How to Sell Executive Benefits Part 10: Third Party Administration

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.
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● 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.
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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
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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
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For agent use only. Not for public distribution. ©2014 Voya Services Company. All rights reserved. CN0430-9754-0516