Employee Education Webinar Sept 09

8/14/2019 Employee Education Webinar Sept 09

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September 10, 2009

What Fiduciaries Should DoIn a Time of Rocky Markets


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Your Presenters

Linda Lauer ThompsonDunavant Employee BenefitPlan Services

Jeff Barnes BarnesRetirement Plan Specialists,Inc.

David Thornton Bass Berry &Sims

Sue Ellen Lovejoy LovejoyAssociates


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You May Be A Fiduciary If You

Have implementation authority to adopt,amend, merge, freeze, or terminate a plan

Have decision-making authority in theselection and retention of plan fiduciaries

Give investment advice with respect to planassets for compensation

Make discretionary decisions under the plansuch as whether a hardship withdrawal may be

made, etc. Select plan providers Investment platforms,

record-keepers, TPAs, brokers, etc.


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Overview of ERISA 404(a) and 404(c)

404(a):Fiduciary

Duties

404(c):Protections for Participant

Investment Decisions

Investment Policy

Statement (IPS)

Quantitative/Qualitative

Fund Analysis

Select Investments

Implement Results

Broad Range of

Investment Options

Sufficient Investment

Information/Education

Policy Statement

and Employee Notice

Copy of Prospectus

Voting and Tender Rights

Description of Fees

and Expenses

Monitor Investments

Follow Plan Document

404(a):Fiduciary

Duties

404(c):Protections for Participant

Investment Decisions

Investment Policy

Statement (IPS)

Quantitative/Qualitative

Fund Analysis

Select Investments

Implement Results

Broad Range of

Investment Options

Sufficient Investment

Information/Education

Policy Statement

and Employee Notice

Copy of Prospectus

Voting and Tender Rights

Description of Fees

and Expenses

Monitor Investments

Follow Plan Document


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Limited Liability Relief Under 404(c)

Plan is exempt fromresponsibility for participants assetallocation decision

Plan fiduciaries are not responsiblefor investment losses that result

from participant investmentdecisions

Plan Sponsor is responsible forevery participant's asset allocation

decision

Yes No

For Example John Doe retires with$250,000 instead of $400,000 because heinvested in a money market fund with a 3%return instead of a more appropriate asset

allocation with a 7% return The plansponsor may be held liable for the

$150,000 shortfall, if the plan fails tomeet all of the 404(c) requirements.

Identify areas where plan is not404(c) compliant and

address/correct deficiencies

Does plan meet all

of the standards of 404(c)?


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Whats your approach?

Good Can withstand a lawsuit. Recent Lawsuitsrelated to 404c

LaRue vs. DeWolff, Boberg & Associates, Inc

Tullis vs. UMB Bank, N.A.

Hecker vs. Deere

In re Tyco Int'l Ltd. Multidistrict Litigation (2009)

Better Can easily withstand a Department of Laboraudit

Best Higher than average participation, higher thanaverage savings rates -- emphasis on successfuloutcome for participants


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ERISA 404(c) Requirements - To comply

The reality

- The participant has an opportunity to obtain written confirmation of his

instructions.- The person to whom the instructions are given is an identified plan fiduciarywho is obligated to comply with the instructions.

- The participant is provided by an identified plan fiduciary with the following:

(1) An explanation that the plan is intended to be a 404(c) plan;

(2) An explanation that the fiduciaries of the plan may be relieved of liability forlosses;

(3) A description of the investment alternatives available under the plan;

(4) A general description of the investment objectives and risk and returncharacteristics of each designated alternative;

(5) Identification of any designated investment managers;

(6) An explanation about giving investment instructions;

(7) A description of any transaction fees and expenses which affect the

participants account balance;(8) The name, address and phone number of the plan fiduciary responsible forproviding information;

(9) Specified information regarding employer securities;

(10) A copy of the most recent prospectus provided to the plan for investmentalternatives subject to the Securities Act of 1933;

(11) Any materials provided to the plan relating to the exercise of voting, tenderor similar rights.


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ERISA 404(c) Requirements - Continued

The participant is able to obtain upon request:

(1) A description of the annual operating expenses of eachdesignated investment alternative;

(2) Copies of any prospectuses, financial statements and reportsprovided to the plan;

(3) A list of the assets comprising the portfolio of each designated

investment alternative;(4) Information concerning the value of shares or units indesignated investment alternatives;

(5) Information concerning the value of shares or units indesignated investment alternatives held in the account of theparticipant.

Plan permits participants to give investment instructions with afrequency which is appropriate in light of market volatility.

The core investment alternatives, constituting a broad range,permit instructions at least once within any three-month period.


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Start with Plan Demographics

Set some goals for participation and savings rate Must know what they are now

How many employees are actively deferring?

How much as a % of pay?

Compare Benchmark to other firms in similarindustries and or of similar size

How are investments spread among participants?

By age?

By balance?


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How to reach goals consider

Participation

Auto-enroll

Make sure to include all eligible but not

participating at scheduled enrollments

Savings Increase

Provide statement readings

Offer savings disconnect analysis calledGap analysis


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Investment Education

On-going process (should have beenhappening prior to and during the recentdownturn)

Have assets been moved into cash, Govtsecurities and guaranteed accounts?

Are allocations still reflective of aparticipants long term goals/desires?

Recent upturn in market may bringparticipants back to less emotional decisionmaking


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Additional Safe Harbors under PPA2006?

New term fiduciary adviser a person ororganization providing specific investment adviceto plan participants.

Fiduciary Advisor must have level comp or fee

neutral meaning the advisors compensationcannot be dependent upon the fund the participantchooses.

Can use a computer-driven model.

Qualified Default Investment Alternative

Target Date, Risk Based or Balanced Funds

Investment Manager Services


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Employee EducationSpecialists

Lovejoy & Associates National network of 50ational network of 50professionalprofessional retirement plan educators locatedretirement plan educators located

in major metropolitan areas across the Unitedin major metropolitan areas across the United

StatesStates

Backgrounds in financial services, humanBackgrounds in financial services, humanresources, banking, or third partyresources, banking, or third party

administration.administration.

On-site group meetings, one-on-one sessions,On-site group meetings, one-on-one sessions,

and online presentations for employees.and online presentations for employees.

Translation Services and Financial LiteracyTranslation Services and Financial Literacy

workshopsworkshops

http://www.LovejoyAssociates.comhttp://www.LovejoyAssociates.com


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Estimates of EmployeeBehaviors

26% Dont participate

50% Do not allocate appropriately for theirage and risk tolerance

48% cash out when changing jobs

Only 10% contribute the maximum allowedunder the plans provisions

Alicia Munnell, Coming Up Short


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On-Going Targeted EducationCampaign

Personalize your education campaign

Consider employee demographics such asage, range of positions, and levels offinancial sophistication.

Make it a collaborative effort withproviders,

designing topics of most concern and/or

interest to employees or to plan sponsor


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FINANCIAL LITERACY TOPICS

Budgeting - What's That?

Who Can Save In This Economy?

Credit Makeover - How To Monitor and Improve Your Report

401(k) Loans - The Good, Bad, and Ugly

What Do Asset Classes Have To Do With Me?

Take A Deep Breath And Open Your 401(k) Statement -Strategies For Volatile Markets


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Summary

Safe Harbors are available Use them

Build a strong case against litigants

Build a strong case to withstand a DOL audit

Document everything! Keep minutes.

Review your plan provider contracts

Promote a culture of engaged savers


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Closing

If you are interested in receiving a copy of

the presentation, please visit:

www.barnesretirement.com

Securities and investment advisory services offered through FinancialTelesis, Inc.

Barnes Retirement Plan Specialists, Inc. and Financial Telesis, Inc. are notaffiliated
http://www.barnesretirement.com/http://www.barnesretirement.com/

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Employee Education Webinar Sept 09

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