abstract collage with arrowFor all of the retirement industry, the next five years is settingup to be a period of historical evolution, and not just withrespect to recordkeeper consolidation. (Photo:Shutterstock)

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[Updated 5-2-19 with new final section with additional DavidMusto interview]  As the retirement industryis on the precipice of massive business, legislative, andregulatory transformation, the largest independent recordkeeper toworkplace retirement and 529 plans intends to stay that way.

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Dresher, PA.-based Ascensus, which administers retirement,college savings, and health plans for more than 8 millionindividuals, has been at the forefront of merger and acquisitionactivity in an industry poised for aggressive consolidation, bothas a buyer and a seller.

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

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Since then, Ascensus has been rapidly acquiring regional ThirdParty Administrators, health care compliance, and benefitscommunication firms.

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In the first quarter of 2019 Ascensus bought an Oregon-basedhealth and welfare compliance firm, and completed a deal with StateFarm that will see the insurance company's SEP and SIMPLE IRA plansmigrate to Ascensus' retirement platform.

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

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

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

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

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

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“What's lost in the conversations over our ownership is thatbusinesses that do great things for their clients continue to notonly survive but thrive,” said Musto, who previously served aspresident of Great-West Investments and executive vice president ofEmpower.

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

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Ascensus' ownership—“whether private equity held or as a publiccompany”—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 issetting up to be a period of historical evolution, and not justwith respect to recordkeeper consolidation.

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

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Each has robust Open Multiple Employer Plan provisions, whichattempt to close the retirement plan access gap among smalleremployers.

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

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

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Other industry analysts have speculated that Open MEPs, whichallow non-affiliated small businesses to aggregate retirementassets under one plan and mitigate administrative costs andemployers' fiduciary liability, will incentivize a migration ofexisting stand-alone plans to pooled plans.

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

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“We feel we are already able to deliver on the promises held outby Open MEPS,” he said. “Many of the aspects that excitepeople—purchasing power on investments, administrativeefficiency—already exist. We have the ability to deliver verycost-effective programs for small companies with high levels ofclient satisfaction, and high levels of efficiency for the sponsor.We're not expecting a shift in terms of our existing clientbase.”

Most productive dialogue ever on retirement issues

 For nearly two decades, Ascensus hasadministered 529 college savings plans, which are sponsored bystates.

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

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Each budget proposal advanced during the Obama Administrationincluded a provision for a federally sponsored IRA program. In lieuof congressional action, the Labor Department advanced regulationslifting barriers to government-sponsored retirement plans.

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Some industry lobbies pushed back, arguing, in part, thatstate-sponsorship of IRA plans would encourage existing smallbusiness sponsors of retirement plans to offload their workers intogovernment retirement programs.

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

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“It's too early in the maturing of state programs to have adefinitive answer,” he said. “We're all anxiously awaiting theresults. But in our experience working with small businesses, it'sclear employers want to do right by their workers. It would be verysurprising to see employers look to a state plan—which is a goodstart for saving—as an alternative to a more robust definedcontribution plan. But time will tell.”

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

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

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“A 'mandate' says you must deliver a benefit,” he said. “That'snot what this is. These are a requirement for inclusion to assureall workers have an opportunity to receive a benefit.”

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

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

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

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

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“I think we are very fortunate to be in a position where thesequestions are now on the table and being debated,” he said. “We nowhave a multiple-decade experiment presenting irrefutable insightinto what works for improving the savings experience of Americanworkers. I don't think we've ever seen such alignment between theprivate and public sectors on these issues. The dialogue is moreproductive then ever before, even around the stickiest issue ofinclusion.”

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.