable organizations that are private and sponsor a 403(b) plan have a choice whether or not they want the plan to be subject to ERISA.

There is an ERISA safe harbor under the 403(b) rules that allow charities to exempt their plans from ERISA if they meet a certain set of requirements. If they don’t meet those requirements, then the plan will be subject to ERISA.

Going back to the original question, if it’s clearly determined that the employer is a governmental employer, you don’t even need to look at the ERISA safe harbor for 403(b) plans. All of the plans will be exempt from ERISA by virtue of the employer’s governmental status.

Question: How do I know who to be designated a named fiduciary? What kind of guidance can you provide on that?

Chase: Who should be the named fiduciary is a different question than from who is the named fiduciary. I’ll first address how you know who the named fiduciary is under the plan. The first place to look is the plan document. Most likely in the definitional section or in the plan administration section you’ll see the employer named as the named fiduciary. Now, that’s a pretty broad, not very helpful or specific provision if it’s just the employer name. The next place to look would be at board resolution to see who the employer, as a named fiduciary, has actually delegated specific responsibilities of plan administration.

The question “who should be the fiduciary in a plan?” is going to vary depending on the size and complexity of the plan and depending on the size and complexity of the employer. In a small plan sponsored by a relatively small employer, it may be sufficient to have a single individual who’s the benefits director or who has responsibility for human resource duties to be named as the plan administrator.

I always tend to think it’s a better idea to Continue reading

Brian Allen talks about Pension Consultants

Hear our president, Brian Allen, talk about Pension Consultants in this video produced about us as a recent finalist of the 2011 W. Curtis Strube Small Business Award. The Springfield Chamber of Commerce selects the Strube Small Business Award finalist and winner based on factors such as their staying power, response to adversity, innovative products or services, business philosophy and contributions to the community.

Pension Consultants, Inc. is a Registered Investment Advisor.
Securities offered through Securities Service Network, Inc. Member FINRA/SIPC.

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.

Are you worried about compliance reviews?

People don’t always act rationally. You’ve, no doubt, experienced this reality many times in life. It will come as no surprise then to learn that retirement plan governance is not exempt from this proverb.

A recently released survey from Towers Watson (and reported on planadviser.com) says that 80% of defined benefit and defined contribution plan sponsors identified regulatory compliance as a top risk over the next two years; however, only one in four (26%) conduct regular compliance reviews.

Proper plan administration is so complex that it is virtually impossible to avoid every regulatory misstep. On-going compliance reviews are essential to identifying mistakes and correcting them timely. Conducting compliance reviews require time, energy and focus. We all struggle to find time, are usually tired as a result and therefore lose focus. So it’s really no wonder that so many plan sponsors irrationally worry about something that they do nothing about.

For those charged with running retirement plans worth millions and millions of dollars and hundreds or thousands of employees, it simply isn’t a risk worth taking. For your sake, your company’s sake, and the sake of all of the employees, take the time and commit to a regular compliance review. Seeking compliance guidance can be an enormous benefit in preparing for reviews.

It isn’t particularly rational to be seriously concerned about something and then fail to address it.

But, you knew that already.

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.