Wachovia Retirement Services is now reaching out to the small and “emerging” business market. The strategy aims to leverage the resources of Wachovia Securities, the third-largest broker/dealer in the country, as well as the company’s own large retirement plan business, and offer full-service retirement plans to companies with 401(k) plan assets from $500,000 to $3 million. The Charlotte, North Carolina-based unit of banking giant Wachovia Corp. found that its small business customers–those with 50 to 300 employees–as well as its financial advisor network were looking for a retirement solution. So Wachovia designed a full-service platform for them that is usually available only to much larger plans.

Joe Ready, director of Wachovia Retirement Services, says the do-it-yourself 401(k) Internet services of today just don’t cut it for small business owners. “I believe that 401(k)s need to be sold, not bought,” he says. Small business owner clients want what “we offer,” he says–”the hand-holding process.” Of course, as the businesses grow, and plan assets surpass $3 million, Wachovia counts on remaining their retirement planner, while still administering to up and comers. Wachovia’s main competitors in the 401(k) market are insurance companies with their group annuity products and mutual fund companies. The new full-service retirement plans feature more than 120 investment choices, including products from Evergreen Investments, Wachovia’s asset management division, as well as third-party products.

Services include record-keeping, trust and custody services, compliance testing and reporting with plan document preparation assistance, management reporting, participant statement production and fulfillment, and Internet sites for access by all parties. Wachovia is using the technology and automation already available for its managed accounts and complementing it with financial advisors’ expertise. In fact, to design the service, which hasn’t generally been available for plans of this size, Wachovia worked with financial advisors and small business clients. Wachovia owns WYSTAR, a record-keeping platform, which it will use for the emerging business market, as well as the proprietary AdviceTrack managed account platform used extensively with other 401(k)s offered by Wachovia.

The use of the company’s platforms and systems brought to a smaller scale keeps the small business 401(k) plans affordable for small companies while retaining the features and benefits of larger plans, according to the company. Wachovia Retirement Services has more than 4,100 plans with more than 1.1 million participants and pensioners, and more than $68 billion in assets under administration, it says. For more information, go to http://www.wachovia.com/401k


LTC Insurance Tax Code Changes

Long-term care insurance, a pillar of retirement planning, may be more accessible for many seniors now that tax laws enacted in 2004 allow higher premiums to be paid with pre-tax dollars from a health savings account (HSA). The new law also allows the self-employed as well as businesses to deduct LTC insurance premiums. “The tax code has provided individuals with the opportunity to deduct a portion of their (LTC) premiums on their 1040 since 1996, but there were no options available to businesses,” says Wilma Anderson of Senior Care Associates in Littleton, Colorado. Now, if a company or business offers HSAs to the company employees, the use of pre-tax dollars to pay for LTC premiums is available, Anderson explains. For the 2004 tax year, the new, higher limits that can be paid from an HSA or deducted for the three top age groups are: ages 51 to 60 – $980; ages 61 to 70 – $2,600; and 71 or older – $3,250, according to tax research from John Hancock Life Insurance Co. The research is available at http://www.nyltcb.com/brokers/eaap/downloads/JH2004TaxGuide.pdf.


ABC Wants Current Pension Rules Modified, Not Scrapped

The retirement industry is casting a wary eye on the Bush Administration’s proposal to reform and simplify the rules governing private defined benefit pension plans in the wake of a more than $23.3 billion deficit in the Pension Benefit Guarantee Corp. The Bush plan calls for replacing multiple measures of pension liabilities with one measure adjusted to reflect risk of termination and replacing a set of contribution limits with one basic method. It would also measure funding liability based on corporate bond rates and require plans to make up funding shortfalls within a specific period of time. The PBGC’s $23.3 billion deficit would be cut by an increase in flat rate premiums to $30 from $19, while the accompanying risk-based premium rate would be adjusted periodically. In a white paper released February 17, the American Benefits Council says it wants the current rules to be modified, not a whole new system. The Council says the administration’s proposal “unjustifiably” burdens the defined benefit plan system and creates a strong disincentive to pre-fund, among other “flaws.” ABC suggests a “benefit-freeze” approach for companies with troubled plans. View the entire white paper at: http://www.americanbenefitscouncil.org/documents/fundingpaper021604.pdf

See the Administration’s detailed proposal at: http://www.dol.gov/opa/media/press/opa/retirementsecurityfactsheet.htm