"Plan participants have filed multiple lawsuits against plan sponsors,
claiming that the decision to pay excessive investment and administrative
fees was imprudent and a breach of the fiduciary duty of care."
- CFO Magazine
"The fiduciaries found liable were not only the employer plan sponsor but also
members of the plan investment and benefits committees, the vice president
of human resources, and the manager of the sponsor's Human Resources
Service Center."
- CFO Magazine
"In 2010, the DOL added nearly 1,000 employees, with the majority focused
on encouraging and enforcing compliance among plan sponsors…last year
the DOL found serious problems with over 73% of plans audited and
collected over $1 billion in fines, penalties, and restitution."
- U.S. Department of Labor
"Because of the increased number of DOL enforcement staff in 2010, the
chance that the DOL could audit your plan is increasing; there is every
indication the DOL is escalating audits of small plans."
- Columbia Management
"83% of 401(k) participants incorrectly think they are
paying no fees to participate in their plan"
- AARP
"For plans with total assets under $10 million, the
average all-in fee per person is a whopping 1.90%"
- New York Times
"A 1 percent difference in fees and expenses could reduce
your account balance at retirement by 28%."
- U.S Department of Labor
"Because of the drastically reduced value of their retirement
accounts…50% of workers plan to remain employed after
they retire, with more than a third having to work past 70 or
never retire."
- CNBC
Managing Fiduciary Risks With the
Department of Labor's New
401(k) Regulations
September 2011
The FLF Investment Group
 We are a highly specialized wealth management
team with UBS Financial Services in St. Louis,
MO
 Our team is comprised of 5 financial advisors
-- Rick Fister
-- Gary Einig, CFP
-- Dick Lautner
-- Mike Mauzy, CRPS
-- Don Vogel, CRPC
 Our practice is focused on two very specific
areas:
– Providing unparalleled investment management and
financial planning for individual clients
Left to right:: Mike, Rick, Dick, Sarah, Gary, Don, & Michele
– Assisting companies with the design,
implementation, ongoing management, and
benchmarking of corporate retirement plans
 Together, we have well over 125 years
experience working with individual and
corporate clients and are entrusted with
managing over $425 million in assets
New Focus on 401(k) Fees
Severe Lack of Understanding
 "Industry Eyes Lawsuits Over Pension
Investments"
 "83% of 401(k) participants incorrectly think they
don't pay any plan fees"
– Financial Times
 "401(k) Fees Gain a Bit of Clarity"
– The New York Times
 "What Your 401(k) Really Costs You"
– U.S. News & World Report
 "Shining a Light on Murky 401(k) Plan
Fees"
– AARP
 "73% of plan sponsors believe participants have
a clear understanding of their plan's fees"
– Transamerica
 "50% of plan sponsors are unsure they're
covering their fiduciary duties"
–
Fidelity
– The Wall Street Journal
 "Cracking Down on 401(k) Fees"
– CNBC
 "7 Conflicts of Interest in Your 401(k) Plan"
– U.S. News & World Report
 "73% of retirement plans audited last year were
required to restore losses or take another type
of corrective action, resulting in over $1 billion in
restoration, fines and penalties"
– U.S. Department of Labor
Today's Agenda
 Introduction to the FLF Investment Group
 Overview of the DOL's New Regulations
 Plan Sponsor Risks & Reducing Your Fiduciary Liability Exposure
 Uncovering Fees & Conflicts of Interest in Retirement Plans
 The Importance of Benchmarking
 Questions / Comments
Department of Labor's New 401(k) Disclosure Regulations
404(a) – Participant Disclosure Regulations
408(b) – Plan Provider Disclosure Regulations
404(a) Participant Disclosure Regulations
Plan Sponsor's Responsibility – Disclose Fees to Participants, Determine
Reasonableness
 All retirement plan expenses must be clearly shown to participants
– Plan administrative expenses
– Investment related expenses
– Individual management and advisory fees
 Participants must be shown how plan-level fees are allocated to their individual
accounts
 Plan sponsors must be sure to identify all the fees, decide whether they're
reasonable, and document their process for doing so.
All individuals involved in plan management on behalf of the
Plan Sponsor are now being held personally liable for any issues
408(b) Provider-level Disclosures
Plan Provider's Responsibility – Clearly Disclose All Fees to Plan
Sponsors
 All retirement plan providers will be forced to provide detailed plan information
– Descriptions of all services provided
– All direct and indirect compensation received
– All revenue paid through plan assets to other service providers (Revenue
Sharing)
– Expense information regarding plan's investments
 All service providers (administrator, advisor, investment managers) will have to
clearly disclose their fiduciary status
Reducing Fiduciary Risks Under the New Regulations
 Choose an appropriate level of fiduciary liability, identify all fiduciaries, and
understand your responsibilities
 Maintain an Investment Policy Statement
 Avoid plan providers with proprietary fund requirements
 Maintain a Due Diligence File – document everything
 Understand all plan fees and revenue sharing arrangements
 Remove advisor conflicts of interest
 Benchmark fees and services
Last year the DOL found serious problems with over 73% of plans
audited and collected over $1 billion in penalties
Don't let this happen to you!!!
Uncovering Fees & Conflicts of Interest in Retirement
Plans
12b-1
Sub
TA
Mgmt
An annual marketing or distribution fee on a mutual fund. The 12b-1 fee is
considered an operational expense and, as such, is included in a fund's expense
ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets.
The fee gets its name from a section in the Investment Company Act of 1940.
Uncovering Fees & Conflicts of Interest in Retirement
Plans
12b-1
Sub
TA
Mgmt
An annual marketing or distribution fee on a mutual fund. The 12b-1 fee is
considered an operational expense and, as such, is included in a fund's expense
ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets.
The fee gets its name from a section in the Investment Company Act of 1940.
Fees paid to record keeper by the mutual funds available on their
platform in order to reimburse for participant/sponsor level
services which are provided by the record keeper.
Uncovering Fees & Conflicts of Interest in Retirement
Plans
12b-1
An annual marketing or distribution fee on a mutual fund. The 12b-1 fee is
considered an operational expense and, as such, is included in a fund's expense
ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets.
The fee gets its name from a section in the Investment Company Act of 1940.
Sub
TA
Fees paid to record keeper by the mutual funds available on their
platform in order to reimburse for participant/sponsor level
services which are provided by the record keeper.
Mgmt
These fees are for managing investment assets and are
usually deducted directly from the investment return (as
part of the annual expense ratio associated with the
particular mutual fund)
Fee Comparisons
American Funds
12b-1
Sub TA
Mgmt
Vanguard
Vanguard ETF
Open Book Accounting
Advisor Fees
12b-1 Fees
Recordkeeping Fees
Administrative Fee
Credit Account
Sub-TA Fees
Legal Fees
Audit Fees
Participant
Accounts
The Importance of Benchmarking
 According to the new regulations, it's your fiduciary responsibility to:
– Identify all fees
– Decide whether or not they're reasonable
– Document your process for doing so
 The only effective way to assess "reasonableness" is to benchmark your plan against
similar companies across several key areas:
– Fees charged by each service provider (administrator, advisor, investment manager)
– Services offered
– Participant success measures
– Quality of investment options
 We will provide a complimentary report through Fiduciary Benchmarks, an independent
industry leader in retirement plan benchmarking, to help ensure:
– You fully understand all hidden fees and revenue sharing
– You are prepared to answer employee questions on plan fees
– You satisfy your fiduciary obligation under the new regulations
Stop by our booth to request your complimentary report today
Thank you for your attendance!
Please stop by our booth with any questions or comments
Or feel free to email us at flfgroup@ubs.com