[Updated 5-2-19 with new final section with additional David Musto interview] As the retirement industry is on the precipice of massive business, legislative, and regulatory transformation, the largest independent recordkeeper to workplace retirement and 529 plans intends to stay that way.

Dresher, PA.-based Ascensus, which administers retirement, college savings, and health plans for more than 8 million individuals, has been at the forefront of merger and acquisition activity in an industry poised for aggressive consolidation, both as a buyer and a seller.

In 2015, private equity firms Genstar and Aquiline bought Ascensus from its previous private equity owner, J.C. Flowers & Co., for a reported $750 million.

Since then, Ascensus has been rapidly acquiring regional Third Party Administrators, health care compliance, and benefits communication firms.

In the first quarter of 2019 Ascensus bought an Oregon-based health and welfare compliance firm, and completed a deal with State Farm that will see the insurance company's SEP and SIMPLE IRA plans migrate to Ascensus' retirement platform.

By some accounts, Ascensus has bought upwards of 30 retirement and benefits administration firms since 2016.

According to the company's numbers, Ascensus was recordkeeper to more than 98,000 retirement plans as of March 31, 2019—more than twice the roughly 44,800 plans it administered in 2015.

But as Ascensus was aggressively acquiring TPAs, its private equity owners were also shopping the firm. In June of 2018, Bloomberg reported Ascensus was on the block for $2 billion. There were no takers. Instead, a 25 percent stake was sold to Atlas Merchant Capital this past February.

David Musto, who was hired as president of Ascensus in 2017, suggested Ascensus' acquisitiveness, and solicitations by its owners, has stirred some uninformed speculation as to the firm's future.

“There is absolutely no doubt Ascensus will be Ascensus in five years,” Musto told BenefitsPRO.

“What's lost in the conversations over our ownership is that businesses that do great things for their clients continue to not only survive but thrive,” said Musto, who previously served as president of Great-West Investments and executive vice president of Empower.

“We have a clear and noble purpose helping 8 million individuals save for what matters most in their lives. We'll continue to invest in purpose-built technology, and our deep expertise between tech and our committed collaboration with our clients,” he added.

Ascensus' ownership—“whether private equity held or as a public company”—won't change that trajectory, says Musto.

Open MEPs not expected to disrupt Ascensus' client base

For all of the retirement industry, the next five years is setting up to be a period of historical evolution, and not just with respect to recordkeeper consolidation.

This month, the SECURE ACT will be brought to full vote on the floor of the House of Representatives. The bill, which passed out of the Ways and Means Committee by unanimous vote, tracks closely with the Retirement Enhancement and Savings Act in the Senate.

Each has robust Open Multiple Employer Plan provisions, which attempt to close the retirement plan access gap among smaller employers.

While it's hard to find opposition to Open MEPs, few in industry think they alone will be a panacea for the more than 50 million Americans that lack access to a workplace retirement plan.

“We believe Open MEPs will help move the needle, but in and of itself will not solve the problem, and will fall short in absence of efforts to simplify delivery of retirement programs,” said Musto.

Other industry analysts have speculated that Open MEPs, which allow non-affiliated small businesses to aggregate retirement assets under one plan and mitigate administrative costs and employers' fiduciary liability, will incentivize a migration of existing stand-alone plans to pooled plans.

If true, that could impact Ascensus, which counts small and mid-sized plans as its bread and butter. But Musto doesn't perceive that as a threat.

“We feel we are already able to deliver on the promises held out by Open MEPS,” he said. “Many of the aspects that excite people—purchasing power on investments, administrative efficiency—already exist. We have the ability to deliver very cost-effective programs for small companies with high levels of client satisfaction, and high levels of efficiency for the sponsor. We're not expecting a shift in terms of our existing client base.”

Most productive dialogue ever on retirement issues

For nearly two decades, Ascensus has administered 529 college savings plans, which are sponsored by states.

That foothold helped the firm win the business of state-sponsored IRA plans in Oregon, California, and Illinois. Those programs have moved forward despite the rollback of an Obama-era safe harbor intended to accelerate adoption of state-sponsored retirement plans.

Each budget proposal advanced during the Obama Administration included a provision for a federally sponsored IRA program. In lieu of congressional action, the Labor Department advanced regulations lifting barriers to government-sponsored retirement plans.

Some industry lobbies pushed back, arguing, in part, that state-sponsorship of IRA plans would encourage existing small business sponsors of retirement plans to offload their workers into government retirement programs.

So far, that's not happening, says Musto.

“It's too early in the maturing of state programs to have a definitive answer,” he said. “We're all anxiously awaiting the results. But in our experience working with small businesses, it's clear employers want to do right by their workers. It would be very surprising to see employers look to a state plan—which is a good start for saving—as an alternative to a more robust defined contribution plan. But time will tell.”

Opponents of government-sponsored retirement plans also argue mandated retirement plans are unduly onerous on small employers. The state plans in Oregon, California, and Illinois require employers that don't sponsor retirement plans to enroll employees in the programs, but do allow workers to opt-out of the plans.

Calling those plans a “mandate” is an unfair characterization, thinks Musto.

“A 'mandate' says you must deliver a benefit,” he said. “That's not what this is. These are a requirement for inclusion to assure all workers have an opportunity to receive a benefit.”

State plans are setting the stage to see if the nation has the “courage” to adopt a federally sponsored retirement plan, thinks Musto.

That courage could be tested sooner rather than later. A bill sponsored by Ways and Means Chairman Richard Neal, D-MA., would require small employers that don't offer retirement benefits to enroll workers in a federal plan.

He and committee ranking member Kevin Brady, R-TX, have promised Ways and Means will take up a second retirement package by the August recess, though it's not clear if a federal program is on the table.

Whatever emerges, Musto says the mere consideration of a federal retirement program signals a focus on retirement issues that he hasn't seen in his 30-year career.

“I think we are very fortunate to be in a position where these questions are now on the table and being debated,” he said. “We now have a multiple-decade experiment presenting irrefutable insight into what works for improving the savings experience of American workers. I don't think we've ever seen such alignment between the private and public sectors on these issues. The dialogue is more productive then ever before, even around the stickiest issue of inclusion.”

Instant Insights /

'Absolutely no doubt' Ascensus will be Ascensus in 5 years

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