AnnuityGuy63
Expert
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Is there anyway to create a 401k for a small company using FIA's? and give the employees a traditional or Roth option?
401K Question
- Thread starter AnnuityGuy63
- Start date
- 4,575
Really asking in the wrong place. Should be directing your question only to those properly legally licensed to be involved with 401k. If you are not licensed, find someone to refer to with no ability to be compensated. If you are licensed, go up your upline in broker dealer or compliance dept to discover what products & licenses you possess that might offer such an offering.
While 401k can offer traditional & Roth, I am not aware of any FIA being involved yet. The secure act 2.0 just recently began promoting the possibility that annuities might be able to be added to employer plans, fiduciaries on the 401k plan have legal exposure to the product offerings in their plan. With a major increase in lawsuits against 401k plans, many of them & their insurance carriers are tip toeing forward with offerings within the plan.
- 11,277
No, he asked in the exact right place.
As far as I know, Lafayette Life is the only company that has a group fixed indexed annuity for qualified plans.
[EXTERNAL LINK] - Group Marquis Fixed Indexed Annuities
As far as I know, Lafayette Life is the only company that has a group fixed indexed annuity for qualified plans.
[EXTERNAL LINK] - Group Marquis Fixed Indexed Annuities
- 11,277
The only license you need is the one to sell the product.
For these complicated sales, one of the two parties needs to be considered a sophisticated or accredited investor by the SEC. That can be the business itself rather than the salesperson.
That's why there are non-registered unallocated group variable annuities and group fixed indexed annuities.
Just did a webinar with Nick Paleveda (founder of National Pension Partners [EXTERNAL LINK] - National Pension Partners) and we discussed 412(e)3 pension plans and we did bring up the licensing aspects for selling these particular plans.
For these complicated sales, one of the two parties needs to be considered a sophisticated or accredited investor by the SEC. That can be the business itself rather than the salesperson.
That's why there are non-registered unallocated group variable annuities and group fixed indexed annuities.
Just did a webinar with Nick Paleveda (founder of National Pension Partners [EXTERNAL LINK] - National Pension Partners) and we discussed 412(e)3 pension plans and we did bring up the licensing aspects for selling these particular plans.
- 4,575
Doesn't appear it is available for 401k, only defined benefit or money purchase or profit sharing. He asked specifically about 401k
Also, 401k plans (employer) have to act in the best interest of the employee, so they must vet out to make sure the chosen ones to offer in the plan are in best interest in regard to carrier, fees, etc. Any 401k committee choosing to buy from am unlicensed planner is putting the employer & the board members themselves in legal jeopardy. There is currently aggressive law firms suing & winning in lawsuits against 401k plans because the fees of some choices were higher than other similar choices. This is causing insurance carriers that insure plans for legal liability, etc to be more strict on making sure the plan & the committee are putting the plans out for bid on a regular basis.
[EXTERNAL LINK] - 401(k) litigation after the Supreme Court decision
[EXTERNAL LINK] - Will 2023 be another banner year for 401(k) fee litigation?
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- 11,277
Excellent points. Just saying that there are ways to go about this without a securities license.
Btw, here's a non-registered group variable annuity:
[EXTERNAL LINK] - WealthQuest III Non-Registered Group Unallocated Variable Annuity
Per the 'fine print' on this PDF:
"Non-Registered WealthQuest® III Group Unallocated Variable Annuity has been developed exclusively for funding Pension Plans, Profit Sharing Plans, and 401(k) Plans. Information herein is not intended to be legal or tax advice. You should consult with an attorney or tax advisor for specific circumstances."
https://img.anicoweb.com/wps/wcm/co...-57540644-29ea-44d3-b522-cbf6be65af75-o2W9Atp
Now, this isn't a fixed indexed annuity, but it is an annuity for funding a 401(k) and no, you don't need a securities license... depending on the state, if I remember correctly.
Btw, here's a non-registered group variable annuity:
[EXTERNAL LINK] - WealthQuest III Non-Registered Group Unallocated Variable Annuity
Per the 'fine print' on this PDF:
"Non-Registered WealthQuest® III Group Unallocated Variable Annuity has been developed exclusively for funding Pension Plans, Profit Sharing Plans, and 401(k) Plans. Information herein is not intended to be legal or tax advice. You should consult with an attorney or tax advisor for specific circumstances."
https://img.anicoweb.com/wps/wcm/co...-57540644-29ea-44d3-b522-cbf6be65af75-o2W9Atp
Now, this isn't a fixed indexed annuity, but it is an annuity for funding a 401(k) and no, you don't need a securities license... depending on the state, if I remember correctly.
- 10,329
Possible, yes. You can set up a 401k through a TPA, then use whatever investment you choose to fund it that is legally allowed under IRS code.
However, the Custodian of the chosen investment must allow that product to be sold and classified as a 401k.
A few FIA carriers do allow this with individual FIAs.
BUT... with empoloyees involved its a no go.
As Allen pointed out, ERISA regs require a Plan Sponsor to not only vet investments but ensure there is adequate investment choices within the plan.
Having just FIAs for employees is a guaranteed lawsuit waiting to happen. I doubt any TPA would take that on.
Ive done this inside SoloKs in the past. But its usually just a temporary measure.
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Some states do allow non-registered reps to sell Group Annuities that have mutual funds in them. Idk about your state.
Ameritas & Lincoln both have non-registered group annuities that can be used as a 401k Plan. Empower does as well.
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I could give you a list of 50 reasons not to use FIAs with employees. All of them end in a lawsuit.
However, the Custodian of the chosen investment must allow that product to be sold and classified as a 401k.
A few FIA carriers do allow this with individual FIAs.
BUT... with empoloyees involved its a no go.
As Allen pointed out, ERISA regs require a Plan Sponsor to not only vet investments but ensure there is adequate investment choices within the plan.
Having just FIAs for employees is a guaranteed lawsuit waiting to happen. I doubt any TPA would take that on.
Ive done this inside SoloKs in the past. But its usually just a temporary measure.
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Some states do allow non-registered reps to sell Group Annuities that have mutual funds in them. Idk about your state.
Ameritas & Lincoln both have non-registered group annuities that can be used as a 401k Plan. Empower does as well.
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I could give you a list of 50 reasons not to use FIAs with employees. All of them end in a lawsuit.
- 4,575
There are definitely some variable & fixed annuities in some 401k plans. However, you have to make it through the TPA plan sponsor (Fidelity, Principal, etc, etc, etc) to get them to agree to do all the added admin work to get the values from the insurance carrier to include in all the regulatory reporting, statements & numerous audits that happen with 401k plans.
lastly, I am very certain you must be securities licensed to be the rep on a variable annuity, unless you were suggesting it wasnt needed if an FIA was to be in a plan.
Trust me, I have attempted to try to get FIA inside my own companies 401k plan because I believe participants age 50+ would really like to have some of their money in a portion of the plan that helps protect against losses and/or has some lifetime income guarantees without having to irrevocably give it up like a SPIA.
With the Secure Act giving plans some protections to add annuities, we may begin to see them. But, I honestly think you are going to see the massive 401k TPA players & carriers connect directly to come up with plan options that the 401k employer/committee will sign on to offer & their legal departments will endorse.
- 10,329
I know you are just using that as an example.
But to the rest of the forum. This is absolutely the worst 401k product you could provide an employer and their employees.
It is everything negative you hear about 401k plans. Extremely high fees, limited investment selection, surrender charges on the entire plan so they are locked in.
Its the equivalent of selling a 15 year FIA with a 3% Cap.
Use Lincoln or Ameritas. They have quality group annuities.
- 4,575
how does this work with DOL & other regs regarding fiduciary standard. How could having a life only licensed agent install a group variable annuity possibly meet that standard, especially if the rep is meeting with any of the employees to discuss the plan & the offerings. Seems like a lawsuit waiting to happen for the employer/plan administrator to not vet that aspect out in todays environment
