Defined Contribution Restatement Cycle 3 Has Arrived.

Qualified retirement plans—including profit sharing, money purchase, and 401(k) plans—receive special tax benefits by meeting requirements set forth by the IRS and Department of Labor. Many of these plans operate under a pre-approved plan document that is recertified by the IRS every six years. What were formerly called “Prototype Plans”, the IRS requires Pre-Approved Documents to be restated on a uniform six year cycle. A new six-year cycle, called Cycle 3, has begun. The restatement period runs from August 1, 2020 through July 31, 2022. The six-year restatement cycle helps to keep plans from becoming too burdened with separate interim “good faith” amendments that may have been added to the plan document over many years of operation. Restatement provides a great opportunity to implement discretionary changes in addition to updating your plan document with mandatory legislative updates. During restatement, our dedicated Plan Consultants can help evaluate potential enhancements and ways to optimize your retirement plan. Why Cycle 3? This is the third six-year cycle for which the IRS has issued opinion letters under the Pre-Approved Retirement Plan Program. Cycle 1 was the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) restatement in 2010. Cycle 2 was the Pension Protection Act (PPA) restatement in 2016. Although this Cycle 3 restatement does not have an ornate title, it is equally important to maintain the qualification of the plan.

Since the announcement of the Cycle 3 Restatement period, Congress has enacted a number of new laws affecting tax qualified retirement plans, specifically the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus, Aid, Relief and Economic Security (CARES) Act. In addition, the IRS has issued substantial guidance regarding the operation of qualified plans under these laws. Congress and IRS have generally permitted employers to comply with these new rules in operation without formally amending the underlying Plan document until some date after the law is effective. The Cycle 3 Restatement does not include these changes; however, the general consensus is that the plan must be amended to conform by the end of the first Plan Year beginning after December 31, 2021. If you are currently on our Pre-Approved Plan Document or if we restate your document during the Cycle 3 Restatement period, we will prepare the amendment for employer signature once we receive the required amendment language. If not, please forward a copy of the Cycle 3 Restatement and any subsequent amendments you obtain from your current provider as soon as they are received.

What Do I Need to Do? EJReynolds has acquired the Opinion Letters from the IRS on our Pre-Approved Documents for the Cycle 3 Restatement Period, and we are ready to begin the restatement process for our clients currently on our document. If you are not currently on our Pre-Approved Plan Document, contact your Plan Consultant to receive a quote on converting. We will be reaching out to you in the coming months and through 2021 to make the process of restating your plan documents as seamless as possible. Be on the lookout for updates. We will be sending you reminders and instructions to keep you current in future blogs on the EJReynolds, Inc. website to guide you through the restatement process.

The Challenge of Prospecting in the time of Coronavirus

Over the last seven months, we have all had to learn to adjust. Suddenly, everyone knows about the CARES Act, the difference between a PPP Loan and PPE, and we all became experts at video conferencing. Now that the end of the year is upon us and what would traditionally be “selling season” in the retirement plan world, how can we help you close business? It may not be easy, but at EJReynolds we believe there is great opportunity in the market for taking on new business, both in the existing plan space and the start-up market.

Many of the best advisors spent the Spring contacting their clients, just to check in and alleviate any fears. Now is the time to find those existing cases that have not heard from their advisors, to show your value proposition. Don’t just ask if they have heard from their current Plan Advisor, ask leading questions. For instance, “When your current Plan Advisor contacted you at the beginning of the shutdown, how did that make you feel?” Many Plan Sponsors may say to themselves, “Well, my existing Plan Advisor didn’t contact me at the beginning of this pandemic, and now I’m feeling insignificant!”. Assessing a potential prospect can be tricky. Knowing what questions to ask at the proper time in the sales cycle can be the key to landing and satisfying a new client. Broad, open-ended sales questions may help find out what is going on in your prospect’s world, but they run the risk of wasting what little precious time that a prospect may give you.

When prospecting for a 401(k) plan, there are two main decision makers: 1) the CFO with little time to waste, especially now, or 2) the HR director who typically has too much on their plate to begin with and doesn’t want more, especially now. By merely calling these prospects, you are interrupting the status quo and you must be prepared to give them a compelling argument to make a change. As they say, change only happens when the pain of staying the same is greater than the pain of making a change.

Prospecting for 401(k) plans is a three-step process: 1) Find Promising Prospects, 2) Call the Prospect, and 3) Meet with The Prospect. It can be that easy if you are well prepared and know when to ask the right questions. Last year, we published a blog with an in-depth discussion of finding and calling the prospect. Today, we are focusing on the meeting. To read our original article, refer to The power of the right question at the right time. Whether you are new to 401(k) plan prospecting or an experienced 401(k) advisor trying to train your staff, this guide lists important questions that will engage a prospect. You will also find some key questions to avoid during the sales process.

Once you have a meeting in place, whether physical or virtual, preparation is key. Summarize your findings to a one page sheet showing specific improvement areas and procedures that you will help put into place once you are hired. If you have never presented in a virtual setting, be sure to practice before your first meeting. Video helps build rapport and create a connection with the buyer. Even if your prospects do not use their video, make sure to show yours. If you’re using Zoom or Teams, there is an option to hide your profile video, which may make it easier to present (have you ever tried to speak to a group of people with a giant picture of yourself in front of you?). Use the Chat Bar and Poll functions, especially if you are presenting to a committee. You can send links to pertinent websites, ask leading questions, and facilitate discussions without giving up control of the meeting. You may be sharing your screen with the group, but sending a link to a proposal or an article can help inspire the buyer, share a new idea or uncover needs and ultimately build an impact case to use you as a professional.

For start-up cases, the first step is to build trust in you, then focus on Plan Design. Once they agree to work with you and are confident with the concept of saving, only then should you bring in the investments. Do not lead with investments if they have not bought into the idea of working with you, and certainly if you have no idea how the plan will be designed. Many businesses are thriving in this environment, so it is a great time to look at a start-up case.

For Takeover cases, do not automatically assume you need to change everything to show you can bring enhanced services to the plan. Taking over the plan as Agent or Broker of Record is the first goal. There may be nothing wrong with the plan that more attention and care will not fix. Just making small changes to the investment lineup or adding some enhanced plan design options, might make all the difference in the world to the client and will not totally disrupt the day-to-day activities of the company. Remember, you are here to help the client.

You may also find business development value in our article The 7 Step Guide to Growing your 401(k) Business. These may be trying times, every day is a new challenge, but the secret of change is to focus all of your energy, not on fighting the old, but on building the new. Feel free to call us with additional questions on developing your 401(k) business. We love to partner with advisors for a win-win relationship.