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In Focus: The Small Business OpportunityWorkplace Benefits for the Fastest-Growing Segment of the American Economy

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Summary

Small business plays a critical role in the U.S. economy, but has traditionally struggled to provide workplace savings plans for employees. Roughly half of American workers have access to retirement plans, but these plans are predominantly found in large companies. And the small companies that strive to provide quality retirement plans struggle to do so efficiently because they lack the administrative resources and expertise to choose among strategies, products, and service providers.

These “twin deficits” of coverage and quality have plagued the workplace retirement savings system for a generation. Workers in the emerging “gig” economy are also disadvantaged, with the majority lacking access to workplace retirement plans. Financial service providers are developing new approaches designed around the unique needs of highly mobile, contingent workers of various types. Purpose-built recordkeepers offering transparent pricing, open-architecture investment platforms and advanced technologies are particularly adept at delivering quality service to small business.

Emerging public policy is supportive, with new state-facilitated plans for private sector workers in small business and proposed expansion of multiple employer plans (MEPs) at the federal level.

Millions of new workers will have access to workplace savings as a result of emerging policies and business practices.

Advisors will play a critical role in helping small business to navigate this evolving ecosystem of products, technologies, and relationships, helping to determine which retirement plan options best serve their clients.

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Table of Contents

A Glass Half Full

Twin Deficits: Coverage and Quality

Challenges for Small Business Plans

Small Business in the U.S. Economy

Resolving the Coverage and Quality Deficits

The Gig Economy

Evolution of Plan Pricing Structures

Purpose-Built Service Providers

Advisors and Next-Generation Benefits

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11

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16

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Ascensus delivers technology and expertise to help millions of people save for what matters most—retirement, education, and health care. With more than 35 years of experience, the firm offers tailored solutions that meet the needs of financial institutions, state governments, financial professionals, employers, and individuals. Ascensus supports over 65,000 retirement plans, more than 4.3 million 529 education savings accounts, and a growing number of ABLE savings accounts. It also administers more than 1.6 million IRAs and health savings accounts. As of June 30, 2018, Ascensus had over $196 billion in total assets under administration. For more information about Ascensus, visit ascensus.com.

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4

A Glass Half Full

48%

67%

Company Size/Number of Workers

1-50 51-100 101-500 501+

81%91%

1 Vanguard, How America Saves 2018, June 2018, https://pressroom.vanguard.com/nonindexed/HAS18_062018.pdf.2 Investment Company Institute,“Retirement Assets Total $28.0 Trillion in First Quarter 2018,” June 21, 2018, https://www.ici.org/research/stats/retirement/ ret_18_q1.3 David John and Gary Koenig, AARP Public Policy Institute, “Workplace Retirement Plans Will Help Workers Build Economic Security,” October 2014, https:// www.aarp.org/content/dam/aarp/ppi/2014-10/aarp-workplace-retirement-plans-build-economic-security.pdf.4 Morningstar,“Small Employers, Big Responsibilities: How Policymakers Can Address the Small Retirement Plan Problem,” November 2017, https://www. morningstar.com/content/dam/marketing/shared/pdfs/policy/SmallEmployersBigResponsibilities.pdf.

Note: Analysis included employees with access to defined benefit, defined contribution, or Cash Balance plans.

American workplace retirement plans have come a long way in the past few decades, offering increased quality and efficiency. More than 97 million Americans participate in defined contribution plans with assets in excess of 7.5 trillion.1 Americans own another $9.2 trillion in individual retirement account (IRA) assets2, most of which originated in workplace plans. Workers that take full advantage of workplace savings opportunities will collectively be among the best prepared retirees in U.S. history. Of course, these benefits only accrue to workers fortunate enough to be employed by companies that offer workplace plans. The more than 55 million workers3 with no access to these plans—most of whom work in small businesses—may struggle to achieve a financially secure retirement.

Less well understood than this “coverage deficit” is a kind of “quality deficit” between plans in large and small companies. Thousands of small companies today struggle to provide workplace retirement plans to support their employees, improve their productivity, and make their companies attractive for recruiting and retaining workers. But in fundamental ways—particularly plan design, quality, and cost—larger companies have a distinct advantage.

These coverage and quality deficits are a vexing challenge for policymakers, plan sponsors, financial service providers, advisors, and, of course, for American workers. But all stakeholders in the system seem to agree that resolving these deficits by expanding plan coverage and quality represents an extraordinary opportunity.

Percentage of Employees with Access to a Retirement Plan4

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Twin Deficits: Coverage and Quality

Large Business Advantage: Design and Scale

Workers enrolled in large business plans are highly engaged and express satisfaction with the high-tech, “high touch” nature of plan interaction. They experience a wide array of best practices at a reasonable cost.

Large company plans are at the forefront of plan design, with high implementation of proven best practices like automatic enrollment, automatic allocation to target date funds or managed accounts, and automatic savings escalation.5 And large plans reflect higher quality engagement on the part of plan participants, with higher levels of enrollment and savings deferral.

The establishment of any workplace retirement savings plan—large or small—comes with certain fixed costs. For large plans, these costs can be spread over a large number of participants, resulting in a much lower cost per-participant.

Large businesses can take advantage of economies of scale, driving down costs with plan recordkeepers, asset managers, advisors and other service providers. According to Morningstar, large businesses (with 1,000 or more participants) can offer retirement plans for as little as 0.4% per year in plan expenses. In small plans, relatively higher charges reflect that with some investment managers and plan providers, recordkeeping costs are being paid through investment-based fees. This provides yet another example of small businesses’ scale disadvantage.6

Qualified Plan Expense Benchmarks6

Plan Size ($Millions)

Plan

Exp

ense

s*

1 1-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1,000 1,000+

1.42%

.88%.80% .74% .68% .63%

.58% .52% .47%.37%

5 Callan Institute, “2018 Defined Contribution Trends,” 2018, https://www. callan.com/wp-content/uploads/2018/01/Callan-2018-DC-Survey.pdf.6 Morningstar, Op. Cit.7 PLANADVISER, “2018 PLANADVISER Micro Plan Survey,” 2018, https:// www.planadviser.com/research/2018-planadviser-micro-plan-survey/.8 Bureau of Labor Statistics, “National Compensation Survey,” March 2017, https://www.bls.gov/ncs/ebs/benefits/2017/ownership/private/table02a.pdf.

*Morningstar® report authors created these DC plan fee benchmarks by aggregating plan investment expenses and expenses directly paid by plan participants. They obtained DC plan holdings data from Morningstar’s Retirement Plan Intelligence (RPI) for the 2015 plan year, a patented process of gathering retirement plan data from Form 5500, Form 5500-SF, the associated schedules, and the associated accountant’s Auditors Report filings. The final dataset included 874,708 investments, representing 10,798 unique funds. Through Morningstar’s managed investment data collection methods, they obtained the expense ratio for each investment, which was defined as the respective investment management fee, from Morningstar Direct. Only investments with an expense ratio greater than 1 basis point were included in the analysis.

Plan Size Auto Enroll UtilizationAuto Increase Utilization

<$1MM7 16% 12%

$1-5MM7 21% 14%

Large Plans5 71% 70%

Employee Count Average Plan Participation Rate8

1-49 34%

50-99 46%

100-499 58%

500 or more 76%

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Small Business: The Opportunity

Smaller businesses often struggle to maintain industry best practices. Because of their scale and resource disadvantage, they tend to offer plans with fewer features and benefits, at higher prices. By the time we arrive at micro business and the contingent workforce of the gig economy, quality workplace plans dwindle.

The problem is certainly not for lack of desire to provide quality benefits. Polls reveal that businesses of all sizes want to provide plans and assistance to their employees. They understand that financially secure employees are productive, that benefits provide incentives for hiring and retention in a competitive job market, and that plans are supported by tax incentives for both employers and employees. But small businesses must contend with a more volatile workforce, with higher turnover and higher cost of plan services per employee. Even plan participant communications are burdened by scale disadvantage. A single element of plan communication distributed to 10,000 employees can be created for a fraction of the cost of communication elements distributed to 1,000 firms with 10 employees each. In a market economy, large companies can deliver quality benefits at a lower cost per employee through the simple impact of economies of scale.

Outcome Differentials: Large vs. Small Plans

The many advantages enjoyed by large plans are reflected in plan participant outcomes. Vanguard’s How America Saves report contains a variety of insightful data on many aspects of plan design and implementation. By comparing account balances for all plans with those plans with under $20 million in assets, we find a notable differential in outcomes.

The average balance in all plans is 65% higher than that of small plans.10 To be clear, this differential is likely influenced by overall lower wages in small businesses and the fact that small business tends to have a higher concentration of young, start-up plans with lower total assets. However, this comparison makes crystal clear the challenge—and opportunity—to be found in the small plan sector.

AverageAccount Balance

MedianAccount Balance

All Plans9 $103,866 $26,311

Small Plans10 $61,525 $11,182

9 Vanguard, Op. Cit.10 Vanguard Retirement Plan Access, “How America Saves 2018, Small Business Edition – Supplement to How America Saves,” 2018, https://institutional. vanguard.com/iam/pdf/HASVRPA_2018_1.pdf.

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Long-term investor outcomes are the ultimate evidence of the relative advantages enjoyed by employees in large and small business. Assuming a 35-year cycle of workplace contributions, savings deferrals of between 6 and 10 percent, Morningstar estimates that an additional 1.01% in investment fees could reduce total accumulations by as much as 21%— the difference between a retirement account balance of $600,000 and a balance of $470,000.11 While plan scale and design can often factor into such differentials between large and small plans, this Morningstar example illustrates how significantly investment fees can contribute to this gap in savings outcomes.

But innovation is chipping away at these inequalities. Across the advisory industry, market forces, network effects, and rapid technological evolution are systematically reducing both fixed and variable costs, allowing quality plan design to migrate from elite, high-net-worth markets to the mass affluent and even mass markets.

This has happened before in many segments of the financial and technology industries. For example, a generation ago, sophisticated asset allocation strategies were limited to a handful of high-net-worth investors, a select few of whom communicated with each other via mobile phones the size of shoeboxes. Today, cost-efficient target date funds (TDFs) can be bought and sold quickly and cheaply over billions of internet-connected wireless devices.

11 Morningstar, Op. Cit.

Market forces, network

effects, and rapid

technological evolution

are systematically

reducing both fixed and

variable costs

Advisor Opportunity:

Advisors often analyze the performance of a plan’s underlying investments to ensure they’re delivering appropriate value. They can plan a similar, regular analysis of the plan’s administrative and recordkeeping fees, determining which are asset-based versus fixed to confirm that the approach makes sense. Advisors can help clients understand the key differences between these two pricing models and the impact that fee structure can have over the long term.

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Following the Money

Differentials in retirement savings balances between small and large businesses derive in part from plan design, but also from the fact that workers in small business tend to earn less money. This has inspired plan sponsors and service providers to ensure that retirement plans optimize their costs and raise levels of cost-efficiency to the benefit of workers.

Median Salary by Company Size15

U.S. Small Business Compensation 2018

$59,039 – U.S. median household income12 $50,347 – U.S. median income for individuals self-employed at their own incorporated businesses13 $23,060 – U.S. median income for individuals self-employed at their own unincorporated firms14

Company Size Median Salary

50,000+ $85,626

20,000 – 49,999 $81,661

5,000 – 19,999 $78,198

2,000 – 4,999 $74,582

600 – 1,999 $71,324

200 – 599 $65,873

50 – 199 $62,622

10 – 49 $60,573

1 – 9 $58,799

12 U.S. Census Bureau data, cited in Tanza Loudenback, “Middle Class Americans Made More Money Last Year than Ever Before,” Business Insider, September 12, 2017, https://www.businessinsider.com/us-census-median-income-2017-9.13 U.S. Small Business Administration Office of Advocacy, United States Small Business Profile, 2018, https://www.sba.gov/sites/default/files/advocacy/2018- Small-Business-Profiles-US.pdf.14 U.S. Small Business Administration Office of Advocacy, Ibid.15 PayScale.com data, as of September 18, 2018, https://www.monster.com/career-advice/article/us-median-salaries#companysize.

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Challenges for Small Business Plans

It’s important to recognize that today’s deficit in workplace retirement plan coverage and quality is nothing new. Contrary to popular belief, there was never really a “golden age” of defined benefit (DB) workplace pensions. Traditional DB plans only ever covered 45% of American workers. And because of 20-year vesting schedules, millions of workers toiled away at companies that offered plans, but never received those benefits since routine job changes could terminate pension accruals.

Industry surveys make clear that small employers would like to offer plans but are concerned over lack of resources and inexperience with plan management. According to a 2016 survey of 1,600 employers by the Pew Charitable Trusts, small businesses struggle with cost, complexity, and lack of in-house benefits departments that could help them navigate the tax code and the marketplace for plan recordkeepers, technology providers, and advisors.16

According to the Pew study, small employers also describe a general lack of interest on the part of their employees, who express a preference for increased wages over increased benefits. This suggests either a deficit of employee education or that many small business employees must prioritize management of short-term financial challenges over long-term goals like retirement.

Main Reason Cited by Employers for Not Offering a Retirement Plan16

Small businesses that employ part-time workers and seasonal labor are less likely to offer retirement plans, while those that are formally incorporated or use outsourced payroll services are more likely to do so. According to the Pew study, small employers are induced to create workplace savings plans when they experience increased business profits, enhanced tax credits, increased employee demand, executive tax incentives, and when they are offered plan options with reduced administrative burdens.

Too expensive to set up

My organization does not have the resources

Employees are not interested

Organization is too new

Our organization is concerned about how to choose a plan

We haven’t thought about it

Other

37%

22%

17%

5%

1%

7%

11%

16 Pew Charitable Trusts, “Employer Barriers to and Motivations for Offering Retirement Benefits,” June 21, 2017, http://www.pewtrusts.org/en/research-and- analysis/issue-briefs/2017/06/employer-barriers-to-and-motivations-for-offering-retirement-benefits.

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Small employers are attracted to plan sponsorship by inducements like increased profits and tax credits, but they lack basic knowledge. While they express a general understanding about how 401(k)s work, they are less familiar with savings structures like SEP, SIMPLE, and IRAs. Small employers seem to perceive an increase in savings plan options as added complexity. And in financial services, complexity almost always breeds disengagement.

Underlying profit dynamics and tax considerations are clearly beyond the control of financial advisors. But small businesses—even those without dedicated benefits departments—can work with advisors, TPAs, and recordkeepers to address issues related to plan setup and expenses, determining what type of plan best suits their needs and educating plan participants about the benefits of retirement savings.

86% Paid time off

61% Health plans

53% Retirement

45% Dental/vision

33% Other

22% Tuition assistance

Workplace benefit offerings of small firms reflect employee focus on short-term priorities such as wages, paid time off, and health care.

17 Pew Charitable Trusts, Ibid.

Benefits Offered by Small and Midsize Businesses17

Advisor Opportunity:

Many small business owners don’t have the background or expertise to understand the intricacies of retirement plan types and offerings. Advisors are a crucial lynchpin in helping them evaluate their alternatives. By consulting with their clients, advisors can help identify the retirement plan types, service models, and cost structures most appropriate for their needs. These can range from IRA and Individual(k) plans, to SEP and SIMPLE plans, and 401(k) solutions. Advisors can also help successful firms develop combined 401(k) and Cash Balance plans to accelerate retirement saving.

To address business owners’ concerns about the time and resources required to administer a plan, advisors can partner with a local TPA. TPAs can consult on specialized plan design, translating technical details into more easily understood benefits for both the sponsor and employees. By incorporating the TPA into this important phase of plan establishment, the advisor can help build the sponsor’s confidence and trust throughout the sales process. In fact, close ratios for retirement plan business tend to be higher for advisors partnering with a TPA. Data from a major recordkeeping partner for the Ascensus TPA Solutions division suggests that TPAs can also assist with client retention in the long term. Plans working with an experienced TPA stayed on this recordkeeper’s platform for an average of 8 years versus 5 years for those not working with a TPA.

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Small Business in the U.S. Economy

Financial service professionals, for sound economic reasons, have long tended to focus their business development on companies with larger pools of employees. But the nature of small business is evolving. Small business today is increasingly populated by experienced workers, mid-career entrepreneurs, and by professionals who can leverage their expertise in sophisticated services through the growing gig economy. And with regulatory, business practice, and technology trends reducing the cost of delivering services to small business, financial advisors and other professionals are giving small business a long, second look.

It is difficult to overstate the significance of small and medium enterprises in the United States. According to the U.S. Small Business Administration (SBA), which considers a small business any firm with less than 500 employees, smaller companies are major drivers of investment, new business startups, and employment.

The SBA also reports that 59 million workers— 47.5% of the workforce—are employed in small business.18 The Aspen Institute Financial Security program estimates that 30 million small businesses (23 million of which are sole-proprietorships) account for 63% of all new job creation.19

The story of U.S. small business employment is twofold, accounting for employees and employers, both of whom are challenged by the workplace benefits deficit. Notwithstanding media focus on young entrepreneurs, boomers are a critical

demographic. Fully 54%—and rising—of small business owners are over 50 years of age.21 The small business retirement savings deficit is therefore of critical interest for business owners planning for their fast-approaching retirement. In many cases, these owners have reinvested the majority of business assets into the company’s continued growth, deferring the opportunity to invest in their own retirement.

Enhanced workplace benefit plans for small business would do more than provide a secure foundation for employers and employees. Extending the benefits once limited to large businesses to small businesses and startups would make it easier for entrepreneurs to create new companies and attract quality employees, benefitting the entire U.S. economy.

Small Business by the Numbers20

30 million small businesses 99% of U.S. businesses

59 million employees 47.5% of U.S. employees

2 million net new jobs annuallyHalf are with companies with less than 20 employees

960,000 startup companies per year

286,835 small businesses export goods from the United States97.6% of total export companies

Small business generates $427 billion in U.S. annual exports 32.9% of the $1.3 trillion total

18 U.S. Small Business Administration Office of Advocacy, Op. Cit.19 Estimate of Aspen Institute Financial Security Program, Conference Presentation,“Bridging the Retirement Divide: Reaching Small Business Owners and Workers,” November 15, 2017, https://www.aspeninstitute.org/events/bridging-retirement-divide-reaching-small-business-owners-workers.20 Estimate of Guidant Financial, cited in Michael Fischer, “More than Half of All Small Business Owners are Over 50,” Think Advisor, June 1, 2018, https:// www.thinkadvisor.com/2018/06/01/more-than-half-of-small-business-owners-are-over-5/?slreturn=20180704110805.21 U.S. Small Business Administration Office of Advocacy, Op. Cit.

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Public policy, industry

practice, and technology

today are all bearing

down on the exciting

prospect of bringing

millions of new workers

into workplace

retirement plans

Resolving the Coverage and Quality Deficits

The American workplace savings system emerged over the past three decades through a process of constant innovation and step-by-step evolution. Today, several diverse trends are converging on workplace savings markets that together promise to contribute to both increased retirement savings levels and broader coverage, notably in small business.

In terms of plan quality, best practices that have taken root in large plans are migrating down market. This means more plans using behavioral finance mechanisms like automatic enrollment, escalation, and allocation to glide path vehicles that nudge workers to higher savings levels.

These best practices are heavily concentrated in larger plans. But a combination of new technologies, tools and systems built around behavioral finance, and a growing consensus around what constitutes “best practice” has created a huge opportunity for smaller plans. Public policy, industry practice, and technology today are all bearing down on the exciting prospect of bringing tens of millions of new workers into workplace retirement plans, creating a once-in-a-generation opportunity for participants, employers, financial service providers, and financial advisors.

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Public Policy: Expanding Small Company Engagement

One of the greatest strengths of the American retirement finance system has always been the diversity of strategies—public and private, defined benefit and defined contribution—that together distribute risk and provide mutual support. New savings vehicles and methods are emerging today that will bring new companies, new savers, and new assets into this system. And employers and employees alike will continue to “migrate” across these retirement finance options as they change jobs and evolve their companies and their careers.

State-Facilitated Initiatives for Private Sector Workers

• Several states, including California, Connecticut, Illinois, Maryland, and Oregon as well as the city of Seattle, are at various stages of rolling out government-facilitated auto-IRA savings plans for private sector workers in small companies that do not offer 401(k) plans. Many other states are actively discussing plans of their own.

• Washington and New Jersey are establishing state-level “marketplaces” through which business owners can find suitable retirement plans.

While some have expressed concern that the emerging state plans could “crowd out” small 401(k) plans, other industry watchers welcome the advent of state-facilitated auto-IRAs as a critical new element in the national retirement finance complex, stepping in to support workers employed by small and mid-size enterprises. Ultimately, proponents feel that such programs could create a new market for workplace savings among small business employees and enhance savings system diversity.

State-Facilitated Savings Plans: Key ProvisionsBusiness owners and employees considering their participation in state-facilitated plans should understand their unique provisions, particularly how they differ from private sector options. State-facilitated auto-IRA programs that have been established to date share the following general characteristics.

• Automatic deferral rates around 5% with savings escalations reaching 10% over time; Contribution limits defined by Roth IRA annual contribution limits: $5,500 per year; $6,500 per year over age 50 (for 2018)

• Investments default to age-appropriate target date funds.

• Workers reserve the right to opt out of programs or make changes to savings rates and investment allocations.

• Contingent and alternative workers may be included on an opt-in basis.

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State-Facilitated Retirement Savings Programs: A Snapshot22

Mandatory Individual Retirement Account (Auto-IRA)

California, Connecticut, Illinois, Maryland, Oregon, City of Seattle

Voluntary Payroll Deduction IRA New York

Voluntary Open Multiple Employer Plan (MEP)

Massachusetts, Vermont

Voluntary Marketplace New Jersey, Washington

Legislative Proposal and/or Study in 2018

Colorado, Georgia, Iowa, Kansas, Michigan, Missouri, New Hampshire, New Mexico, Pennsylvania,

Rhode Island, Tennessee, Virginia, Wisconsin, Wyoming

State Efforts (2012-2017)

Arizona, Arkansas, Indiana, Kentucky, Louisiana, Maine, Minnesota, Montana, Nebraska, Nevada,

North Dakota, North Carolina, Ohio, Oklahoma, South Carolina, Texas, Utah, West Virginia

22 Georgetown University, Center for Retirement Initiatives, “State-Facilitated Retirement Savings Programs: A Snapshot of Plan Design Features,” May 31, 2018, https://cri.georgetown.edu/wp-content/uploads/2018/05/States_SnapShotPlanDesign5-31-18FINAL.pdf.

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There is evidence that the rise of new publicly-sponsored plans might actually stimulate employers—in a tight labor market—to create plans of their own to distinguish themselves in the marketplace. According to Pew Research, when asked whether they would enroll their workers in a state-sponsored auto-IRA program or start their own retirement plan, half (51%) of businesses without plans said they would consider starting their own.23

These efforts are beginning modestly, as did the 401(k) system many years ago. But given that the United States has 55 million workers without access to plans and that emerging state-facilitated plans currently in process may bring more than 9 million new workers a workplace savings vehicle (Oregon: 1 million; Illinois: 1.2 million; California: 7 million), nascent state initiatives, by themselves, could reduce the nation’s plan coverage deficit by 17%.24

Open MEPs

Congress and regulators are considering long-discussed proposals for open multiple-employer plans (MEPs) that would allow small employers to band together to sponsor private workplace savings plans. These proposals, which have reasonable bipartisan support, would help mitigate the cost and administrative burdens of workplace savings plan sponsorship, extending the benefits of popular 401(k)-style plans to a whole new cohort of American workers, particularly in small companies. MEPs are not new. They already cover some 4.5 million workers, although participants must share a “commonality,” such as common ownership or membership in an industry association or trade group in order to qualify for fiduciary protection.25

Removing these membership restrictions could expand MEP membership to thousands more employers and millions more workers. Also under discussion is elimination of a “bad apple” rule by which regulatory infractions by one member of a MEP invalidated the MEP in its entirety. Proposals focus on identifying infractions and correcting them for individual members without impacting the overall MEP or its individual members.

Policymakers, legislators, regulators, and other institutions have woken up to the challenge of retirement finance. And they are following the industry’s lead, collaborating to create optimal conditions to accommodate their innovations. Tens of millions of Americans that have never employed workplace savings before are about to enjoy opportunities developed over decades of industry collaboration and evolution.

23 Pew Charitable Trusts, Ibid.24 Ascensus at the Aspen Institute Financial Security Program, Conference Presentation, “Bridging the Retirement Divide: Reaching Small Business Owners and Workers,”Aspen Institute Financial Security Program, November 15, 2017.25 Nick Thornton, “Can Open MEPs Close the Access Gap with Small Employers,” Benefits Pro, July 31, 2018, https://www.benefitspro.com/2018/07/31/can- open-meps-close-the-access-gap-with-small-empl/.

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The Gig Economy

Even as the workplace benefits industry methodically expands its coverage toward smaller businesses, a particularly challenging service threshold looms–the growing contingent labor force, or gig economy. Labor economists and other experts are still attempting to define this phenomenon. Depending on how one counts part-time or seasonal employees and various types of workers—contractors, seasonal workers, and workers from temporary staffing agencies—the current number of contingent laborers ranges widely.

The Department of Labor’s Bureau of Labor Statistics (BLS) states that 5.9 million workers, or 3.8% of the total U.S. workforce, are in the contingent workforce. But the BLS also notes that this number would be much higher were one to include those with “alternative work arrangements,” including independent contractors (10.6 million workers), on-call workers (2.6 million), workers from temporary employment agencies (1.4 million), and workers provided by contract firms (933,000).

Noted academic studies estimate that the contingent labor force may be much larger and growing rapidly, increasing from 10.7% of the workforce in 2005 to

at least 15.8% in 2015.26 By one expansive estimate embracing freelancers, part-timers, and independent contractors, contingent workers may actually account for fully 34% of the American workforce.27 A significant driver of the contingent labor phenomenon is the rise of “non–employer firms,” or companies that have only minimal full-time employees and are staffed by self-employed freelancers. Examples include ride-sharing companies, on-demand technology contractors, and others rising on gig employment platforms through which workers can sign up for work, self-manage schedules, and be paid. According to one study, in 2017 alone, employment in non-employer firms grew by 2.6%, as compared with 0.8% for traditional payroll employment.28

However one defines the contingent labor force, industry surveys suggest that gig workers lack the financial stability and benefits protection enjoyed by full-time traditional workers.29

• Contingent workers earn an average of $36,500 per year versus $62,700 for full-time employees.

• Only 16% of gig workers have assets in an employer-sponsored retirement plan, as compared with 52% of full-time workers.

Advisor Opportunity:

Advisors can counsel their clients on these seismic changes in the retirement landscape and help them understand what they could mean.

• As legislation continues to progress, advisors can compare the potential costs, benefits, and program restrictions of open MEPs to those of a standalone 401(k) plan and determine if they could lower costs and meet their clients’ specific needs.

• For businesses located in states with emerging state-facilitated retirement savings programs, advisors can help business owners assess their alternatives and understand the key differences in design between the state programs and private plans.

26 Lawrence Katz and Alan Krueger, “The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015,” NBER Working Paper, 22667, September 2016.27 Contingent Workers Now Make up 34% of the U.S. Labor Force,” Quartz, November 24, 2015, https://qz.com/472248/contingent-workers-now-make-up- 34-of-the-us-labor-force/.28 Robert Maxim and Mark Muro, “Rethinking Worker Benefits for an Economy in Flux,” The Brookings Institution, March 30 2018, https://www.brookings. edu/blog/the-avenue/2018/03/29/rethinking-worker-benefits-for-an-economy-in-flux/.

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• 54% of gig workers lack access to employer-based benefit plans.

• Contingent workers that enjoy access to employer-based insurance do so at less than half the rate of full-time employees in terms of health insurance (40% vs. 82%); life insurance (20% vs. 59%); dental insurance (25% vs. 66%); and short-term disability (5% vs. 42%).

Notwithstanding these sharp differentials in employee compensation and benefits, the emerging contingent labor economy does have distinct advantages. Employers enjoy the ability to convert fixed payroll costs into flexible and dynamic expenses. Workers enjoy flexibility, the autonomy of self-employment, and the ability to blend full-time, part-time, and gig employment with the demands of family and school.

While there are different ways to measure the impact and growth of contingent labor, one thing seems sure: the American workplace is changing rapidly, and the American benefits infrastructure should re-invent as needed to keep up. Policymakers, academics, financial firms, and advisors are today evolving the concept of “portable benefits” that could follow workers across their careers through full-time and part-time employment, contracting, gig employment, and self-employment as business owners.30 The goal is to provide the surety of workplace benefits plans while allowing for the creativity and high-flexibility of contingent labor. According to the Aspen Institute’s Future of Work Initiative, these benefits should be:

• Portable: These benefits should not be tied to any particular job, company, or employment contract and should allow for multiple, simultaneous income.

• Pro-Rated: Different employers and contract-granters should provide benefits at a rate based

upon earnings. In situations where projects are shared between different contractors, contributions should be shared.

• Universal: Workers should have access to nearly all the benefits enjoyed by traditional workers, including savings plans for health care, retirement, and education as well as critical protections such as health insurance, disability insurance, and workers’ compensation.

As the contingent labor market expands, and as this expansion changes the nature of adjacent markets for part-time and even full-time employment, the financial services industry in general—and advisors specifically—have the opportunity to re-define the nature of compensation and benefits in line with this fast-evolving and tech-centric new paradigm of employment.

29 “Gig Workers in America: Profiles, Mindsets and Financial Awareness,” Prudential Financial, 2017, http://research.prudential.com/documents/rp/Gig_ Economy_Whitepaper.pdf.30 David Rolf, Shelby Clark, and Corrie Watterson Bryant, “Portable Benefits in the 21st Century: Shaping a New System of Benefits for Independent Workers,” Aspen Institute Future of Work Initiative, 2016, https://assets.aspeninstitute.org/content/uploads/files/content/upload/Portable_Benefits_final.pdf.

Advisor Opportunity:

Advisors can help gig workers make the right retirement savings decisions for their personal goals. They can encourage these workers to consider the benefits of an Individual(k) plan or IRA-based SEP plan, which generally have higher contribution limits than IRAs. A common misconception is that an owner-only, Individual(k) plan is complicated to establish and maintain; education on how easy they can be to manage can help address gig workers’ hesitation to initiate such a plan.

Traditional or Roth IRA contributions are also a logical and simple first step for gig workers looking to build their retirement nest egg. Other than making a contribution once annually, there are no other administrative demands. Administrative fees are typically limited to a couple hundred dollars with solutions offered through various financial institutions, including local banks and credit unions.

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Market Practice Innovation

Long-term public policy shifts will be powerful and enduring, should they come to pass. But in the meantime, practical market-based solutions are already making life easier for small business plans. To make this happen, various actors in the workplace benefits industry—recordkeepers, advisors, technologists, and TPAs (third-party administrators)—are partnering to improve client service through outsourced plan administration, new savings strategies, alternative approaches to plan fees, and a convergence of health care and retirement savings.

Consistent with the history of American workplace savings programs, public policy innovation and private sector market practices are today evolving on individual tracks and converging with transformative effect. The net result will be a market that is both larger and also characterized by superior products and services that stimulate enhanced, more productive workplace savings.

The TPA Alternative

Industry surveys make clear that small businesses would like to offer comprehensive benefit programs but feel they cannot because of the administrative requirements they entail. Cost is often cited as an inhibitor, but when offered a comprehensive assessment of the actual financial commitments involved, many plan sponsors find that they are less costly than anticipated. But plans do have to be administered and without an in-house benefits department, this can be particularly challenging.

The combination of a technology-enabled financial advisor and equally tech-savvy third-party administrator (TPA) has become an industry-driven solution to this dilemma. Plan sponsors, advisors, and TPAs can efficiently address the paper trail: designing plan documents and taking care of employee benefits and disclosure documents, compliance with IRS nondiscrimination rules, and filing annual reports (notably Form 5500) with the Department of Labor, IRS, and other government agencies.

TPAs can provide best-practice plan administration, relationship management, and quality plan design. They can also help maximize employer contributions to highly compensated employees (including owners), while maximizing tax deductible retirement savings.

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In terms of management practice, advisors and TPAs can assemble a “team of experts” that is highly flexible, ensuring that any challenges in plan servicing are backed up by partners. In seeking out TPAs with which they can partner, advisors should assess experience, professional designations, the availability of comprehensive actuarial services, expertise in ERISA compliance, and the possibility of a combined advisory/TPA solution. Plans and their advisors today are seeking out TPA solutions centered on web-accessible resources and services, innovative and evolving technology, and data security.

In industry surveys, plan sponsors often cite concerns over fiduciary liability when considering a workplace retirement plan for their employees. As experts in their field of work, often with little expertise, staff, or time to focus on the details of benefits regulation, this is a legitimate concern. Innocent mistakes could mean serious operational infractions. The Department of Labor’s Employee Benefits Security Administration (EBSA) agency recently disclosed the magnitude of such infractions and their related penalties in their 2018 Fact Sheet.

In 2017, EBSA closed 1,707 civil investigations, 65% of which resulted in fines for ERISA violators.31 This is a 72% increase over 2016, which underscores EBSA’s goal to increase compliance enforcement.32 The DOL has also ramped up their monitoring efforts, employing new technologies and algorithms to identify plans out of compliance.

To frame this risk for small business clients, advisors can share EBSA’s independent fact sheet and discuss the potential benefits of 3(16) fiduciary compliance services. These services enable a sponsor to outsource the plan’s annual notice delivery, distribution approvals, forfeiture account usage, and compliance testing.

Advisors can partner with a TPA or service provider that enables them to layer these 3(16) services onto their own offerings, bundling fiduciary oversight of plan administration with their own 3(21) or 3(38) investment services. 3(16) outsourcing also reduces the likelihood of administrative “headaches” or incremental administrative work that would have otherwise been required on the part of the advisor.

Advisor Opportunity:

31 Employee Benefits Security Administration Fact Sheet, 2018, https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/fact- sheets/ebsa-monetary-results-2017.pdf.32 U.S. Department of Labor, Strategic Plan, 2018, https://www.dol.gov/sites/default/files/StrategicPlan2014-2018.pdf.

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33 U.S. Department of Labor, “Private Pension Plan Bulletin: Abstract of 2008 Form 5500 Annual Reports,” March 2012, https://www.dol.gov/sites/default/ files/ebsa/researchers/statistics/retirement-bulletins/private-pension-plan-bulletins-abstract-2008.pdf.34 2018 National Cash Balance Research Report: 10th Annual Edition, Kravitz, Inc., August 2018.

The Cash Balance Advantage

Many of the innovations that are transforming the workplace savings landscape today involve new technologies and strategies that were unavailable until recently. But others represent a kind of “back to the future” move that combines the best elements of traditional pensions with those of contemporary workplace savings plans.

Cash Balance plans—once known primarily as a method of passing vested retirement savings to employees of large companies closing down their defined benefit pension plans—are enjoying a surge in popularity. Intriguingly, the growth is not so much driven by DB pension plans closing, but by the creation of new Cash Balance plans by small business owners.

Often considered a “variety” of DB plan, Cash Balance plans are in fact a hybrid, combining the flexibility, portability, and simplicity of workplace savings with the high contribution limits associated with traditional defined benefit plans.

Cash Balance assets under management are soaring, topping $1 trillion in 2018, up from $623.5 billion in 2008, an increase of 61% in just 8 years. The number of U.S. Cash Balance plans expanded from just over 5,000 in 2008 to over 20,000 in 2016. Cash Balance plans today make up 37% of all U.S. DB plans, up from just 11% a decade ago.33 Small business is playing a crucial role in this growth; 92% of Cash Balance plans have less than 100 total participants, and 57% have less than 10 participants.34

Cash balance plans

are…a hybrid, combining

the flexibility, portability,

and simplicity of

workplace savings with

the high contribution

limits of traditional

DB plans…

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The growth in Cash Balance plans is being driven by their unique “hybrid” structure, generous tax advantages, their utility as a late-career retirement savings top-up, and regulatory initiatives that have increased their tax benefits. The plans are of great benefit to workplace retirement plan participants. Employers typically increase their contributions to employee accounts by 50% or more when adding Cash Balance plans to their retirement savings lineup, a vital competitive edge in a tight labor market.

For financial advisors or business owners interested in exploring Cash Balance opportunities, the key starting point is to understand exactly which business types are the right fit. Businesses or individuals that possess the following characteristics are often considered good candidates:

• Professional services firms, including medical and financial services firms

• Companies that have demonstrated consistent profit patterns

• Companies with an existing New Comparability plan

• Companies already contributing 3-4% to employees, or at least willing to do so

• Partners or owners who desire to contribute more than $50,000 a year to their retirement accounts

• Partners or owners over 40 years of age who desire to “catch up” or accelerate their pension savings

• Successful family businesses and closely held businesses

Advisor Opportunity:

Current tax law offers a significant tax break for pass-through business owners, but exclusions and limitations may prevent many professional services firms from benefitting. Fortunately, Cash Balance retirement plan contributions can allow some business owners to reduce adjusted gross income (AGI) enough to qualify for the full deduction, 20% of qualified business income (QBI). Advisors can help owners at small service firms optimize their tax breaks by connecting them with a team experts that enable them to implement a Cash Balance plan or 401(k)-Cash Balance combination plan. To demonstrate their expertise in this specialized plan design, advisors can pursue the Certified Cash Balance Consultant designation. For additional information on this certification program, visit cashbalancedesign.com.

In light of recent tax law changes, some financial advisors are forging professional relationships with regional tax advisors and CPAs. Together, they can identify clients that would most benefit from a Cash Balance design, establishing a formal referral program to educate these business owners about their options.

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Today Year 5 Year 10

Flat Dollar $6,500 $6,500 $6,500

Asset-Based $20,500 $26,872 $34,870

Flat Dollar $5,000,000 $6,909,701 $9,347,018

Asset-Based $5,000,000 $6,820,593 $9,105,713

Evolution of Plan Pricing StructuresSince the introduction of the Department of Labor’s fee disclosure rules, the retirement plan market has made marked improvements in its pricing models. Many plan sponsors have seen their retirement plan fees and expenses go down, both for investment products and administrative services. However, most business owners—particularly those on the smaller end of the market—still struggle to determine if their plan pricing structure is delivering appropriate value. The recordkeeping services industry has historically supported two distinct pricing models: flat dollar, per-participant tiers or asset-based fees. Small business owners often rely on a financial advisor’s expertise to closely evaluate these very different fee structures and what they could mean for plan value in the long term.

A $5 million retirement plan, for example, with 50 participants contributing $100,000 annually and experiencing 5% market return could be priced in a flat dollar model. In this example, the plan sponsor pays a base fee for the first 20 participants

and a $75 fee for each additional participant. The plan sponsor has opted to pay the recordkeeping fees out of plan assets. Assuming the number of participants in the plan remains constant over a ten-year horizon, the recordkeeping fees will remain a flat, consistent dollar amount. However, in an asset-based structure, as those 50 participants continue to build their balances, the recordkeeping fees will increase in step with plan assets. In the long term, this could result in a $241,305 difference in the market value of the plan. As more advisors and their clients begin to recognize this distinct advantage of a participant-based pricing approach, the industry has seen a shift in pricing models.

This shift represents a step in the right direction, as service providers recognize the importance of keeping the focus on the participant outcomes they deliver rather than the retirement dollars they administer.

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*Illustration assumes that the plan sponsor pays recordkeeping fees out of plan assets and that the plan has $5,000,000 in assets, 50 participants, $100,000 in annual contributions, and 5% market return annually. Flat dollar pricing structure has a base fee of $4,250 plus $75 for each additional participant up to 100. Asset-based pricing structure has a base fee of $1,750 plus $25 for each participant and .35% on assets. This illustrative plan has a full service model and does not incur any TPA fees.

Flat Dollar vs. Asset-Based: An Illustration*

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Retirement and Health Care Savings Convergence

Ever since the passage of the Patient Protection and Affordable Care Act (ACA) in 2010, policy analysts have focused on the law’s impact on health plan coverage and benefit delivery. But a significant legacy of the law will likely be its role in spurring the expansion and adoption of health savings accounts (HSAs): tax-exempt trust/custodial accounts used to pay medical expenses. While HSAs are primarily designed to support high-deductible health insurance, they also have the potential to substantially expand retirement savings.

HSAs have a triple tax advantage. Contributions are tax deductible, interest and earnings grow tax-free, and distributions are free of tax when applied to qualifying medical expenses. Their utility in retirement is twofold. Medical expenses can derail retirement plans, so HSAs obviously play a significant role in protecting accrued retirement savings that might have to be tapped to pay for these costs. But workplace savers diligent and fortunate enough to avoid major medical expenses over the course of their working lives can accumulate these additional HSA dollars to use later in life rather than depleting their retirement savings.

Many advisors today recommend that employees save in their workplace retirement plans until they reach the limit of employer matches, “rotate” savings over to HSAs until reaching their limit, and then shift savings back to workplace retirement plans thereafter.

The growth of HSAs is emerging as one of the truly significant wealth management trends of recent years. According to industry consultant Devenir, the number of HSA accounts reached 23.4 million in 2018, with investments and deposits rising to $54 billion on the back of a 25.6% compound annual growth rate over the past decade, more than quadruple the growth rate of defined contribution workplace retirement savings plans.35 Workplace benefits plans are the leading driver of account growth, stimulated by increased adoption of high-deductible health plans.

As these vehicles mature, advisors will play a crucial role in integrating HSA investment into more holistic financial planning strategies that encompass both debt/liabilities and long-term investment goals. In the near term, advisors can add great value to client relationships by delivering expertise in this area. Over time, it is conceivable that financial advisors may be the primary distributors of these solutions and play a big role in managing investment solutions that integrate across DC and HSA vehicles.

35 Devenir Research, “2018 Midyear HSA Market Statistics & Trends,” August 22, 2018, http://www.devenir.com/research/2018-midyear-devenir-hsa- research-report/.

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Purpose-Built Service Providers

When workplace savings plans emerged a generation ago, they rose in many corners of the financial services industry. Service providers for the new plans were to be found in broker-dealers, insurers, banks, and mutual fund companies. For many firms, the new savings market represented an important distribution channel for their financial products.

Decades later, as the market for workplace retirement plans and IRAs tops $17 trillion, the retirement savings juggernaut is maturing and standing as a substantial financial services industry sector in its own right. The many varieties of plan recordkeeper still co-exist, but the high-touch, high-technology sophistication of today’s plan marketplace—together with higher transparency and narrowing margins—are driving many firms to either commit wholeheartedly or retreat from the field. Just as was the case with pension fund custodians a decade or two ago, the workplace savings recordkeeping sector is consolidating into dedicated firms that are “all-in.”

With the continued consolidation of recordkeepers among multi-purpose financial services firms, providers specializing in scalable, “purpose-built” technology and wholly dedicated to the retirement plan marketplace have become the leading choice for businesses large and small.

Plan sponsors and advisors today are looking for recordkeepers that offer expertise, technology, independence, and versatility, supporting contemporary best practices that allow advisors to concentrate on what they do best.

Expertise: Purpose-built service providers are capable of providing plan design, servicing, or technical consultation, either directly or through TPA partners, in a way that less focused providers may not be.

Technology: Platforms purpose-built for the small market deliver efficiency and quality at a cost structure that enables advisors to drive investment selection independently; reduces the noise and distraction of serving large numbers of small plans; drives better outcomes for this smaller market segment; and provides the information and insights most helpful to advisors in managing their practice.

They must have complex back-end technology architecture that is highly scalable and uses straight-through-processing to service tens of millions of user accounts behind a simple front-end interface.

While front-end digital experience seems to be the current “shiny penny” of focus, savvy advisors are now looking beyond flash to the underlying technology that is driving specific client and advisor benefits.

“providers specializing

in scalable, ‘purpose-

built’ technology...have

become the leading

choice for businesses

large and small”

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Independence: Increasingly, these purpose-built firms are looked to as a source of conflict-free retirement solutions that are open-architecture in design and offer best-of-breed services from different providers. This enables advisors to work in a completely independent model on behalf of their client, unencumbered by fund selection.

Versatility: Versatility from these purpose-built firms comes in several forms for their advisor partners, including the ability to:

• tailor investment line-up and plan design for clients without sacrificing low price and high-quality, consistent service;

• integrate a broader set of client solutions, like cash balance, ESOP, HSA, or even financial wellness; and

• the ability to support the advisor’s preferred business model.

Such versatility allows the advisor to better serve clients and expand revenue opportunities.

The Wellness Opportunity

Purpose-built service providers are well-placed to elaborate holistic financial wellness solutions that many believe foretell a vastly expanded field of work for financial advisors. Wellness solutions offer a 360-degree approach to wealth management that takes into account the full measure of clients’ financial lives.

• Management of debt: everything from student loans to mortgages, auto loans, secured debt, and credit cards

• Development of spending plans and household budgets

• Long-term investment strategies for housing, health insurance, children’s education, and retirement

Well-constructed wellness solutions help guide retirement savers to better outcomes, but these solutions have been historically offered to only the largest companies given their cost. However, with advances in technology and the ability to lower the overall cost of operating a small retirement plan, some purpose-built firms have been able to package financial wellness services into their core offering for small plan clients and their advisors. There is no doubt that other market leaders will follow suit, helping to address the financial education gap between small and large market workers.

The rise of wellness does not imply a “robo” alternative to advisory. It suggests a vastly larger expectation from financial advice: new strategies, products, and services and the opportunity to increase the value that advisors provide to investors.

These wellness solutions have a natural home in purpose-built service providers in which products and services are obtained through an open-architecture, conflict-free service model. And, these solutions create a space for advisors to amplify their advisory fee when committing to provide more participant support around these programs.

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Advisors and Next-Generation Benefits

The current burst of activity in the workplace benefits sector—public policy initiatives, industry restructuring and evolution, new technologies, and the emergence of an employment benefit architecture less wedded to specific jobs—is complex and difficult to monitor. And it is creating a new industry in which advisors must assume a new kind of role.

The industry is now embarking on a collective public and private mission to bring tens of millions of new employee-investors into the system. Expanded workplace benefits coverage will define the next era, even as the traditional “workplace” is re-defined to embrace a more liquid, fast-changing job market and the rise of contingent forms of employment. And the industry is also embarking on a transformative new era of market practice innovation: enhanced utilization of specialized retirement plan design and 3(16) fiduciary services; the convergence of the health savings account with the retirement plan marketplace; the rise of purpose-built service providers that can more efficiently scale their technology and service model within the small market; and integrated financial wellness solutions that can be bundled into small plan offerings.

Leading plan advisors are not being displaced by all of this innovation in policy and industry. Rather, they are benefiting from new efficiencies in serving the small market and assuming a critical new role helping plan sponsors navigate the complexities of this innovation.

In many cases, concerns over the rise of the new government-facilitated savings architecture have been somewhat overstated. For example, some industry observers have wondered whether the rise of state-facilitated plans for private workers might “erode” the small-plan marketplace.

But many companies, collaborating with their advisors to understand the financial and tax benefits of plan sponsorship, have been inspired to develop their own benefits offerings as a means of distinguishing themselves in the marketplace.36

The emerging state-facilitated plans have been described as “training wheels” for employers, who gain experience executing payroll deductions into retirement accounts and tracking savings. And behavioral finance research suggests that the new programs, by giving workers experience and momentum in retirement savings, will make them better future customers for financial advisors service providers.

Therefore, these state-facilitated plans, together with MEPs, could remake the landscape for small business retirement plans and open new doors for advisors.

Through strategic partnerships with TPAs, advisors can offer small business clients plan design consultation and lean on these experts for day-to-day client relationship needs. They can also capitalize on the increasing interest in Cash Balance plans and health savings accounts, bringing these innovative retirement savings solutions to the table for small business prospects.

36 Pew Charitable Trusts, “Small Business Views on Retirement Savings Plans.” January 2017, http://www.pewtrusts.org/~/media/assets/2017/01/small- business-survey-retirement-savings_f.pdf.

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By identifying purpose-built providers that offer flat-dollar pricing models, an open-architecture investment platform, and integrated wellness solutions independent of plan size or assets, advisors can deliver value for small market clients and create additional revenue streams for their business.

Advisors have the opportunity to help companies to re-shape their benefits architecture in an era of fundamental change. This means not only helping to define plan architecture, but to design the ecosystem of relationships with service providers and recordkeepers that can most efficiently support plans. And in an era of price transparency, narrowing margins, and new technologies, this also means optimizing plan design and participant engagement.

The Final Agenda

• Plan advisors have traditionally struggled to provide services to small business due to the high cost of providing products and services to this market.

• But the small business market is growing and the gig economy is expanding alongside this segment.

• Owners of startups and small professional services firms have great potential to build wealth over time.

• State-of-the-art plan design, best practices, and new technologies are making it more feasible for advisors to engage small business.

• New public policies including state-facilitated savings programs and the anticipated creation of multiple employer plans (MEPs) will drive millions of small business employees into the workplace savings market for the first time.

• The advisory industry is on the cusp of an historic opportunity to serve these growing cohorts of worker/savers.

Ascensus provides administrative and recordkeeping services and is not a broker-dealer or an investment advisor.Ascensus® and the Ascensus logo are registered trademarks of Ascensus, LLC.Copyright ©2018 Ascensus, LLC. All Rights Reserved.

Conclusion

As retirement plans undergo seismic changes in regulations, technology, and market practice, advisors can help their clients understand the impact of these diverse forces. They can help small business owners identify retirement plan types, service models, and cost structures most appropriate to their needs, regardless of plan size. They can also assess recordkeeping fees and services and help businesses to understand new options, such as participation in open MEPs, or the creation of their own private plans.

Plan advisors can play a productive role in helping plans to understand the beneficial impacts of partnership with TPAs, strategies for outsourcing fiduciary compliance with ERISA’s Section 3(16), and the benefits of joining the fast-growing marketplace for Cash Balance plans. They can also help plans to evaluate the relative merits of flat-dollar versus asset-based fee structures and the convergence of tax-incented health and retirement savings plans via health savings accounts.

Addressing the changing nature of the American workplace, advisors can also help contingent workers and entrepreneurs determine which retirement savings options and strategies can help them invest in their future. In doing so, they can bring the industry one step closer to resolving the plan coverage and quality deficits that have plagued the U.S. retirement system for decades.

Today’s evolving workplace savings environment is complex, challenging, and full of opportunity. Financial advisors may prove to be the ultimate arbiters of workplace savings best-practice for small business—the fastest-growing, most vital segment of the American economy.

For more information on the range of small business retirement plan solutions, visit ascensus.com.