Schwab RT SQL Recordkeeping Operations Library Automatic Portfolio Balancing Compared to IPMs

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1 Schwab RT SQL Recordkeeping Operations Library Automatic Portfolio Balancing Compared to IPMs Schwab Retirement Technologies Recordkeeping Operations Library

2 Schwab RT Recordkeeping Operations Library Automatic Portfolio Balancing compared to IPMs The material contained herein is proprietary to Schwab and for informational purposes only. The information is not intended to provide tax, legal or investment advice. Schwab does not guarantee the suitability or potential value of any particular information source. Certain information presented herein may be subject to change. The information or material contained in this document may not be copied, assigned, transferred, disclosed or utilized without the express written approval of Schwab. The Charles Schwab Corporation provides services to retirement plans and participants through its subsidiaries: Charles Schwab & Co., Inc.(Member SIPC), Charles Schwab Trust Company, a division of Charles Schwab Bank, Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company and Schwab Retirement Technologies, Inc. (Schwab RT). Schwab RT is engaged in developing and licensing proprietary retirement plan recordkeeping systems to independent Third Party Administrators. For further information, contact Schwab Retirement Technologies, Inc. at Ballantyne Corporate Place, Suite 300, Charlotte, NC 28277, USA, Tel: (800) , Web site: schwabrt.com Schwab Retirement Technologies, Inc. All rights reserved. Page 2 of 7

3 The Recordkeeping Operations Library The Schwab RT SQL Recordkeeping Operations Library provides you with topicspecific documents available for recordkeeping system processes. Collectively, these documents comprise Schwab RT s Recordkeeping System Manual of modular individual topics that can be individually maintained with current information, for on-demand downloading and printing. Topic-specific documents coordinate with the Recordkeeping online Help system, and overcomes printing limitations with on-line html Help pages. Additional technical setup procedures and tips might be included in topic-specifics documentation that is not pertinent to the on-line Help. If you are new to Schwab RT you may also want to refer to our Recordkeeping Setup, Options, and Maintenance Reference Guide for overviews of many key SQL Recordkeeping concepts and setup options. Page 3 of 7

4 Automatic Portfolio Rebalancing Compared with IPM Accounts Automatic Portfolio Rebalancing enhances investment management for participants by keeping their accounts automatically aligned according to a pre-set cycle for a participant-chosen set of investments. While both IPMs and portfolios are designed to offer participants a selection of diversified funds to meet their investment objectives, these represent two considerably different approaches for participants. Key differences lie in the flexibility and control over when and how rebalancing should occur and there are also significantly different restrictions associated with each, which are outlined in the following table: IPM Accounts IPMs hold the actual assets. IPM rebalancing can be scheduled to run in SchARP or as a manual process conducted at the discretion of the plan sponsor. Participants cannot change cycles. Cycle frequency is set by the plan sponsor without any choice by the participants. Rebalancing and frequency are not controlled by the participants. Officers cannot be excluded from participation. Call Center is not able to view the allocation of underlying funds in an IPM. Not available with an IPM. Participant information on IPMs is available on the Web. An IPM cannot include rebalance portfolios. IPMs can include assets that don t exist anywhere else in the plan. 200 fund slots are available, any of which can be used for IPMs as well as other investments. Investment elections can vary across sources. Realignments, transfers, and investment election changes can be performed in an out of an IPM. Non-consolidated sources are not restricted with IPMs. Both consolidated and non-consolidated plans can be included. Not available with IPMs. Automatic Portfolio Rebalancing A portfolio might be described as a pseudo IPM that offers diversification without actually holding the actual assets. Portfolios are automatically rebalanced on a cycle selected by the participants and can be changed at their discretion. Settings are defined and maintained in Plan Maintenance. Participation and rebalancing cycles can be changed through the Web and Customer Service. Cycle frequency for rebalancing is chosen by the participant (from one or more cycles selected to be offered by the plan sponsor). Participants can choose to opt into a portfolio without electing to participate in automatic rebalancing. They can select an automatic cycle at a later time. Officer participation can be excluded. Web and Call Center applications can view the allocation of the underlying funds in a portfolio. If the plan sponsor offers it, participants can complete an on-line risk-management questionnaire to assist them in selecting an appropriate portfolio. Participants select a portfolio based on Web site descriptions defining the portfolio s objectives. IPMs can be included as funds within a portfolio All assets in the portfolio must be from the plan. Portfolio allocations are created and maintained in Plan Maintenance. A maximum of 15 Automatic Rebalancing Portfolios can be defined per plan. Participants can opt into only one portfolio at a time. Investment elections apply across all sources. Unless the participant first opts out of the portfolio, he/she cannot do a realignment, transfer, or investment election change. Only consolidated sources can be in any portfolio. Portfolios involve both realignment and an investment election change across all sources. Portfolio features can be re-branded through the Web Admin Tool to use a unique name for marketing purposes. Page 4 of 7

5 In the following example scenarios, this is how these differences might look between Plan A, which includes IPMs and Plan B, which offers several Portfolio choices: Example Scenarios from a Plan Sponsor s Perspective Plan A includes IPMs each composed of sources determined by the plan sponsor, which can include sources outside of the plan. IPM rebalancing is determined by the Plan Sponsor. Plan A (up to 200 funds, several of which are IPMs) Fund 4: Money Market Fund X: Stock Fund IPM 1: ABC Fund DEF Fund GHI Fund IPM 2: Hi-Fly Fund Hi Stakes Fund Capital Appreciation Fund Great Expectations Fund IPM 3: QRS Fund TUV Fund Stock Fund XYZ Fund Plan B offers individual sources plus several (up to 15) Portfolios, each set to meet specific objectives. Funds in a portfolio must be funds from within the plan. Rebalancing is determined by the participant. Plan B (up to 200 funds in addition to a maximum of 15 portfolios, tied to selections from those funds.) Fund 4: Stock Fund Fund 5: IPM 1 Fund X: Money Market Portfolio 1: 25% in Aggressive Growth Fund 25% in Bond Fund 25% in Capital Appreciation Fund 25% in Money Market Portfolio 2: 50% in Aggressive Growth Fund 15% in Bond Fund 35% in Money Market Portfolio 3: 20% in IPM 1 (Fund 5) 40% in Capital Appreciation Fund 20% in Stock Fund 20% in Money Market Page 5 of 7

6 In the following scenario, the sources highlighted in maroon represent a participant s chosen investment selections. Example Scenarios from a Participant s Perspective Participant A Can choose to invest in a choice of one or more IPMs along with other Sources offered by the plan. Plan A (up to 200 funds, some of which can be IPMs) Fund 4: Money Market Fund X: Stock Fund IPM 1: ABC Fund DEF Fund GHI Fund IPM 2: Hi-Fly Fund Hi Stakes Fund Capital Appreciation Fund Great Expectations Fund IPM 3: QRS Fund TUV Fund Stock Fund XYZ Fund Participant B Can choose to invest in either individual funds, OR select ONE Portfolio at a given time. Each Portfolio reflects only sources from Plan B, set to percentages designed to meet that Portfolio s stated objectives. Plan B (up to 200 funds in addition to up to 15 rebalance portfolios) Fund 4: Stock Fund Fund 5: IPM 1 Fund X: Money Market Portfolio 1: 25% in Aggressive Growth Fund 25% in Bond Fund 25% in Capital Appreciation Fund 25% in Money Market Portfolio 2: 50% in Aggressive Growth Fund 15% in Bond Fund 35% in Money Market Portfolio 3: 20% in IPM 1 (Fund 5) 40% in Capital Appreciation Fund 20% in Stock Fund 20% in Money Market Page 6 of 7

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Schwab RT SQL Recordkeeping Resource Library. Roth 401(k) Accounts. Schwab Retirement Technologies Recordkeeping Resource Library

Schwab RT SQL Recordkeeping Resource Library Roth 401(k) Accounts Schwab Retirement Technologies Recordkeeping Resource Library Schwab RT Recordkeeping Roth 401(k) Accounts Schwab RT Recordkeeping Resource