Chapter Meeting - Des Moines ISCEBS
West Des Moines, IA
September 7 th , 2011
Presented By:
Jean Duffy, AIFA®, FLMI, ARPC
Financial Advisor
CAPTRUST Financial Advisors www.captrustadvisors.com

PRESENTATION AGENDA

RETIREMENT PLAN DATA
• As of 2010, retirement plans assets in the United States totaled
$17.5 trillion. Defined contribution plans represented $4.5 trillion of that total.
• The median plan participant balance is $26,926 and the average plan participant balance is $79,077 for 2010.
• The average plan participant rate for 2010 was 74%.
• The average deferral rate was 6.8% and the median was 6.0% in 2010.
• The average number of funds being offered by retirement Plan Sponsors in 2010 was
18.6 (target date fund offerings are counted as a single option). The average number of funds used by participants was 3.3.
Source: How America Saves 2011 - Vanguard

PARTICIPANT REALITY
• Currently, the traditional retirement age for American workers is 65.
• Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts.
• Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs.
• Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice.
• 39% of workers plan to work past age 70 or do not plan to retire.
• 54% of workers expect to plan to continue working when they retire.
• 40% now expect to work longer and retire at an older age since the recession.

PARTICIPANT ACCOUNT BALANCES
In 2008, participant balances declined by 27% to just over $50,000.
Thru the second quarter of 2009, participant balances increased on average by 13.5% to about $53,900.
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
A verage A ccount Balances
Fidelity Perspectives: An Unprecedented Year - August 12, 2009 reporting.

PARTICIPANT DEFERRAL RATES
• Despite a disastrous year in the financial markets in 2008,
96% of participants continued making deferrals into their DC plans.
• So far in 2009, employee participation has been increasing and is up 4% since 2007, moving from 73% to 77%.
• Fidelity reported the percentage of participants who stopped contributions during Q2 2009 was 1.3%, which is in line with the historical average of about 1%.

TUMULTOUS MARKET ACTIVTY
Date
Jan 4, 1999
Dow Jones
9,212
Jan 3, 2000 11,501
Jan 2, 2003
Jan 1, 2007
Jan 1, 2009
8,342
12,459
8,772
Market Events
DJIA moves from 5000 in 1995 to 11,000 in mid 1999
Market closes at all time high in
January, 2002
Market drops through late 2002 to
7,200 and begins to rebound in early
2003
Market continues on a five year upswing
Market peaks in Oct 2007 and experiences over a 50% drop through
March 2009

ASSET ALLOCATION TRENDS
A llocation Trends
45.0 0 %
40 .0 0 %
35.0 0 %
30 .0 0 %
25.0 0 %
20 .0 0 %
15.0 0 %
10 .0 0 %
5.0 0 %
0 .0 0 %
Hewitt 401(k) Index
1999 20 0 0 20 0 3 20 0 7
G IC /STA B LE/M M B O N D A SSET A LLO C A TIO N EQ U ITIES C O STO C K O TH ER
20 0 9

CURRENT FOCUS
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FEE DISCLOSURE
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ERISA 408(b)(2) – Effective January 1, 2012
Requires disclosures by plan service providers to plan sponsors/ fiduciaries of fee and service information
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ERISA 404(a)(5) – Effective November 1, 2011
Proposed extension provides 120 days after plan year’s beginning to furnish disclosures
Requires plan fiduciaries to disclose certain plan, fee and investment-related information to participants and beneficiaries.

FEE DISCLOSURE
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Plan Sponsors must understand new regulations (Fiduciary
Role)
•
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Plan Sponsors must disclose two types of information:
Details about retirement plan itself
Information about the investments
Plan Sponsors need to understand all expenses relating to retirement plan to help participants understand.
Communicating fees & expenses in an uncomplicated manner is the cornerstone of the participant disclosure rules.

FEE DISCLOSURE
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Consider developing Disclosure Checklist
Review & Understand Disclosure Regulations
Determine & Document Administrative & Investment Fees
Perform benchmarking study
Undertake formal competitive bid process
Work with service provider on fee disclosure information
Review annual plan sponsor fee disclosure statement
MONITOR

BENCHMARKING
• Recommended Every 3-5 Years
• When to Seek Fee Benchmark / RFI / RFP
• Marriage of Best Practices with Culture, Objectives & Cost
• Fiduciary Documentation

EDUCATION & GUIDANCE
• Education programs have been around for decades
• Historically education and guidance has been delivered by vendors
• Tools include: o Print materials like risk questionnaires and model allocations o Computer based programs o Asset allocations funds (risk based and target date)
• Concerns: o Cost of delivery (hard and soft dollar) o Conflicts of interest o Effectiveness

PARTICIPANT ADVICE
• Next step beyond education
• Specific investment advice to individuals that need it most
• Many don’t have access to advice, understand investments nor want to understand investments
• Answer two questions: o How much should I save? o Where should I invest my money?

WHAT IS ADVICE?
• Pension Protection Act of 2006 introduced the concept of advice to help provide a greater number of participants with access to individual advice
• Original regulations say that an “eligible investment advice arrangement” is participant advice offered under either of these two methods:
1. Based on a computer model
2. “Level fee” arrangement
• 2010 regulations reaffirmed basic concepts
• Advice appears to be the future – Financial professionals could be considered ERISA Fiduciaries and will want to consider impact.

KEYS TO A SUCCESFUL ADVICE PROGRAM
• Choose the right model for your organization o Computer based o Face to face, level fee provider
• Computer based program should be sophisticated enough to be meaningful but not so complex that participants “optout”
• Face to face provider should have o Experience giving individual advice (preferably plan level) o Sufficient number of retirement clients so as to:
 Understand the process
 Posses necessary tools
 Be able to deliver meaningful advice at a reasonable cost
• NO CONFLICTS

HOW TO MEASURE SUCCESS
• Data Driven
• Snapshot – demographics o Participation o Deferral o Allocation
• Don’t look at averages o By age group, location, etc.
• Quality Driven o Questionnaire

PLAN DESIGN CONSIDERATIONS
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• Balanced Funds, Target Date Funds, Asset Allocation
Models

ON THE HORIZON
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Electronic Delivery of Information – DOL has requested information on what the rules should state for electronic delivery. Guidelines will not be in place prior to 11/1/11.
Lifetime Income – Proposed legislation intended to educate participants on monthly income their account could provide. They are also considering encouraging participants to annuitize at least a portion of their balance.

ON THE HORIZON
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Automatic IRAs – would require employers that do not sponsor a retirement plan to offer a directdeposit IRA.
Alleviating Leakage in 401(k) Savings Plans – intended to protect 401(k) plans by providing flexibility in repayment of loans & limiting # of loans permitted by plan.

ISSUES FACING PLAN SPONSORS
I.
II.
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Stable Value Products
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• Wrap provider exposure, capacity, and cost
Is Market Value/Book Value Ratio acceptable?
Interest Crediting Rate reasonable?
Underlying holdings
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Target Date Investment/Allocation Tools
• Asset Allocation Assumptions – Are the funds appropriate for your participant population?
Comfortable with the Glide Path
Have participants been educated properly?
III.
Overall Plan Costs & Revenue Sharing
• New 5500 Schedule C Disclosure
Requirements
• Revenue sharing – Who is receiving it and how much?
•
• 408(b)2 & 404a regulations
I shares a consideration
IV.
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Investment Options
• Prudent process to select / monitor / deselect funds
Bundled provider: Fund family exposure
Are all asset classes represented with limited overlap
V.
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Fiduciary Liability
• Independent Co-Fiduciary – Provide advice
& share responsibility
Recordkeeper – Provide guidance
X.
VI.
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Income Products
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• Have you reviewed industry options?
What is available from your plan provider?
Is this appropriate for participants?
VII.
Plan Management
• Plan design review – can participants maximize deferrals
• Formal Committee meetings and meeting minutes
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• Plan is operational compliance?
Reviewed auto features\safe harbor\QDIA?
• Have you reviewed Roth features?
VIII. Participant Education/Advice
• Education / Guidance from plan
• provider
Advice & Planning from independent specialist
• Global allocation DC, DB & outside assets
• Need for one on one planning
IX.
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Executive Compensation Plans
• Reviewed the need for a Nonqualified
Plan
Fee based vs. commission approach
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Participant Data
• Participation rates & savings rates in line with peers
Asset allocation at a macro level

WHO IS THE PLAN FIDUCIARY?
According to ERISA a Fiduciary is any person(s) who:
• Has discretionary authority over the management or administration of the plan or its assets
• Exercises any control, authority, or influence over the management or administration of the plan or its assets
• Renders investment advice for compensation
Automatic Fiduciaries:
• Plan Administrator, named fiduciary, trustee
NOT a Fiduciary:
• A person who performs purely ministerial tasks (e.g. calculates benefits, prepares government forms)

FIDUCIARY STANDARDS & RESPONSIBILITIES
• Act solely in the interest of plan participants
• Act for the exclusive purpose of providing benefits to participants
• Carry out duties with care, skill, prudence and diligence of a prudent person
• Follow plan documents
• Diversify plan investments
• Review and pay reasonable plan expenses

THE OLD RULES
• Informal
• Few rules
• Simple reporting
• Few fiduciary obligations
• Limited duty to oversee program
• Limited vendor involvement
• No plan document
• Little employer involvement
• No employer vetting of investments
• Outdated regulations
• “Not my problem”

THE NEW RULES
• Formal
• Written document
• Lots of rules, audits, policies and procedures
• Compliance testing and costs
• Employer makes key decisions
• Single vendor (duty to monitor)
• Choice means “fund choice”
• Audits
• Employer selects and monitors provider/investments
• Clear fiduciary obligations for plan sponsor, committees, trustees, and individuals
• Employer accountable for understanding costs as well as educating participants
• Frequent rule changes
• Congressional and DOL focus
• “Now it is my problem!”

FIDUCIARY DUTIES
1.
Duty Of Loyalty & Impartiality
2.
Duty To Be Prudent
3.
Duty To Ensure Reasonable Costs
4.
Duty To Monitor & Supervise
5.
Duty To Avoid Prohibited Transactions
6.
Duty To Diversify

WAYS TO SATISFY FIDUCIARY DUTIES
PROCESS, PROCESS, PROCESS
• Train fiduciaries in responsibilities and potential liability
• Follow the plan document
• Implement clear, consistent procedures for decision making and compliance
• Seek out alternatives and options when making decisions
• Document everything: meetings, decisions, alternative, information, analysis, the basis for decisions, compliance with procedures

BEST PRACTICES
• Create a fiduciary structure
• Appoint plan fiduciaries
• Document authority
 Don’t forget liability insurance and bonding
• Document fiduciary responsibilities
• Establish regular meetings and maintain records
 Evaluate and document service provider selection and monitoring (fee structure transparency, quality of service, value received)
• Create prudent process for investment selection
• Monitor plan investments
• Maintain plan documents
• Monitor plan administration

IN SUMMARY: PRACTICAL STRATEGIES OF A FIDUCIARY
F ollow an investment policy statement
I nvestments should be diverse
D ocument activities and decisions
U se level of expertise to make decisions
C osts should be evaluated and compared
I nterest of plan participants should be top priority
A void conflicts of interest and prohibited transactions
R etain qualified service providers to ensure prudent standard is met
Y OU are the Fiduciary

Retirement Readiness
Employees are properly versed and financially prepared to transition into retirement.
Corporate Stewardship
The retirement program is competitively structured and priced.
Fiduciary Fitness
Proper fiduciary practices are known, documented, and followed.
Retirement
Readiness
Corporate
Stewardship
Fiduciary
Fitness
True success can be measured when all three key areas of retirement plan oversight are aligned.

QUESTIONS?

FOR MORE INFORMATION
Jean Duffy, AIFA®, FLMI, ARPC
Vice President, Financial Advisor jean.duffy@captrustadvisors.com
CAPTRUST Financial Advisors
3001 Westown Parkway, Suite 100
West Des Moines, IA
1.515.657.4102
www.captrustadvisors.com
The information provided in this presentation is for educational purposes and should not be construed as individualized investment advice. This is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. CAPTRUST Financial
Advisors does not render legal, accounting, or tax advice. Clients should consult their tax professional or legal counsel for such
Member FINRA/SIPC
© 2011 CAPTRUST Financial Advisors