5 Tips to Fine-Tune Your Sales Strategy With Form 5500

Retirement plans are a highly competitive sales market. To find success, you need to consider all the sales tools at your disposal. One valuable tool is the Form 5500.

Form 5500 includes information about plan design and financials, compliance, service providers and employees. For advisors, this data can help identify areas for improvement and how you can add value to the client relationship.

The form is a compliance and disclosure document developed by the Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation. Its purpose is to help ensure that employee benefit plans are operated and managed according to ERISA standards. Qualified retirement plans are required to file a Form 5500 every year.

• Plans with 100 or more participants must file Form 5500. This two-page document is accompanied by one or more schedules of information. Also attached are the findings of an audit performed by an independent third party.
• Plans with fewer than 100 participants must file Form 5500-SF. This two-page form has no attachments or schedules.

How Can Form 5500 Help With Sales?

Follow five tips to help you fine-tune your sales strategy using Form 5500:

1. Make sure you’re looking at the most recent form for the plan. This ensures you have the most up-to-date information. To find the most recent form, go to the DOL website and select Form 5500 Series Search. Enter the name of the plan you’re interested in.

2. Look for the effective date of the plan. This will tell you how long the plan has been in operation. The older the plan, the more likely you’ll be able to identify ways to improve it. Here are questions to ask about older plans:

• Is the current investment lineup meeting the needs of the current plan demographics?
• Is there a Qualified Default Investment Alternative for the plan?
• Is the plan making use of the latest plan design features to help improve retirement outcomes, such as automatic enrollment and escalation?

3. Check the employer/plan sponsor signature to confirm the name of your key sales contact.

4. Examine lines 5 and 6 to determine the number of participants at both the beginning and end of the year. This will tell you if the plan is growing.

5. Look at line 8a, which shows a list of codes corresponding to plan attributes. Those that start with the number “2” pertain to defined contribution plans. These codes can be conversation openers:

• 2F: This means the plan is a 404(c) plan. Ask if the plan sponsor is absolutely sure that participants are receiving all disclosures and information required by ERISA. Many are not, which is a potential pain point you can explore. This oversight can open up the plan sponsor to fiduciary liability. If no 2F code is listed, you can describe the benefit of 404(c) protection.
• 2K: This means that the plan offers an employer match. If code 2K is not listed, you can explain how employer contributions can encourage higher deferral rates and better potential outcomes for participants.
• 2S: This indicates that the plan uses automatic enrollment. If 2S doesn’t appear on the form, take this opportunity to introduce auto features as a way to help the plan sponsor increase participation and improve outcomes.
• 2T: This means the plan has a default investment option for employees who don’t select their investments. If a plan doesn’t have a QDIA, take the opportunity to explain the potential benefits of one, such as a target date fund.

Dig Into the Attachments

Schedule A may give you information about the plan’s insurance broker, including fees and commission. Can you offer better service at a more favorable rate?

Schedule C, which is for large plans, can help you learn what other service providers are offering and how much a plan is paying a TPA. You can also learn valuable details from the independent plan audit that must be submitted with Schedule C.

Schedule H, for plans with 100 or more participants, and Schedule I, for smaller plans, will give you information on a plan’s current investment lineup. This attachment can also show whether the plan has experienced any administrative headaches, such as deemed distributions. This could be an opportunity to offer a solution with a better provider and service.

Reach out to your retirement plan consultant for more information and guidance on using Form 5500 in your sales efforts. Read about more ways to assess a client’s experience using Form 5500.

For financial professional use only.