Bridging The Retirement Plan ‘Coverage Gap’ For Small Business Employees
HARRISON, New York, June 23, 2014 -- Transamerica's Retirement Plan Exchange is taking direct aim at America's retirement plan "coverage gap" by offering small businesses an alternative that significantly reduces the administrative burdens and fiduciary liabilities associated with traditional plans.
A new white paper from Transamerica Retirement Solutions, "Minimizing an Employer's Fiduciary Risk Through the Retirement Plan Exchange", allows small business employers to compare and contrast the features in the Retirement Plan Exchange with traditional retirement plans. The white paper, prepared by The Wagner Law Group on behalf of Transamerica Retirement Solutions, concludes that the Retirement Plan Exchange significantly reduces and minimizes the burden of an employer's fiduciary responsibilities compared with traditional retirement plans.
Over one-quarter of small businesses currently do not offer a 401(k) or similar plan to their employees. "Expanding retirement plan coverage is an important step in improving American workers' ability to retire securely, and the benefits of the Retirement Plan Exchange can help," said Jim Kais, Senior Vice President, Defined Benefit and Special Markets Sales at Transamerica Retirement Solutions.
"In traditional arrangements, an employer establishes its own plan and assumes primary responsibility for the management and administration of the plan," said Kais. "With the Retirement Plan Exchange, participating employers receive help developing an investment policy statement and lineup, assistance with monitoring of investments, as well as ongoing reporting support. Outside of the Retirement Plan Exchange, these duties fall directly on the employer."
The fiduciary protection provided through the Retirement Plan Exchange is far-reaching. The employer delegates primary responsibility for managing certain aspects of the retirement plan operation to the administrative fiduciary, which serves as the plan administrator 3(16), along with an investment manager 3(38) or 3(21) to manage the investment menu offered to plan participants.
There are also cost savings on audit fees, filing fees, document preparation, and time/labor advantages. The Retirement Plan Exchange handles important tasks like Form 5500 filing, non-discrimination testing, contribution limits tracking, distribution processing, and hardship requests.
Additionally, the Retirement Plan Exchange helps plan participants prepare for a secure retirement by auto-enrolling eligible workers at a six percent contribution rate with a two percent auto increase in each of the next two years, providing over time the ability to achieve a minimum annual savings rate of 10 percent.
"Transamerica's Retirement Plan Exchange is a significant step in the right direction to help improve retirement outcomes for American workers," Kais said. "Now, small businesses have a solution to help them offer retirement plan coverage to their employees without having to worry about fiduciary liability."
The white paper "Minimizing an Employer's Fiduciary Risk Through the Retirement Plan Exchange" is available to financial professionals and plan sponsors by calling Transamerica at 888-401-5826, Monday - Friday, 9 a.m. - 7 p.m. ET.