How to Sell Executive Benefits Part 10: Third Party Administration Nonqualified retirement benefits are benefits that are offered to supplement what as qualified retirement benefits (i.e., 401(k) plans, profit-sharing plans, qualified pension plans, etc.). The purpose of offering employers recruit, retain, and reward the talented executives needed to make their Party Administrator (TPA)? A TPA is an organization that typically provides the following services with regard to a benefit plan: The greatest differences are in the areas of ERISA reporting and disclosure, and funding requirements. ● Record keeping of benefits to be provided to plan participants  Why would an employer ● Financial reporting (accounting) of plan costs and liabilities, including balance sheet, P&L and cash flow effect There are a number of reasons: ● Reporting (if necessary) to regulatory authorities, such as the IRS, DOL, and SEC  What are the differences The similarities outnumber the differences today. Both types of plans require the calculating and monitoring of liabilities, FASB accounting adherence, and For agent use only. Not for public distribution. Their knowledge, along with their sophisticated computer systems, can provide a high level of assurance to a plan sponsor that their plan will remain in compliance. Administration between qualified and non-qualified plan administration? Most importantly, Section 409A added a strict requirement of regulatory compliance, with severe financial penalties assessed on plan participants for violations. It is imperative that a non-qualified plan be monitored to avoid potential violation. Skilled non-qualified plan TPAs are well versed in the provisions of 409A, along with its 300 plus pages of regulations. Enrollment ● Regulatory Compliance Monitoring. hire a TPA to administer their non-qualified plan(s)? Underwriting businesses a success.  Howard, what is a Third Product these benefits is to help The Interview communication to participants on their benefits. 409A, a section of the IRS Code with regulations finalized in April of 2007, established compliance and tax rules that are applicable to non-qualified deferred compensation plans. I believe 409A has placed these non-qualified plans on an equal footing with qualified plans with regard to the importance of compliance. Case Design employers are allowed to offer This chapter asks the important question of how to administer executive benefit plans. An expert in this topic, Howard Stern from The Pangburn Companies, joins us to answer those questions. Marketing At the VoyaTM Life Companies, Executive Benefits refers to supplemental retirement benefits that employers can make available to their most valued employees and executives. Secondly, the particular plan design may require a TPA. One of the most popular non-qualified plan designs is the “401(k) Look-Alike” plan. These plans typically require daily valuation and 401(k) flexibility, such as transfer and re-balancing capabilities. Many TPAs possess software systems that can perform these functions.  Can you provide a general idea Lastly, many TPAs enjoy expertise in FASB accounting, FICA, payroll, and W2 treatment for non-qualified plans, where such expertise may not be available in house. Our charges consist of a one time set up fee, and an annual “per participant” fee paid by the plan sponsor. The one time set-up fee ranges from $1,000 to $2,500, depending upon plan design. The set- up fee covers creation, and/or review of a compliant plan document for a new plan, or review of an existing document for a take over plan, plan enrollment forms, Board Resolutions, preparation of the DOL letter, plan summaries for participants, and the creation of the web site for plan participants, plan sponsors, and advisers. The annual “per participant” fee ranges from $150 to $350, depending upon plan design. Yes. an employer? We also prepare compliant plan documents and forms for review by the client’s attorney. For agent use only. Not for public distribution. If a Plan Sponsor is dealing with a simple plan design, such as Traditional Executive Bonus, or Key Person Insurance, then the administration could probably be managed more cost effectively in house. However, for the more sophisticated designs such as “401(k) LookAlike” plans, Defined Contribution or Defined Benefit SERP, Split Dollar Plans with Post Retirement Benefits, etc., a TPA should be seriously considered for many of the reasons stated above, and below.  At what time should an employer get a TPA involved? (i.e. early in the plan design or later on.) We recommend being contacted early in the process. As stated above, we offer our consulting services for a fee to plan sponsors in appropriate plan design to satisfy company objectives. Our database enables us to suggest plan designs that companies of similar structure have put in place for their key executives. Administration We provide services for a large variety of non-qualified plans types. As a few examples, we administer Defined Contribution SERP, Defined Benefit SERP, 401(k) LookAlike Plans, Phantom Stock and SAR Plans, 457(f) Plans for tax-exempt organizations, and Non- Loan Regime Split Dollar Plans and Executive Bonus Plans. For daily valued plans such as the 401(k) Look-Alike plans, we maintain a rich and robust web platform, where participants may look at their account values, transfer, rebalance, change investment choices, and basically perform any action that they would find on a qualified 401(k) platform. In addition, our administrative services include periodic detailed accounting reports to the plan sponsor for benefit liabilities and life insurance, based upon FASB rules, plan cash flows, asset/liability comparisons, and a variety of additional reports. The outsourcing of administration and recordkeeping to a TPA for any benefit plan is ultimately a question resolved by cost- benefit analysis and/or the availability of in-house expertise. Enrollment  What other services do you offer TPA makes most sense? And are there situations where it makes less sense? Underwriting Underwriting We at The Pangburn Companies provide consulting services to financial professionals who represent an Insurance Carrier that participates in our “Advanced Carrier Services Program” (APS Program) and the Voya Life Companies are among them. We will work with a financial professional and his or her client on designing the plan to meet their objectives. We will participate in conference calls; provide web casts and presentations from our offices when appropriate. We are available to consult with regard to plan design, and plan alternatives.  Are there situations where hiring a Product One of the reasons for the popularity of non-qualified plans is flexibility in design – being able to design a plan to meet the specific objectives of the Plan Sponsor and individual participants. Although regulations have placed some limitations on plan design, there remains enough room for creativity. Case Design designing and selling a case? We are a “fee for services only” organization. We do not share in any insurance product commission, or any fees associated with any asset. Marketing  Can a TPA help in the process of of costs?  What do you see on the horizon? Product Underwriting Underwriting Howard holds a Bachelor of Science degree from the City University of New York as well as a Master of Science degree from New York University in Applied Mathematics and Statistics. Additionally, he is a Fellow of the Society of Actuaries (FSA) and a member of the American Academy of Actuaries. Case Design Howard D. Stern joined The Pangburn Company in early 2006 after serving as the Senior Vice President of Product Development at MAGNER.NETWORK. Howard was formerly with SunGard Insurance Systems beginning in 2000. Howard came to Sungard with extensive experience in technical and managerial areas of the life insurance industry, having held key positions with several large insurance companies, including VP and Chief Actuary of Manhattan Life Insurance Company. In 1985, Howard formed Howard Stern & Associates, Inc. a financial services organization specializing in the design, implementation, and administration of non-qualified employee benefit plans. Beginning in 1996, Howard assumed the Vice Presidency, as well as a seat on the board of directors, of American Financial Systems, Inc. There he served as an actuarial consultant for non-qualified proposal and administrative software and non-qualified case design. Marketing Non-qualified plans continue to be as popular today as they have been in the past. However, they have become more complex, and more important in attracting and/or retaining key personnel. The compliance, reporting, disclosure and accounting issues have focused attention on non-qualified plans and mandated that clients play more active roles in their design, implementation and administration. Design, funding and administration require a higher than ever level of both knowledge and technology. Failure to comply and the accompanying financial penalty, on what could be an unwitting participant, underscore the importance of these issues. That said, a TPA could provide invaluable assistance to a financial professional and his or her client, as a member of the consulting team. Howard Stern, FSA Sr. Vice President and Actuary Howard is responsible for advanced case consultation, consultation on software design, and actuarial support. Enrollment The information and opinions presented by Mr. Stern in this interview are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions do not necessarily reflect those of Voya or its affiliates. Voya is not affiliated with The Pangburn Companies. Administration For agent use only. Not for public distribution. Making it Easier  Executive Benefits Producer Guide (#140181) Marketing The Voya Life Companies have created a platform to help make Executive Benefits easier for you. To learn more, try any of the following materials:• Buy An overview of Executive Benefits and the different plan designs that can be used to help employers recruit, retain, and reward key employees and executives. An overview of Executive Benefits and plan designs that you can give to clients.  Executive Benefits Wizard Producer Guide (#139991) Case Design  Executive Benefits: Recruit, Retain and Reward Your Top Talent Consumer Brochure (#140220) A tool that producers can use to help select an Executive Benefits solution for their clients. Product To find these as well as additional materials and information, go to the Executive Benefits page on Voya for Professionals, the Executive Benefits microsite at VoyaExecutiveBenefits.com or call Advanced Sales at 866-464-7355, Option 4. Underwriting Underwriting Enrollment 153116 09/01/2014 Voya.com Administration The Voya Life Companies and their agents and representatives do not give tax or legal or accounting advice. This information is general in nature and not comprehensive, the applicable laws change frequently and the strategies suggested may not be suitable for everyone. Clients should seek advice from their tax and legal advisors regarding their individual situation. These materials are not intended to and cannot be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matter addressed in this document. The taxpayer should seek advice from an independent tax advisor. Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY), and Security Life of Denver Insurance Company (Denver, CO). Variable universal life insurance products are distributed by Voya America Equities, Inc. Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted and its products issued. All are members of the Voya™ family of companies. For agent use only. 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