An Online Tool to Manage DB Plans

Have you contemplated managing defined benefit plans but recoil at the thought of working with pension attorneys and actuaries? Well, CCA Small Business Group in Chicago recently launched an online tool called MyMax that allows advisors to help self-employed clients defer up to 100% of their annual income to a DB plan without using actuaries or lawyers.

CCA Small Business is an offshoot of Chicago Consulting Actuaries, which provides actuarial consulting services to huge companies like BellSouth and SBC. CCA was launched “to attack the actuarial field in a different way than the big guys,” says Jeff Stevenson, CCA’s president. CCA’s main goal is to “use technology to make retirement plans more understandable to the consumer, benefits manager, or employer,” he says–and in MyMax’s case, for advisors as well.

Helping small businesses manage DB plans is a “hot spot” now, Stevenson says, because small businesses, like their larger brethren, need products and services designed specifically to fit their needs. The problem is that small firms can’t afford to hire consultants to design such products. “If you’re a small business, it’s not that easy to justify the economics” of hiring a firm, he says. “We think the benefits [for smaller firms] are there, but the question is how to deliver them in an effective and economic way.” The most effective and cost-efficient method is to “use technology to automate the process and then use effective distribution channels,” Stevenson says.

MyMax www.mymaxplan.com is a fully automated process that allows the advisor not only to set up model DB plans online, Stevenson says, but also “apply for the plan and administer the plan online–without maybe ever talking to an actuary.” Pioneer Investments and Medavante recently unveiled single-person DB plans as well, but Stevenson says both products are “front-end modeling tools” that aren’t automated and still require the advisor to interact with actuaries.

Jeff Merriman-Cohen, managing director of Merriman Capital in Seattle, calls MyMax user-friendly and says it offers “a much more seamless, direct connection between the advisor and the administrator.” The actuarial work, he says, “is built into MyMax, and it’s transparent to the advisor.” Like many other advisors, Cohen has refrained from jumping head-first into managing lots of DB plans (his firm handles a few such plans now) because it’s a complicated process. The fact that MyMax takes care of the actuarial legwork is a welcome service for any advisor, he says. “The last thing we want to do is communicate with actuaries. It’s not our language.”

A Solution for Sole Proprietors

Stevenson says the small DB plan market can be broken into two categories: sole proprietors and firms that have from two to 100 employees. For now, MyMax allows advisors to set up DB plans for sole proprietors. Automating a service for firms with more than one employee is more complex. With one-person DB plans, “you don’t have discrimination testing, or a lot of IRS compliance issues to deal with,” Stevenson says, “so you can set up a DB plan that looks and operates like an IRA.”

Advisors who are using MyMax now give it two thumbs up, Stevenson says, and are anxiously awaiting a version that can service multiple-employee DB plans. Such a service is on CCA’s agenda, and Stevenson says the company hopes to “roll out something next year.”