Fiduciary Plan Review

Transcription

1 Fiduciary Plan Review Prepared for: Sample Client August 28, 2009 Presented by: Michael E. Morris, AIF, CRPS Director Institutional Consulting C O N F I D E N T I A L Ross, Sinclaire & Associates 700 Walnut Street, Suite 600 Cincinnati, OH Ph:

2 Table of Contents I. INTRODUCTION... PAGES 1-5 II. FIDUCIARY EDUCATION... PAGES 6-11 III. PLAN DEMOGRAPHICS AND DESIGN... PAGES IV. BEST PRACTICES & COMPLIANCE... PAGES V. CONCLUSION... PAGES 47-49

3 Retirement Plan Advisory Group Mission Statement Retirement Plan Advisory Group is an independent qualified retirement plan consulting firm that helps protect plan fiduciaries from personal and corporate financial liability, while enhancing investment opportunities and helping plan participants achieve financial security. Through our comprehensive network of value-added services and professional consulting expertise, we deliver on our mission each day to create ongoing successful retirement plan experiences for employers and employees. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

4 Retirement Plan Advisory Group Overview of Services We enhance investment opportunities through dedicated and ongoing Investment Analysis utilizing 15+ quantitative and qualitative metrics. Investment Analysis Reports Scorecard SM SM Fund Fund Ranking Asset Asset Allocation Models Quarterly Market Update We guide participants on on the benefits of of the 401(k) plan and promote better understanding of of investments through hands-on Advice and Education. Investment Education Meetings One-On-One Guidance Sample Memos Bi-lingual Consultants We save companies and participants money by by conducting detailed Fee Benchmarkings to to ensure total plan costs are relative to to services received. Service Provider Comparison Total Total Cost Cost Analysis Investment Rankings Provider Contract Review We protect fiduciaries from personal and corporate financial liability and help maintain Plan Compliance through documented, proven Due Diligence processes. Investment Policy Statement 404(a)/404(c) Guidance Fiduciary Plan Plan Review Plan Plan Design Analysis Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

5 Retirement Plan Advisory Group Client Service Plan Service Description Scheduled Delivery Month Actual Delivery Date History/ Comments Investment Review Market Review, Investment Policy Statement, Scorecard Methodology, Fund Scores and Recommendations February May August vember February 11 May 26 August 6 Report Card Reviewed and Completed February February 11 Fiduciary Fitness Program Fiduciary Education Plan Design Review May February May 26 February 11 Fiduciary Best Practices and administrative compliance review vember RFP Analysis and Benchmarking Analysis of incumbent provider costs and services compared to bidding service providers 2010 Last RFP in 2007 Employee Communication Group employee education meetings Individual employee education meetings Newsletters and Memos Client newsletters for Retirement Committee Employee memos for Plan Participants Monthly Monthly Monthly Monthly Other Service Meetings Service Year: 2009 Updated: August 6, 2009 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

6 Fiduciary Fitness Report Card Action Items Reference Materials Documentation Requirements Met Comments Fiduciary Education Reference Guide: Section 2 All Education Modules Education Module Checklist Selecting and Monitoring Fiduciaries Identifying and Monitoring Parties in Interest Reference Guide: Section 3 Education Modules 1, 2 & 3 Reference Guide: Section 3 Education Modules 1, 2 & 3 Documenting Fiduciaries, Consultants and Service Provider Responsibilities Selecting and Monitoring Service Providers Reference Guide: Section 3 Education Modules 4 & 5 Selecting and Monitoring: Consultants, Plan Providers, Auditors Vendor Analysis & Benchmarking Compensation Disclosure Selecting and Monitoring Plan Investments Education Module 6 Investment Policy Statement SM Investment Scorecard 404(a) & 404(c) Compliance Reference Guide: Section 4 Education Module 7 404(a) & 404(c) Checklist 404(c) tice & Policy Statement Maintaining a Fiduciary File Reference Guide: Section 4 Education Module 8 Maintaining Your Fiduciary File Checklist Investing in Employer Securities Reference Guide: Section 5 Education Module 9 404(c) tice and Policy Statement Addendum N/A Consider Hiring Outside Independent Fiduciary to Handle Securities Minimizing Risk: Fidelity Bond and Fiduciary Insurance Claims and Appeal Procedures Reference Guide: Section 6 Education Module 10 Reference Guide: Section 7 Education Module 11 Copy of Bond Copy of Policy Documentation of Claims and Appeals (actual events) Plan Demographic and Document Review Reference Guide: Section 7 Education Module 12 Annual Plan Review Sample tices: ACAs, QACAs and EACAs, Initial QDIA, Annual QDIA, Safe Harbor and Summary Annual Report Prohibited Transactions Reference Guide: Section 7 Education Module 13 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

7 Online Report Access Retirement Plan Advisory Group clientele are offered the ability to gain access to our virtual client portal, known as the Fiduciary Briefcase sponsors access this system through using their secure User ID and Password.. Plan Through this portal, we make pertinent plan data available to plan fiduciaries to help them better manage their plan, and organize their fiduciary file in case of an audit. Examples of resources available to our clients are: Fiduciary Investment Reviews Investment Policies and Guidelines Meeting Minutes and Service Plans Quarterly Market Commentaries and Plan Sponsor Newsletters General Retirement Education and Communications Vendor Analysis and Annual Plan Reviews Organization of their Plan s file Daily Access to Plan Information Investment Education Information for Investment Committees Fiduciary Liability Management and Instant Preparation for Plan Audits Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

8 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

9 Fiduciary Update Fiduciary Fitness Program: Fiduciaries Fiduciary Defined A fiduciary is Any individual or entity that has, or exercises discretionary control over the management of the plan or the plan s assets A plan may have More than one fiduciary An individual serving in more than one fiduciary capacity A fiduciary is not Anyone who performs ministerial functions and does not have the authority to make decisions with respect to plan policies, procedures, etc. Example: Individual who calculates benefits or processes claims Functional vs. n-functional The fiduciary test is a functional one You re a fiduciary if expressed appointment or delegation of fiduciary authority, but is functionally considered in control or in possession of authority over the plan s management, assets, or administration Example: members of the Employer s Board of Directors/Trustees with power to exercise discretion and control May include non-board & non-voting members Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

10 Fiduciary Update (continued) Functional vs. n-functional Duties Functional Duties Duties Include Include Implementing plan plan related related decisions Carrying out out processes and and procedures in in regard regard to to plan plan management Acts Acts carried carried out out on on behalf behalf of of the the plan plan Selection of of provider, investments or or investment manager n-functional Duties Duties Decision to to establish a plan plan Include Include plan plan features Terminate a plan plan Business decisions in in regard regard to to a plan plan Named Fiduciaries Each plan must have one named fiduciary These are named in or identified with a procedure prescribed in the plan document May be the: plan sponsor, officer, Board of Directors/Trustees or member of the management team Can allocate responsibilities to others if plan document permits Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

11 Fiduciary Update (continued) Co-Fiduciaries Co-fiduciaries are those to whom named fiduciaries allocate their responsibilities in an effort to better manage the plan Fiduciaries are not liable for Acts and omissions related to those responsibilities, but do have the duty to monitor the co-fiduciaries performance Acts and omissions related to allocated person or entity Named fiduciary has a responsibility to monitor performance of allocated responsibilities Co-Fiduciary Liability Co-fiduciaries liability includes duties delegated to them by named fiduciary, plus those of another if Knowingly participates/undertakes to conceal an act or omission of another fiduciary Enables another to commit a fiduciary breach Has knowledge of a committed breach and fails to make a reasonable effort based to remedy the breach Individual co-fiduciaries may bear the majority of liability with overall plan management and performance Board of Director/Trustees Board of Directors/Trustees are fiduciaries only to the extent that they function as fiduciaries (i.e., exercise discretion and control) If delegate authority, responsibility and liability are limited to selection and retention of fiduciaries unless individual becomes liable under co-fiduciary rules Must monitor performance of Co-Fiduciaries Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

12 Fiduciary Update (continued) Benefit/Investment Committees Benefit/Investment Committees are fiduciaries if allocated fiduciary responsibilities Best practices to adopt Committee Charter Written minutes should describe issues discussed, action taken and how each member voted Members can resign in protest to a fiduciary breach of another member on the committee Resignation may not be sufficient to discharge reasonable efforts to remedy duties Other steps may be necessary Trustees and Fiduciaries Trustees are fiduciaries Trustees should carefully document all meetings where actions are taken with respect to plan management and control Written minutes should describe actions taken and how each trustee voted Members can resign in protest to a fiduciary breach of another co-trustee Resignation may not be sufficient to discharge reasonable efforts to remedy duties Other steps may be necessary Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

13 Fiduciary Update (continued) Other Fiduciaries Employees are generally not plan fiduciaries, but can be depending on individual facts and circumstances An Investment Manager is a fiduciary if manager meets ERISA 3(38) requirements Must be a bank, insurance company or Investment Adviser registered under the Investment Advisers Act of 1940 Manager must acknowledge it is a fiduciary in writing Generally, a professional trustee for a retirement plan is also an investment manager Attorneys, Accountants, Actuaries, Consultants Generally these professionals performing their usual professional functions are not fiduciaries However, they are considered a fiduciary if they express discretionary authority or control over the management of the plan, or render investment advice for a fee In practice, many consultants, attorneys and third party administrators become fiduciaries when plan fiduciaries rely on their advice when making fiduciary decisions Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

14 Fiduciary Update (continued) Individuals Prohibited from Fiduciary Role Individuals are prohibited if they have been convicted of, or been imprisoned as a result of said conviction for Robbery Robbery Bribery Bribery Extortion Fraud Fraud Embezzlement Grand Grand larceny larceny Kidnapping Burglary Burglary Arson Arson A felony felony involving illegal illegal substances Murder Murder Rape Rape Violation of of of of Labor-Management Relations Act Act Crimes Crimes barring barring individual from from serving serving as as an an investment adviser adviser Violation of of any any ERISA ERISA provision Violation involving kickbacks from from public public works works Violation of of federal federal mail mail prohibitions Conclusion Plan sponsors must select and monitor Fiduciaries for their plan Selection should be based on experience and expertise, not title It is also important to monitor the interactions between the plan and Parties in Interest Fiduciary Fitness Program helps make it easier to monitor all parties involved with the plan and bring the necessary procedural prudence and documentation ERISA and the DOL require Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

15 Plan Participation Measuring Participation in Your Plan: Our Plan last year current % % Our Goal Figure 1. Participation Rates (by Plan Size) All Plans 1 to to to to 4, ,000 + Source: PSCA s 51 st Annual Survey of Profit Sharing and 401(k) Plans Figure 2. Participation Rates by Industry (Average) Accommodation and Food Services 48% Administrative Support, Waste Mgmt, and Remediation Services 59% Agriculture, Forestry, Fishing, and Hunting 55% Arts, Entertainment, and Recreation 53% Construction 57% Educational Services 61% Finance and Insurance 71% Health Care and Social Assistance 61% Information Services 62% Management of Companies and Enterprises 64% Professional, Scientific, Tech Services 66% Manufacturing 64% Mining 70% Other Services 57% Real Estate and Leasing 60% Retail Trade 51% Transportation & Warehousing 60% Utilities 79% Wholesale Trade 63% Source: Fidelity Investments, Building Futures, Volume VIII Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

16 * $25,000 (retirement assets) Deferral Percentage Average Deferral Percentage: Our Plan Our Goal HCE: % % HCE: NHCE: % % NHCE: Figure 3. Average Deferral Rates (by number of participants) Pre-Tax [401(k)] After-Tax [401(m)] Plan Size (# of participants) HCE NHCE HCE NHCE All Plans to * * 50 to * * 200 to ,000 to 4, , Source: PSCA s 51st Annual Survey of Profit Sharing and 401(k) Plans *Indicates no data or insignificant sample size Figure 4. Sample Deferral Rate Grid CORE Assumptions: AROR: Inflation: Assets: Replace: SSN at: SSN Ben: RROR: Retire: Term: 7.5% 2.8% * 75% 67 Avg. Est. 5% INCOME: AGE: , % 2.2% 4.6% 7.5% 11.4% 16.7% 24.4% 37.4% MAX MAX 30, % 3.6% 6.1% 9.1% 13.2% 18.8% 27.0% 41.0% MAX MAX 35, % 4.7% 7.2% 10.4% 14.6% 20.5% 29.2% 44.3% MAX MAX 40, % 5.4% 7.9% 11.1% 15.4% 21.4% 30.2% MAX MAX MAX 45, % 6.0% 8.6% 11.9% 16.3% 22.5% 31.7% MAX MAX MAX 50, % 6.6% 9.3% 12.7% 17.3% 23.7% MAX MAX MAX MAX 55, % 7.0% 9.7% 13.2% 17.9% 24.4% MAX MAX MAX MAX 60, % 7.3% 10.0% 13.5% 18.2% 24.8% MAX MAX MAX MAX 70, % 7.9% 10.6% 14.2% 19.0% MAX MAX MAX MAX MAX 80, % 8.3% 11.1% 14.7% MAX MAX MAX MAX MAX MAX 90, % 8.7% 11.5% 15.2% MAX MAX MAX MAX MAX MAX 100, % 9.0% 11.9% MAX MAX MAX MAX MAX MAX MAX 120, % 9.5% 12.4% MAX MAX MAX MAX MAX MAX MAX 150, % 9.9% MAX MAX MAX MAX MAX MAX MAX MAX Source: Retirement Plan Advisory Group Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

17 Addressing Failed ADP/ACP Testing Alternative Solutions to Consider: Implement auto-enrollment (either traditional or an Eligible Automatic Contribution Arrangement (EACA)) Adopt Qualified Automatic Contribution Arrangement (QACA) Add a non-qualified deferred compensation plan for your most highly compensated employees Adopt safe-harbor match or contribution Increase employer match Recharacterize return of excess as either catch up contribution or as after-tax contribution, as appropriate Perform mid-year testing Refund excess to HCE (return of excess) Change from current year to prior year testing and advising HCEs of maximum each year Cap HCE deferrals Review eligibility Use permissive disaggregation in testing Exclude HCEs from participating in the 401(k) plan Contribute a qualified non-elective contribution (QNEC) Contribute a qualified matching contribution (QMAC) Institute employee campaigns/education Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

18 n-qualified Plans: A Solution to Many Qualified Plan Limitations What type of n-qualified plan do you have currently? Existing Plan: Are you confident you have the best investments for your key employees? Are you compliant with 409A? Do you know the cost of your current program? When was the last review of your NQ plan? Are your Golden Handcuffs working? New Plan: Solution to attract, reward, and retain key employees Fix 401(k) limitations Allow HCEs to save more Provides ER greater control of compensation for key employees Allows executives to control when they pay their taxes Would you be interested in implementing this type of plan? Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

19 Plan Design Summary Type of Plan 401(k) Profit Sharing Plan Name ABC Company Plan Year 2009 Name & Date of Document February 2007 A. Eligibility Provisions pg. Eligibility for Elective Deferrals (employee money) Eligibility for Matching Contribution Minimum Age: Length of Service: Hours: Minimum Age: Length of Service: Hours: Minimum Age: Eligibility for Profit Sharing Contribution Length of Service: Hours: Includes: Figure (k) Plan Eligibility by Company Size (by number of participants) Eligibility Type All Plans < ,000-9,999 >9,999 Immediate Months or 90 Days Months or 1,000 Hours Year Other Total 100.2% 100.0% 100.0% 100.1% 100.0% 100.0% Source: PSCA, 401(k) Profit Sharing Plan Eligibility Survey 2008 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

20 Plan Design Summary (continued) B. General Design Features pg. Excluded Employees Predecessor Service Plan Entry Employee Savings Changes Employee Savings Limit Catch-up Provision Rollover Permitted (IRA/403b) PPA Safe Harbor: Eligibility: Automatic Enrollment Escalation: Default Deferral %: Default Fund: Roth 401(k) Compensation Definition for Contribution Purposes Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

21 Plan Design Summary (continued) C. Contributions pg. Traditional Safe Harbor Plan Match Type: Employer Match Contribution: Match Funding: Add l Year-end: Discretionary Contribution Job Classifications for New Comparability Vesting Schedule: Calculation: Forfeitures Figure 6. Common Fixed Matching Formulas More than $1.00 per $ $1.00 per $ $0.50-$1.00 per $ $0.50 per $ $0.2-$0.50 per $ $0.25 per $ Less than $0.25 per $ Source: PSCA s 51 st Annual Survey of Profit Sharing and 401(k) Plans Figure 7. Most Common Match Formula by Industry Agriculture, Forestry, Fishing 50% up to 6% of pay Mining 50% up to 6% of pay Utilities 50% up to 6% of pay Construction 50% up to 6% of pay Manufacturing 50% up to 6% of pay Wholesale Trade 50% up to 6% of pay Retail Trade 50% up to 4% of pay Transportation, Warehousing 50% up to 6% of pay Publishing, Broadcasting 50% up to 6% of pay Finance, Insurance 50% up to 6% of pay Real Estate, Rental Leasing 50% up to 6% of pay Professional, Scientific Services 50% up to 6% of pay Other Services 50% up to 6% of pay Technology 50% up to 6% of pay Healthcare 50% up to 4% of pay Source: Principal Financial Group, The Total View 2007 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

22 Plan Design Summary (continued) D. Withdrawals / Distributions pg. Employee Loans Cashout Hardships rmal Retirement Early Retirement In Service Distribution Options E. Other pg. Trustees Discrimination Testing Plan Year: ADP: HCE NHCE ACP: HCE NHCE Method: Corrective Actions QNEC or QMAC Bonding Requirement Company Stock Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

23 Documenting Plan Fiduciaries, Consultants and Service Providers In order to document fiduciaries and their responsibilities, complete the table below. Fiduciaries should be monitored periodically to ensure they are adhering to the responsibilities allocated to them and meeting those standards identified in the chart. The chart should be updated whenever there is a change in plan fiduciaries or their responsibilities. Plan Name: ABC Company Fiduciaries Name/Organization/Title Documented Responsibilities Establish Retirement Committee Board Of Directors Select Fiduciaries of Plan Create Committee Charter Retirement Committee Committee Charter or Resolution Plan Administrator (internal) Plan Document Investment Manager (if applicable) Consultant (Plan Level) Consultant (Participant Level) Advisory Agreement Engagement or Advisory Agreement Advisory Agreement Service Provider Other (Auditor, Attorney, CPA, etc.) Service or Equivalent Agreement Engagement or Equivalent Agreement Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

24 Documenting Parties in Interest In order to document fiduciaries and their responsibilities, complete the table below. Fiduciaries should be able to identify and monitor all Parties in Interest and their dealings with the retirement plan. The chart should be updated and kept current on an ongoing basis. Plan Name: ABC Company Party in Interest Name/Address Plan Administrator Trustee(s) Board of Directors Company Officers Plan Actuary Attorney(s) Accountant and/or Auditor(s) Investment Advisor/Manager(s) Insurance Agent(s) All Shareholders and their Percentage Ownership Affiliated Entities of Plan Sponsor Other (Auditor, Attorney, CPA, etc.) Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

25 Selecting and Monitoring Plan Consultants The purpose of this section is to conduct the proper due diligence on your plan s consultant and ensure they can meet your plan s needs. Use the questions below to evaluate the objectivity of a consultant s recommendations. Question SELECTING AND MONITORING PLAN CONSULTANTS Response (1) What percentage of your total revenue is from retirement plan consulting? (2) How many of your employees are dedicated to retirement plan consulting? (3) What are the total qualified plan assets under management of the plan sponsors you serve? (4) Does your firm or a related firm also offer third party administrative (TPA) services? (5) How many clients do you serve in each of the following plan asset categories: Under $2 million $2 million to $10 million $10 million to $25 million Over $25 million (6) Is your firm a registered investment advisor? (7) If your firm is a registered investment advisor (RIA), does your ADV II provide written acceptance of your co-fiduciary status under ERISA? (8) Does your firm provide a written retainer agreement or service contract detailing the services that you provide? (9) Does your firm disclose all forms of compensation, including commissions, bonus payments, fees, revenue sharing and other forms of compensation? How is this information disclosed to us? Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

26 (10) How much E&O insurance does your firm have (per incident and aggregate annual coverage)? How many representatives are covered under this policy? (11) Are the representatives from your firm that will be servicing us on an ongoing basis available for an onsite due diligence interview at your office? (12) Do you employ a Chartered Financial Analyst (CFA) that will directly deliver services to our firm? If so, please describe how they will be delivering services and the qualifications and background of this individual. (13) Have your investment materials been reviewed by FINRA? Is a copy of FINRA s opinion letter available for our review? (14) Have your investment materials been reviewed by an outside legal counsel for compliance with ERISA? (15) What software and research tools does your firm use to prepare investment research reports for plan sponsors? (16) How many individuals in your firm are available to provide group or individual employee education meetings for our employees? (17) Please list the qualifications and process for the person(s) who will be responsible for delivering ongoing service to our plan: Will our plan have a dedicated service rep with bottom-line accountability? Industry experience Number of customers serviced in their total block of business Percentage of time representative dedicates to service (versus sales, marketing, etc.) Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

27 Selecting and Monitoring Service Providers The following questions are intended to assist plan fiduciaries in evaluating the objectivity of the recommendations provided, or to be provided, by a service provider. Question SELECTING AND MONITORING SERVICE PROVIDERS Response (1) Has the plan been benchmarked in the last 3 years or more frequently depending on significant changes in your plan (asset growth, acquisitions, plan design, etc.)? If, contact your Advisor to conduct a Benchmarking. (2) Who is the current service provider? (3) What are the current plan assets? (4) What type of plan document is used (i.e., prototype, non-standard prototype, custom, or volume submitter)? (5) What are the current administration charges? (6) What are the current asset charges? (7) Where are all fees (direct and indirect) disclosed and are they disclosed in a concise and understandable manner? (8) What services does the provider offer: Administration Recordkeeping Trustee Services Compliance Legal Accounting Payroll Investment Management Custodial Education (9) What is the total amount of retirement assets the provider services? Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

28 (10) What is the provider s average plan size (assets)? (11) Has the provider provided their processing, conversion and timing service standards and if so, what are they? (12) Is the provider bonded and if so, what is their coverage amount? (13) Is the provider properly licensed for the services provided (at the federal and state levels)? (14) Does the provider give their plan clientele regular information and updates regarding the services offered? Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

29 Selecting and Monitoring Auditors Use the following questions offered by the DOL to evaluate auditors. Generally, ERISA requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report (Form 5500). If a qualified retirement plan is required to have an audit, then the plan sponsor (or other named fiduciary so designated) must hire an independent qualified public accountant. The following questions are designed to assist fiduciaries in selecting an auditor and reviewing the audit work and subsequent report. Question SELECTING AND MONITORING AUDITORS Response (1) Is the plan auditor licensed or certified as a public accountant by a state regulatory authority as required under ERISA? (2) Is the plan auditor independent of any financial interests in the plan or the plan sponsor that would affect his ability to render an objective and unbiased opinion about the plan s financial condition? (3) Does the plan auditor have experience auditing ERISA covered plans? (4) Has the auditor provided references and is his license valid and up-to-date? (5) Does the auditor take the following into consideration when he audits an ERISA-covered plan: Whether plan assets covered by the audit have been fairly valued; Whether plan obligations are properly stated and described; Whether contributions to the plan were timely received; Whether benefit payments were made in accordance with plan terms; If applicable, whether participant accounts are fairly stated; Whether issues were identified that may impact the plan s tax status; and Whether any prohibited transactions were properly identified. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

30 Question SELECTING AND MONITORING AUDITORS Response (6) Does the auditor provide a signed copy of the audit in a timely manner (i.e., in advance of the 5500 filing due date)? (7) Does the auditor have a quality control mechanism in place to ensure that audits are accurate? Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

31 Investment Committee Charter [Name of Plan] [Date] 1. The Fiduciary Investment Committee shall be composed of individuals appointed by the Board of Directors of (Name of Plan Sponsor). The Fiduciary Investment Committee shall act pursuant to authority delegated by the Board of Directors of the Plan Sponsor (the Board ), subject at all times to the right of the Board to withdraw such delegation and undertake the responsibilities previously delegated to the Fiduciary Investment Committee directly. 2. The purposes of the Fiduciary Investment Committee are to act pursuant to delegated authority by the Board to satisfy the obligations of the Board under the Employee Retirement Security Act of 1974, as amended as follows: a. Establishing and maintaining the Investment Policy statement; b. Selecting investment options; c. Selecting investment managers; d. Periodically evaluating the Plan s investment performance and recommending investment option changes; and e. Providing Plan participant investment education and communication. 3. The Fiduciary Investment Committee shall follow all the policies and procedures set forth in the Investment Policy statement (the Investment Policies ) of the Plan, as from time to time amended by the Committee subject to approval by the Board. In case of any conflict between the terms of this Charter and the terms of the Investment Policies, the terms of the Investment Policies shall take precedence over the terms of this Charter and shall govern the activities of the Fiduciary Investment Committee. 4. The Fiduciary Investment Committee shall consist of no less than [three] members as the Board may from time to time designate. 5. At any time that the Fiduciary Investment Committee is required to act pursuant to the Investment Policies, the chair or its designee shall convene a meeting of the Fiduciary Investment Committee. 6. Two members of the Fiduciary Investment Committee shall constitute a quorum for any action to be taken by the Fiduciary Investment Committee at a meeting. A majority of the members participating in the meeting may take any action or make any determination at a meeting of the Fiduciary Investment Committee; proving, however, that both members participating in the meeting must agree to take any action or make any determination in the case of a meeting consisting of only two members. Members of the Fiduciary Investment Committee may participate in a meeting of such Committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 7. The Fiduciary Investment Committee shall provide information to our Service Provider to assist our Service Provider in preparing all necessary documents. 8. The Fiduciary Investment Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to consult counsel to the Plan and other experts or consultants at the expense of the Plan. 9. This Charter may be amended by action of a majority of the members of the Fiduciary Investment Committee at a meeting or by the Board; providing that, if amended by the Fiduciary Investment Committee, the Fiduciary Investment Committee shall present such Charter, as amended, to the Board at its next regularly scheduled meeting. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

32 Investment Committee Charter (continued) The following represents a potential listing of suggested additional duties which could be included to convert an Investment Committee into an inclusive 401(k) Steering Committee. Feel free to choose from the following duties or customize to suite the needs of your Plan (change prior verbiage accordingly). ADMINISTRATIVE DUTIES: - Confirm that all Plan operations, administrative and otherwise, are being carried out as prescribed by the Plan. - Document, and related documents, consistent with current regulations. - Approve or reject and document any appropriate transaction requests (i.e., loans, hardships, withdrawals, distributions). - Confirm and maintain timely remittance of participant contributions pursuant to current DOL regulations. - Maintain reports from each service provider associated with the Plan (Investment Advisor/consultant, recordkeeper, custodian/corporate trustee, actuary, legal counsel). - Adopt any necessary amendments or restatements to the Plan Document. - Review results of compliance testing annually and document any resulting recommendations and activities. - Review general plan provisions annually and implement appropriate changes (with Board Approval). - Review applicable legislative updates and significant pending legislation. - Confirm that all necessary reporting to participants, vendors and appropriate governmental agencies is accomplished and documented on a timely basis. - Review and confirm current regulatory compliance status and initiate any appropriate corrections to ensure compliance. - Review and document all ERISA Section 404(a) & (c), compliance related activities as well as general fiduciary guidelines. - Plan and document all participant education/communications activities. - Review, confirm and document competitiveness of plan expenses and services for each plan vendor. - Provide for Committee fiduciary training as necessary. - Report, to the Board of Directors, any potential elective increase in Plan expenditure exceeding $ Review and confirm maintenance of all fiduciary practice standards. - Confirm that the Committee and Board of Directors has adhered to the Exclusive Benefit Rule of ERISA Section 404(a). - Report to the Board of Directors, at least annually, on all significant issues affecting the Plan. Investment Committee Charter Executed: (Date) Board Members: Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Name and Signature Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

33 ERISA 404(a) & 404(c) Compliance Checklist Plan fiduciaries are required to meet specific guidelines as set forth by ERISA. Complete this checklist to indicate compliance with ERISA 404(a) and, if applicable, 404(c) guidelines. Investment Policy ERISA 404(A) ACTION ITEMS Action Item Completed Comments Quantitative and Qualitative Analytics Applied Investment Recommendations and Policies Reviewed Periodically Investment Selection/Monitoring Process Documented 404(C) ACTION ITEMS Action Item Completed Comments Plan Offers a Broad Range of Investment Alternatives Plan Allows Participants to Give Instructions on How to Invest Their Account with Frequency Plan Allows Participant to Obtain Sufficient Information Necessary to Make Informed Investment Decisions Plan Allows Participants to Exercise Independent Control Over Their Investments Other Matters Addressed (Reference 404(c) Checklist; Details provided in User Guide) Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

34 404(c) tice and Policy Statement Overview To comply with some of the important requirements of 404(c), we strongly suggest that you take the following actions: Review and sign the attached tice & Policy Statement and keep on file. Distribute the attached tice & Policy Statement, along with the customized Fee Disclosure exhibit, to all eligible employees at your earliest convenience and include a copy in each enrollment package. Why are the above action steps so important? The issue of complete and concise fee disclosure, on both plan and participant levels, is growing more crucial. To help protect you and all of the plan fiduciaries we strongly recommend distribution of the (attached) investment fee description exhibit in addition to the attached basic 404(c) Disclosure Statement (minus the signature page) to all employees. Section 404(c) of ERISA says that, by complying with the 404(c) requirements, plan fiduciaries will not be liable for losses that result from the investment decisions made by participants. Conversely, if plan fiduciaries do not comply with 404(c), they could be liable for losses due to poor investment decisions made by plan participants. How do the attached materials help protect you? It establishes your general intention to comply with 404(c) It discloses to plan participants your intention to comply with 404(c) (te: If your plan has employer stock, ERISA counsel should be consulted prior to distributing the attached tice) The customized one page fee disclosure complies with the 404(c) requirement of disclosing specific fees that are deducted from participant investment returns Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

35 404(c) tice and Policy Statement (continued) [Retirement Plan Name] Section 404(c) tice and Policy Statement The Company offers a defined contribution retirement plan to provide eligible employees with a long-term savings vehicle and potential source of retirement income. The above-named plan (the Plan ) is intended to be an ERISA Section 404(c) Plan. Under an ERISA Section 404(c) Plan, the Plan fiduciaries may be relieved of liability for any losses that are the direct and necessary result of investment instructions given by a participant or beneficiary. This Section 404(c) tice and Policy Statement outlines the procedures for implementing and monitoring the requirements set forth in the Section 404(c) regulations. It also establishes the intent of the Plan Sponsor to comply with Section 404(c) and describes certain procedures and guidelines to ensure compliance with Section 404(c). PLAN FIDUCIARY RESPONSIBLE FOR PROVIDING INFORMATION TO PARTICIPANTS The Plan fiduciary named below is responsible for ensuring that participants receive information about the investment options available under the Plan and for ensuring that the participant s investment instructions are followed. 401(k) Committee Company Street Address City, State, Zip Phone Number AVAILABLE INFORMATION FOR PARTICIPANTS The Plan fiduciary will provide the following information to all participants [#7-#11 to be provided to participants upon request (based on the latest information available to the Plan)]: 1. A general description of the investment alternatives available under the Plan and, for each investment alternative, a general description of the investment objectives and risk and return characteristics of the investment alternative. The description must include information on the type and diversification of assets comprising the portfolio of each designated investment alternative. 2. If applicable, the identification of any designated investment managers. 3. An explanation of the procedures for participants to give investment instructions and an explanation of any limitations on such instructions, including any restrictions on the exercise of voting, tender, and other similar rights. 4. A description of any transaction fees and expenses incurred in connection with the purchase or sale of each investment alternative which may be directly assessed against the participant's account, including commissions, sales loads, deferred sales charges, and redemption or exchange fees. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

36 404(c) tice and Policy Statement (continued) 5. In the case of an investment alternative which is subject to the Securities Act of 1933, and in which the participant currently has no assets invested, immediately prior to or following the participant s initial investment, a copy of the most recent prospectus provided to the Plan (prospectuses provided to the Plan must be made available upon request regardless of investment type). 6. Subsequent to a participant's investment in an investment alternative, the participant must be furnished with any Plan provisions or materials provided to the Plan relating to the exercise of voting, tender or similar rights which are incidental to the holding of an ownership interest in such investment, to the extent such rights are passed through to participants. 7. Copies of prospectuses, financial statements and reports, and any other materials relating to investment alternatives available under the Plan to the extent they are furnished to the Plan. 8. A description of the annual operating expenses of each investment alternative, such as investment management fees, administrative fees and transaction costs, which reduce the rate of return to the participants or beneficiaries, and the aggregate amount of such expenses expressed as a percentage of average net assets of the designated investment alternative. 9. A list of the assets which comprise the portfolio of each investment alternative, the value of each asset individually (or the proportion of the investment alternatives which it comprises), and with respect to each individual asset which is a fixed rate investment contract issued by a bank or similar institution, the name of the issuer, the term of the contract and the rate of return on the contract. 10. Information concerning the value of shares or units in designated investment alternatives, as well as past and current investment performances of the alternatives determined net of expenses on a reasonable and consistent basis. 11. Information concerning the value of shares or units in designated investment alternatives held in the account of the participant. The Plan fiduciary must comply with a participant s investment instructions except where (a) implementation of the investment instructions would result in a prohibited transaction under ERISA or the Internal Revenue Code; (b) implementation of the investment instruction would generate taxable income to the Plan, or (c) implementation of the investment instruction is not in accordance with Plan documents (to the extent the documents are consistent with ERISA), would cause a fiduciary to maintain ownership of any assets outside the U.S. and its sovereignties, would jeopardize the Plan's tax qualified status, would result in a sale, exchange or lease of property between a Plan Sponsor and the Plan, would result in a loss in excess of a participant's account balance, or would result in a loan to a Plan sponsor. INVESTMENT CHOICES The Plan fiduciaries have provided at least three diversified core investment categories representing a wide range of risk/return characteristics, so as to allow Plan participants to choose from a broad range of investments. The Plan fiduciaries also have established an Investment Policy for the Plan that includes criteria for the initial selection and ongoing monitoring of the investment alternatives under the Plan. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

37 404(c) tice and Policy Statement (continued) INVESTMENT CHANGES The Plan fiduciaries provide participants with the opportunity to make investment changes on any business day, at no cost, through the investment provider s toll-free 800 number or Internet site. Restrictions on investment changes may apply that prevent or inhibit late trading practices, excessive trading, or other investment change activities that could possibly have a negative impact on investment performance or expenses. An explanation of how to make investment changes, account balance transfer restrictions or limitations, and transaction confirmations, are included in the enrollment kit and/or provider website. AMENDMENTS TO 404(C) NOTICE AND POLICY STATEMENT The Plan fiduciaries reserve the right to amend this 404(c) tice and Policy Statement at any time without notice. This 404(c) tice and Policy is effective. NOTE: This document provides SAMPLE wording and should be reviewed by legal counsel prior to signing. Name of Plan Trustee Signature Date Name of Plan Trustee Signature Date Name of Plan Trustee Signature Date Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

38 Plan Fee Disclosure Form Investment Option Management Fee Asset Charge Total Investment Expense All of the above fees were taken directly from information furnished by the investment provider, including, but not limited to: Their website; Investment prospectus information; Investment highlight sheets; Direct s and correspondence from the investment provider (to Retirement Plan Advisory Group), and other written material. The accuracy of this information is not guaranteed, as it has not been audited by the investment provider. In addition, the investment provider, and/or the underlying fund managers, may make investment and/or pricing changes at any time, subject to the provisions and limitations of their investment contracts (between the plan sponsor and investment provider). The plan provider may also eliminate or replace funds at their discretion. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

39 Retirement Plan Components The diagram below illustrates the essential components that collectively define plan services that are delivered to you, the plan sponsor, and your participants. Retirement Plan Advisory Group only seriously considers plan providers who deliver product excellence in all areas. Cost Recordkeeping Accounting Employer/Employee Reports Processing Payroll Deposits Quality Assurance Standards Billed Fees Investment Management Fees Asset Based Fees Revenue Sharing Disclosure Web-based Tools Automated Voice Response System Loan/Withdrawal Processing Online Enrollment Technology Services Plan Sponsor Retirement Plan Services Participant Plan Document, SPD Discrimination Testing 5500 Filings ERISA Resources Investment Philosophy Quantitative Analysis Qualitative Analysis Scorecard SM Fund Ranking Enrollment Materials & Meetings Individual Advice Solutions Participant Statements Bi-lingual Support Compliance Communications Investment Management Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

40 Revenue Sharing By definition, revenue sharing includes payments made by investment managers to service providers or plan consultants for (a portion of) the revenue generated from the management of a particular fund or funds. Historically such allowance may or may not be known to a plan sponsor; nonetheless, it is imperative that plan sponsors with fiduciary oversight of their organization s retirement plan understand the distribution systems that most investment management organizations use and how they share revenue. The most common forms of revenue sharing can include 12b-1 fees, shareholder servicing fees, and sub-transfer agent fees. In some instances, a portion of the investment management fee for proprietary funds may include some revenue sharing. The diagram below illustrates potential fund expenses. 12-b1: Distribution expenses paid by mutual funds from fund assets. Includes commissions to brokers, marketing expenses and other administrative services. Investment Management: Fees for managing investment assets. Charged as a percentage of the assets invested and deducted from the investment return. Investment Management Fee 12-b1 Fees Shareholder Servicing Fees Sub-TA (Agency Transfer Fees) Shareholder Servicing: Revenue shared by the mutual fund company with the service provider. Asset / Wrap Fee: Additional fees layered on top of total investment fees. Sub-TA: Brokerage firms and mutual funds often contract recordkeeping and other services related to participant shares to a third party called a subtransfer agent. Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

41 Retirement Plan Cost Analysis Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

42 Retirement Plan Cost Analysis RETIREMENT PLAN FEE SUMMARY Total Cost Investment Cost Administration Cost ABC Company $ $ $ % % % Benchmark* % % % Plan Assumptions Number of Participants Plan Assets as of *Source: 401(k) Averages Book, HR Investment Consultants (9th Edition) **Average account balance for benchmark is $50,000 Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY

43 Compensation Disclosure STATEMENT OF PURPOSE This document is provided voluntarily to customers of Retirement Plan Advisory Group. Its purpose is to provide complete disclosure of all compensation paid to our firm for services delivered by Retirement Plan Advisory Group to your plan. This document does not replace any legal or required disclosures mandated by the Department of Insurance, Department of Labor, IRS, FINRA, the SEC, Financial Telesis, Inc. (our Broker Dealer), or any laws, regulations or legal directives impacting the subjects covered in this document. This document may review compensation that is also disclosed in other documents and forms provided to you through your plan provider, filings of government forms and documents, and other sources. METHOD AND AMOUNT OF COMPENSATION Retirement Plan Advisory Group receives one or more of the following types of compensation, as detailed below: 1. Commissions (Mutual Fund, FINRA Registered Contracts, or Group Annuity Contracts) These are payments made by the plan provider to Retirement Plan Advisory Group. These commissions are included in the existing pricing that applies to the plan (that includes this type of arrangement), and are addressed in the contractual documents between the plan provider and plan sponsor detailing total plan costs. 0.XX% of plan assets 2. General Consulting Fees The scope of services and plan sponsor fee payments are outlined in the Retainer Agreement approved and signed by the plan sponsor. $ annually 3. Additional Compensation not charged directly to your plan Some plan providers may, at their sole discretion, pay Retirement Plan Advisory Group annual additional compensation not charged directly to your plan up to.05% of plan assets. The additional compensation made by the plan provider to Retirement Plan Advisory Group does not increase the specific pricing that applies to the plan. Generally, Retirement Plan Advisory Group receives these payments for delivering employee communications, investment due diligence and other services to plan sponsors. Estimated at 0.XX% of plan assets Retirement Plan Advisory Group Fiduciary Plan Review / ABC COMPANY