Amanda Iverson: Redefining Retirement: How Cash Balance Plans Can Help Close the Gap

Today on The Gap, we’re thrilled to welcome Amanda Iverson, a true leader in the retirement plan space. Amanda is the CEO and a partner at Pinnacle Plan Design, a firm known nationally for its defined benefit and cash balance expertise. She was also the 2024 President of The American Society of Pension Professionals and Actuaries (ASPPA), the nation’s largest organization representing Third Party Administration (TPA) professionals in the retirement plan services industry. Amanda is known for her thought leadership. She speaks at national conferences and has been widely published on topics ranging from firm management to HR best practices. She was a Tucson “40 Under 40” honoree. She is a champion for educating business owners as well as other TPA firms and financial advisors.

Please join me in welcoming a dynamic leader who is shaping the future of the retirement plan industry— and one of my best friends, also known as the other half of the dynamic duo, Shamanda.

In this episode, Shannon and Amanda Iverson discuss: 

• The evolving role of TPAs in retirement plan administration
• Education and advocacy in the retirement planning space
• The strategic use and understanding of cash balance and defined benefit plans
• Addressing the savings and coverage gaps in the American retirement system

Key Takeaways:

• Pinnacle Plan Design collaborates with over 45 Third Party Administrator (TPA) firms across the country by providing specialized actuarial services behind the scenes, allowing these smaller firms to offer complex retirement solutions like defined benefit and cash balance plans without having to employ in-house actuaries.
• Despite the common misconception that cash balance plans only benefit high-income business owners, these plans often provide increased contributions for rank-and-file employees and can significantly boost total retirement savings across an organization.
• Because cash balance plans offer guaranteed employer-funded benefits with a stable rate of return, they are especially valuable for employees who are unable to contribute on their own due to financial constraints like student loans or childcare costs.
• Pinnacle places a strong emphasis on education by hosting regular webinars, offering training sessions with both actuaries and non-actuaries, and breaking down complex technical language so TPAs, financial advisors, and employers can confidently understand and present defined benefit plans.

"I love the advocacy work and being able to help get our voice out there to address the gap that still exists and is improving every day." — Amanda Iverson

Connect with Amanda Iverson: 

Website: https://pinnacle-plan.com/

Email:

Transcript

SPEAKER_01 0:27

Hello, I'm Dan and Edwards, your host of the Unarchized Service and Consulting. I would like to welcome all new listeners to our podcast. I started this podcast because I have a passion for helping Americans achieve a dignified retirement. This podcast is designed to help improve lives by sharing ideas for closing the gap that America has in both retirement savings and retirement plan coverage. Today on the gap, we are thrilled to welcome Amanda Iverson, a true leader in the retirement plan space. Amanda is the CEO and a partner at Pinnacle Plan Design, a firm known nationally for its defined benefit and cash balance expertise. She was also the 2024 president of the American Society of Pension Professionals and Actuaries, the nation's largest organization representing TPA professionals. Amanda is known for her thought leadership. She speaks at national conferences and has been widely published on topics ranging from firm management to HR best practices. She was a Tucson, 40 under 40 honoree. She is a champion for educating business owners as well as other TPA firms and financial advisors. Please join me in welcoming a dynamic leader who is shaping the future of the retirement plan industry and one of my best friends, also known as the other half of the dynamic duo, Shimanda. Today we're going to be talking about her journey, how Pinnacle supports other TPA firms and helps close both the savings and coverage gaps in America's retirement system and why she believes cash balance plan can help to close the savings gap for working Americans. Welcome, Amanda.

SPEAKER_02 2:02

Thanks, Shannon. I'm happy to be here. This is fun.

SPEAKER_01 2:06

I'm happy to have you. Of course, I always enjoy the chance to just sit and chat with you. So anyway, let's get started. First of all, I want to get started with your story. What on earth led you to a career in retirement plan services?

SPEAKER_02 2:20

Well, I'm no different than everyone else who found themselves here, right? Because very few people woke up when they were 10 and thought they weren't on to service retirement plans. But I got my degree in accounting. I went to a CPA firm and became a CPA public auditor. And I audited a bunch of retirement plans and I loved it. And that was my favorite niche to audit. So then Pinnacle Plan Design is associated with the CPA firm. So they actually had an opportunity to join them. And then I thought, well, this is great because I was only auditing employee benefit plans probably about 40% of my time at the firm. And so I thought if I can work on retirement plans in some way or help retirement plans in some way 100% of my time, let's do that. So then I ended up at Pinnacle a long time ago.

SPEAKER_01 3:04

Well, they are lucky to have you. So tell me what has kept you so passionate about this space since joining Pinnacle.

SPEAKER_02 3:12

Yeah, so it's pretty rewarding when we get to see our clients retire. You know, they talk about planned terminations. And we had a lot of planned terminations going on because of the length of the firm. And it's exciting to hear about work that we've done that helps other people retire every day. So that is one piece. But uh about maybe a decade, a little over a decade ago, I became pretty heavily involved in ASPA, the American Society of Pension Professionals and Actuaries, and ARA, the American Retirement Association. And through that, I got to see about a lot of the lobbying work that goes on and a lot of the work that we can do in order to help with that savings gap. And so that really fueled my passion and continues to fuel my passion there.

SPEAKER_01 3:53

Uh yes, you and I both have that passion for the advocacy work that ARA does and for the volunteer work that they let us do. So okay. So you have your CPA, your MBA, your HR credentials.

SPEAKER_02 4:09

Yeah.

SPEAKER_01 4:09

You graduated with your MBA from the University of Wisconsin MBA consortium. You're now the CEO and a partner at Pinnacle Plan Design. So for people who may not be familiar with Pinnacle or with you, can you tell us a bit about what Pinnacle does and who you serve?

SPEAKER_02 4:29

Sure. So Pinnacle, like your firm, one piece of what we do is we serve retirement plans as the third-party administrator of the TPA. So we serve several, many, many plans in 40 states in that capacity. So we're working as their TPA with the financial advisor. And so we do that very regularly every day here. And then another side of what Pinnacle does, which is a little bit more unique, is we also work with other TPA firms. So firms like yours that may not have an actuary on staff. And we work and do their, we call it the back office actuarial work. So they don't they are able to offer cash balance and define benefit plans to their clients. And we're in the background doing the actuarial work over here. So we work with about 45 TPA firms across the country.

SPEAKER_01 5:11

Wonderful. And we are lucky to have you supporting us because there is no way that I uh would want to do defined benefit plans myself or and I don't have the opportunity to have an actuary on staff. So it has been a real blessing to have you guys as our back office actuarial firm.

SPEAKER_02 5:28

Thanks.

SPEAKER_01 5:29

That's good to hear. One unique aspect of Pinnacle is your support for other TPA firms by offering those actuarial services that we just talked to. Tell me how did that model come about for you all? And how does that collaboration help strengthen the overall retirement plan ecosystem?

SPEAKER_02 5:47

Yeah, okay. So our original founding partner, radius managing partner was Kevin Dawnan, and he is an actuary and he is extremely passionate about education, particularly educating other professionals in the retirement plan industry. And so he spent a lot of his career and then helped many others within our firm encouraging us to educate other TPAs across the country. And out of that, we saw a need for uh TPA firms that wanted to offer additional services to their clients, but they couldn't. And so we're like, wait a minute, we have capacity, we have multiple actuaries, they need help. Can we figure out how to do this? So through that, organically, it grew and grew and grew and grew to where it is today. Um, so it's great because it it allows other firms that, like you said, don't have the opportunity to have an actuary on staff, still be able to offer that benefit uh to their uh clients. And it's another retirement plan, which you know, more retirement plans is a good thing. So that's uh I love it.

SPEAKER_01 6:51

Awesome. Thank you. Okay, so many TPAs don't have in-house expertise in defined benefit or cash balance plans like we've been talking about. How does Pinnacle work to educate and empower those TPAs so they can better serve their clients?

SPEAKER_02 7:07

Sure. So we work, like I said, that we are pretty passionate here about education. So we work on educating the TPAs. So oftentimes a TPA will come to us and say, you know, I've all these 401k plans and all these clients, but I've never worked on a cash dolls plan, or they're, you know, sort of intimidated by them, say. And uh so what we do is we do a lot of education. So at minimum, we have quarterly webinars on various define benefit plan topics. We have a kind of unique situation in that we have some non-actuaries like myself, and then many actuaries here. So sometimes the actuaries speak in a way that I'm sort of like, okay, back it up English, English version, right? So we do a lot of training sessions where someone like myself and then the actuary will get on and talk about pretty technical, defined benefit plan things, and then we call it actuarial language in English because I'll have to remind them, like, okay, back it up, let's talk about that in English. So I think what they our actuaries do a really great job of is taking this really complex uh matter and breaking it down so our TPAs can understand it so they can understand when it makes sense for their clients.

SPEAKER_01 8:15

Yeah, I know you guys just did one on planned terminations and Allison, my office manager and I were listening to it. And one of the things we thought was really funny was the first time we went through a planned termination with Pinnacle, we had no idea that you couldn't charge distribution fees to participants in a planned termination. And so of course we did, and then we got the big no-no call. Yep. And so I noticed in your uh in your webinar the other day, I think they said 15 times at least you cannot charge fees to participants for distributions from a cash balance plan. And Allison and I just laughed when we got off. They were like, Oh, that was definitely directed at us.

SPEAKER_02 8:55

But no, that is a very common when people first come in. So now, right away from the beginning, we say some things like you must know this. And that is one thing, you cannot charge those fees distribution.

SPEAKER_01 9:07

Well, it was so funny because when we did, I was like, I was talking to Lynn, who, you know, has primarily tried to train me so that I can work better with you all. But it was funny. I was like, well, I mean, that would have been nice to know before we processed the distributions. And sure enough, everything from then on says you cannot charge these fees. So, but I've learned so much. I mean, it's you know, there's a lot uh that DC practitioners don't know, and you your team is really good at teaching us those things and explaining them to us.

SPEAKER_02 9:38

But it is helpful, just like you said, like because sort of around here, that's like second nature, right? But if you're new to the plans, you're like, how would I know that, right? So we actually depend on our TPAs to tell us the stuff they don't know, and that helps us with the education.

SPEAKER_01 9:52

Yeah, that's no, that's great. Okay, back to cash balance plans, defined benefit plans. What trends or misunderstandings do you commonly see among business owners, TPAs, and financial advisors when it comes to defined benefit plans? And I want to know how pinnacle helps kind of bridge that knowledge gap.

SPEAKER_02 10:12

So the most common uh thing I hear when I people say like this is pinnacle, they specialize in defined benefit plans or cash balance plans, or aren't defined benefit plans dying, right? That's what I hear all the time. And the answer is not necessarily no. You know, the ginormous defined benefit plans, their trends are what they are, but we're dealing more with mid to mid-size businesses. And those trends, uh, they're still a really great uh option for benefit for those clients. So that's one thing that um we commonly the other thing is so say a company got into a windfall in one year and they want, then they're like, hey, we want a cash balance plan. We know that this is a great thing. And we have to remember that there's still a permanency requirement. And so, you know, a really cyclical company is not typically a great option for a cash balance plan because they're just there needs to be some stability and you need to be able to handle some risk. And so those huge windfalls when they want to make a plan for a year, we're kind of like, no, the plan is not supposed to be here for a year. That's not a great option for you.

SPEAKER_01 11:17

Right. Do you get a lot of concerns from financial advisors or from business owners or even from, you know, TPAs that are interested in working with you? Concerns about like complexity and cost, and how do you kind of tackle those?

SPEAKER_02 11:32

Yeah. So we're just trying to be transparent as possible. So the honest to goodness truth is just transparency. So an education. So we're talking to them about here are the risks associated with the plans, right? And then here are the costs associated with the plans, and here are the benefits associated with the plans. And we look at all that to see if a cash balance plan makes sense for a business. But oftentimes it does. And really, I think the complexity, people are worried, like I'm gonna have to know what the actuary knows. And you don't have to know what the actuary knows, right? They're in the back doing all the um calculations, but that isn't really the job of the financial advisor or the other TPA or the business owner, right? You gotta understand how the plan works and we got we've got to do a good job of educating them there. But that complex nature of it, people sometimes think, oh, they're just too complicated. And they're really not, they're really not that complicated. I'll don't tell the actuaries I said that.

SPEAKER_01 12:24

Oh, yeah, I won't tell them. I promise I won't tell them. It's funny though, because you know, most of the financial advisors that we work with and most of the business owners that we work with, they just want to know that the clock works. They don't want to know how the clock works. And then every once in a while I get one that wants to know how the clock works.

SPEAKER_02 12:42

Yeah. So it's not going that level of detail. You know, certainly you can go into, hey, here's how you build this entire bike, right? But um, a lot of people just want to ride the bike and enjoy it.

SPEAKER_01 12:51

So yeah. I just want to ride the bike and enjoy it and have you all tell me that the bike is fine to ride. So honestly, the mission of this podcast is to explore ways to close the retirement savings and coverage gaps in America. From your perspective, how is Pinnacles work, especially in the defined benefit and cash balance space, contributing to closing those gaps?

SPEAKER_02 13:14

Okay. So since you told me to focus on that area, that's where I'll focus. But obviously, in the same way that other TPA firms, you know, we're focused also on those 401k and and profit sharing funds, of course. But there's a misnomer on a cash balance plan for a small business that that's only for the owner. And that's just not the case. A lot of times, Shannon, if I was going to give you$3 to retire or give you$7 to retire, which one would you rather have? Well, seven, of course. Seven, right? So a lot of times that cash balance plan, adding that on to a$401k plan can really increase the benefits to the employees as well as the owner. So that helps with that gap, that coverage gap um with the savings, because it really can enhance someone's savings by having that plan added to their overall plan or portfolio.

SPEAKER_01 14:04

Yeah. And I think, you know, there has been some stuff, some stuff recently where, you know, they portrayed a cash balance plan as something that it's not, right? They portrayed it as something just for high income earners or business owners. And, you know, I really feel like they they don't tell the whole story in that, or they don't know the whole story.

SPEAKER_02 14:28

Right.

SPEAKER_01 14:28

And that it's really not true. I'm because as you mentioned, oftentimes we're increasing benefits that the employees wouldn't have already gotten.

SPEAKER_02 14:37

Absolutely.

SPEAKER_01 14:39

And employees are happy to have those increased benefits. And a lot of times it helps, you know, keep the employees there longer because they're interested investing in that and stuff.

SPEAKER_02 14:50

So like you said, there's two there, like there's two kinds of things you hit on there. One is increasing that savings number. So, you know, if you just had a defined contribution or 401k plan all by itself, you might get$3, like you said. And then you add a cash balance plan and now suddenly you're getting$7. Well, that's a great benefit to you. Another benefit is just retention for that um company because, you know, if I'm looking at two companies and one has both plans, and one only has one plan, and the benefits are richer over in this other plan where they have two, that's great retention benefit for the plan or for the company, excuse me. So yeah, I agree with you that uh there's a lot of uh mistaken uh understandings of cash bonds plan if they're only for, you know, owners or high-income people. And that's not necessarily true. They can be really beneficial for all employees.

SPEAKER_01 15:41

Yeah, I think one thing that I really like about them too, added to the 401k plan, is sometimes we have employees or team members who they're not in a position, maybe due to something in their personal life, to actually save for themselves. Um, you know, maybe they're paying off student loans, maybe they have, you know, two kids in daycare. Whatever the situation is, maybe at this time of their life, they don't have the extra income to put away themselves. So one thing that I really like about the cash balance plan too is that they don't have to put money away. They are gonna get the benefit of the company contribution, whether they put their own money away or not. And then I think if we compare it, you know, to the 401k plan, where most 401k plans are giving participants the ability to direct their own investments, to make their own investment choices, which may or may not turn out to be a wonderful, profitable idea for them, but it is what most 401k plans do now. You know, the cash balance plan has a guaranteed rate of return on it, that the participant is not, you know, not going to get hurt. They're going to get that guaranteed interest rate. You want to touch on that a little bit?

SPEAKER_02 16:58

Yeah, on the 401k side, just like you're saying, if if it's participant directed right, that participant is bearing the risk, let's say, of that, how that investment does, if they're deciding where it goes, right? And so, you know, if their investments go gangbusters, great. But if they tank, oh whoops. Uh, whereas the employer is really bearing the risk over on that cash balance side because they're directing all of those assets. And usually a cash balance plan has a more conservative uh uh savings plan. And so it is that nice supplement where, you know, over here, you know, if I don't know anything about it, you have hopefully a financial advisor who's doing a great job, guiding you, of course, and helping you with that. But really, as the employee, you're bearing the risk. And over here on this cash balance plan, you know, the employee is no longer bearing that risk because they have that uh rate of return that they know they're getting basically in their plan, essentially.

SPEAKER_01 17:50

And labor.

SPEAKER_02 17:51

Yeah.

SPEAKER_01 17:52

And it's, you know, I mean, that's a huge benefit in and of itself, as far as I'm concerned, because no matter what happens, they're going to get the promised benefit at the end, either when they retire or when they terminate employment. You know, they're going to get what I promised them or what the business owner promised them at the very beginning, regardless of what happens in the market.

SPEAKER_02 18:11

Yeah, that's kind of the nice piece of the cash balance plan more so than a defined benefit plan. A cash balance plan used to kind of say, Hey, when you retire, you're gonna get here's this long formula, right? Whereas um a cash balance plan looks a little bit more like a 400k. It sort of tells them, like, here's your theoretical account balance, here's you know, what the number is. And so it kind of um helps them understand a little bit more. It's a little more understandable about, oh, this is what I'm getting. All right.

SPEAKER_01 18:37

Right. I no, I totally agree. When uh when we started talking about cash balance plans years ago, I finally sort of understood what we were talking about versus like trying to talk about traditional defined benefit plans and figure out what exactly the participant was really getting when they retired. But I I agree with you, it's easier to understand.

SPEAKER_02 18:55

Yeah, easier for the president, the owner, everybody.

SPEAKER_01 18:58

Yeah. What would you say to a business owner or financial advisor who's hesitant to explore cash balance plans because they think they're too complex?

SPEAKER_02 19:06

Well, first I would talk to them. Like I said, I always like to tell them the risks associated, right? So I start with that, like here's the I want to be transparent. Here's the risks, here's some rules associated with them. This is not a plan for a year. I want to make sure that permanent C role is they're very clear about that. And then I want to talk at what are your goals, right? So let's look at your overall demographics of your company and mix and let's do an illustration. Let's see if it makes sense for you. And you know, in what makes sense for one company might not make sense, even the same exact illustration for another company because it just depends on the goals of those come, uh those plans. For the financial advisor, usually the financial advisors uh like the plans because, like I said, it's a little bit more conservative of an investment. So they're trying to get a certain rate of return when they're investing the assets. So that's a little bit, I would say, even dare I say, easier for that financial advisor when they're trying to do that. So actually for them, once they understand it again about education. But I I do want to make sure that when you never sell a plan without them understanding the benefits and the risks for sure.

SPEAKER_01 20:09

Right. Okay, as we look into the future of retirement plan design, what excites you the most about the role of TPAs, especially those who are stepping into more advanced plan types like defined benefit and cash balance plans?

SPEAKER_02 20:24

Well, the as we expand that throughout the country more and more, you know, if we can get more and more cash balance plans out there. I'm excited about that because like I said, I'd rather have see employees get$7 versus$3. And that often happens with a plan. So that is uh a huge benefit, I think. Overall, I love that TPAs are generally we're the sort of the nerds of the bunch, right? You know, we're kind of like they're you're like the less cool version of a financial advisor, let's just say. We generally really like education. I know that's a stereotype, but generally that's the case. And so I really appreciate that TPAs are excited about educating their clients about the benefits of a plan and how important it is. You know, I'm always surprised when I we still find businesses that don't have plans. And right this is it seems crazy to me. I'm like, it's such a huge recruiting tool for you. And an important part of being a business owner is like looking at this and looking at your employees and making sure, you know, you have some plans for them, including a retirement plan, helping them out there. So I'm excited that TBA seem passionate about that education piece. I like that. And then those of us who are involved heavily with ARA, I love the advocacy work and and being able to help uh get our voice out there to help, you know, with that gap that's still sitting there. That's improving every day, but still sitting there is improving and is improving.

SPEAKER_01 21:45

So, and I I, you know, I firmly believe in ARA's mission, as well as, you know, their belief that the private retirement system is working and is working well. Because I think, you know, all of us that are in the trenches every day. Working with plan participants, working with business owners, working to get those gaps closed, we're actually seeing those improvements on a daily basis. So I think, you know, it is exciting.

SPEAKER_02 22:12

Yeah, it is. And you know, really uh when we think of retirement, sort of have the social security bag, right? And then we have this retirement plan bag. And the more we can add to that retirement plan bag and get that in there, those two working hand in hand. It's exciting when you get to see clients retiring and what goes to their employees and you know, helping to cover that gap every day is an exciting part of what we do.

SPEAKER_01 22:35

It is. So Amanda, thank you so much for being here and for all the work you and your team are doing to empower TPAs and help close the gaps in retirement savings and coverage. Your insight into cash balance plans and education is exactly the kind of practical innovation we need in our industry. For anyone who wants to learn more about the work Amanda and her team at Pinnacle are doing in the industry, we will drop her contact information in the show notes. Thank you for joining us on The Gap, and we will see you next time. Thanks, Shannon.

SPEAKER_00 23:06

Thank you for listening to The Gap. Be sure to check out the show notes for important links, retirement plan resources, and more at TriStarPension.com. While you're there, sign up for our information packed newsletter. And if you enjoyed the conversation, follow our podcast, share it, and tell a friend about it. And most importantly, rate and review it on Apple Podcasts or wherever you get your podcast. Thanks for listening.