Creating and Monitoring Defined Contribution Plans in Advisor Workstation

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1 Creating and Monitoring Defined Contribution Plans in Advisor Workstation Disclaimer Overview What are some key terms to know? What is the process for creating the DC Plan Status report? Creating a Group Record Overview How do I create a group record? Creating a DC Plan Overview How do I create a DC plan? How do I use the Investments tab? How do I use the Allocate tab? How do I use the Fees tab? How do I use the Report Options tab? How do I save a DC plan? Constructing Alerts to Monitor DC Plans Overview How are alerts processed? When are alerts processed by the system? How will I know when an alert has been triggered? How do I create and apply alerts for a DC plan? How do I compare a fund s return to a benchmark? How do I correct an alert? How do I apply an alert to a new fund in a DC plan? How do I monitor and reset triggered alerts? Version 2.0 i

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3 Disclaimer This guide reflects a generic version of Advisor Workstation and is used for training purposes only. Your institution might not license all of the features and functions demonstrated in this manual. Disclaimer This document explains how to do the following: Create a group record to associate with a DC plan Create a DC plan to use with the DC Plan Status Report Construct alerts to monitor a DC plan, and Generating the DC Plan Status Report. Overview Instructions on generating the Plan Comparison Report is available in a separate manual. The table below defines some key terms to understand when working with DC plans in the Advisor Workstation. What are some key terms to know? Term Group DC Plan Model DC Plan Definition DC plans can be assigned to a group record, which you can think of as the plan sponsor. Creating a group for each plan sponsor allows you to have multiple files for the same client all in one place. For instance, if a client has both a 401(k) and a 403(b) plan, you can create both as DC Plans and assign them to the same group (plan sponsor). This classification system is also useful if you have multiple plans for the same client, or if you want to have files for both the current fund line up and a proposed fund line up. A DC plan is used to create an investment lineup for defined contribution clients. They must be assigned to a group record. The Model DC Plans page is where you will find all of your transferred DC portfolios. The instructions that follow in this document ask you to assign these model DC plans to group records, so they can be moved to the DC Plans page. Version 2.0 1

4 What is the process for creating the DC Plan Status report? What is the process for creating the DC Plan Status report? The DC Plan Status Report is the same in Advisor Workstation. However, the process and procedures used to create DC plans and the report have changed from Advisor Workstation 1.0. Note the flowchart below: Start Is the DC Plan a model? No Does the group record exist? No Create the group record Yes Yes Create a model DC plan Create the DC plan Are alerts assigned to the plan? No Create and assign the alerts Yes Generate the DC Plan Status Report Note the following: When creating a DC plan, you need to determine whether it will be used as a model, or if it is for a particular plan sponsor. If the DC plan is a model, you can immediately create it. If it is for a plan sponsor, though, you need to create a group record to which the plan will be assigned. Without a group record, the DC plan can be saved only as a model. A DC plan is distinct from a portfolio. You cannot create a portfolio that is a DC plan. They are two different items in Advisor Workstation. Alerts can be a part of the DC Plan Status report. They can be created specifically for one DC plan, or for all DC plans. These alerts are also distinct from any alerts you might create for portfolios. 2 Version 1.0

Creating a Group Record Overview Creating a Group Record This section explains how to create a group record. You can think of the group record as the plan sponsor for a DC plan.

5 Creating a Group Record Overview Creating a Group Record This section explains how to create a group record. You can think of the group record as the plan sponsor for a DC plan. The DC plans you create must be either saved as a model, or assigned to a group. Without a group record, though, you will be able to save a DC plan only as a model. Overview To create a group record, do the following: 1. From the menu bar at the top of the screen, select File New Group. (Alternatively, from the Clients & Portfolios module, you can go to the Group page and click the New Group icon above the spreadsheet area.) The Group File window appears. 2. On the General Information tab, in the Group Name field, enter a name for the group. How do I create a group record? Note: Only the Group Name is required. All other information is optional. 3. Click the Group Type drop-down field and select Plan Sponsor. 4. Click the Status drop-down field select Client or Prospect. 5. Click the Activity drop-down field and select Active, Inactive, or Former. The group Name field is the only required information you need to enter before saving a group record Note: Entering information in the Address and Notes sections is also optional. 6. If you have client records you would like to associate with the group, click the Clients tab and enter the information there. You can use this feature if you want to assign a non- DC client to a plan sponsor group. 7. Click Save, then click Close. The new group record can now be found on the Groups page in the Clients & Portfolios module. Version 2.0 3

Overview Creating a DC Plan Creating a DC Plan Overview This section shows you how to create a DC Plan. In addition to selecting investments for the plan, you can assign a value to each holding.

6 Overview Creating a DC Plan Creating a DC Plan Overview This section shows you how to create a DC Plan. In addition to selecting investments for the plan, you can assign a value to each holding. How do I create a DC plan? To create a DC plan, do one of the following: From the menu bar at the top of the window, select File New DC Plan. The Morningstar Defined Contribution Plan window opens. You can maximize this window to take up the whole screen, if desired. From the menu bar, select File New DC Plan If you are on the DC Plans or Model DC Plans page in the Clients & Portfolios module, you can click the New DC Plan icon. Click this icon Click here 4 Version 1.0

7 Creating a DC Plan How do I use the Investments tab? The Investments tab in the Defined Contribution Plan window allows you to choose the holdings for a DC plan. To select investments, do the following: 1. From the Select Universe drop-down field, select the type of security you want to find. US Mutual Funds is selected by default. 2. In the Find field, type the name or ticker of the security you want to find. How do I use the Investments tab? Click here to choose an investment type Using the holdings from a model DC plan can speed the investment selection process 3. If a match does not appear automatically, click Go. 4. In the Total Search Results area, double click the name(s) of the item(s) you want to include in the DC plan. Version 2.0 5

How do I use the Allocate tab? Creating a DC Plan How do I use the Allocate tab? On the Allocate tab, determine how the assets will be divided among the plan holdings.

8 How do I use the Allocate tab? Creating a DC Plan How do I use the Allocate tab? On the Allocate tab, determine how the assets will be divided among the plan holdings. You can allocate by dollars, percentage or shares. If you elect to allocate by percentages, the Total Value field becomes available. Note: DC Plans always have a fixed allocation; they cannot be set to a floating allocation (as portfolios can). The Total Value field populates automatically as you enter currency amounts or shares. If you are allocating by percentage, click in the field and type the total amount being allocated among all holdings. The Include in Totals field controls whether the value of the DC plan is included in the asset total for the group. (This would be seen in the Total Asset Value column on the Groups page in the Clients & Portfolios module.) To exclude the value of a DC plan from a group s total, select No here. In the Status field, you can indicate whether this is an Actual, Proposed, or Historical DC plan. Select this drop-down field to decide how to allocate assets among the holdings in a plan You can enter a value in each row, or use the Apply to All row to use the same value for all holdings 6 Version 1.0

9 Creating a DC Plan How do I use the Fees tab? Enter the fees for the DC plan on the Fees tab. You can include fees at both the investment and plan level. These can include wrap fees, revenue sharing plans (which are refunded to the plan), or any of a number of administrative costs. How do I use the Fees tab? Set investment-level fees here Set plan-level fees here See the table below for more information on the options available here. Field Net Fund Exp Add Wrap Exp% Fund Rev Share% Net Exp% Total Number of Participants with Balance Description This is the fund's net expense ratio, as found in the fund's prospectus. This field cannot be edited. In this field, you can enter an additional amount to be charged to the plan for managing it as a wrap account. The amount you enter here is automatically added to the Net Exp% column to the right. Enter any revenue-sharing amounts from a security here. This amount is subtracted from the Net Exp% column to the right. This field is the total of the security's Net Fund Exp, plus the Add Wrap Exp%, minus the Fund Rev Share%. This field cannot be edited. In this field, type the total number of participants who do (or will) have a balance in the DC Plan. Version 2.0 7

10 How do I use the Fees tab? Creating a DC Plan Field Fee Type Allocate By Amount Paid By Paid Percent $ Paid by Participant $ Paid by Sponsor $ Plan Total Description This column shows all fee types you can charge for in a DC plan. The names of these items cannot be edited. Note that only one Miscellaneous Fee exists, so if you have more than one fee that does not fit in the labels provided, you will need to total them, then enter them in this row. In the Allocate By column, you can decide how each fee will be paid. You can allocate either by dollars per participant, dollars per plan (to be paid by the plan sponsor), or % of assets for the following fees: Record Keeping Fees Participant Education/Advice, and Trustee/Custodial Services The amount of the fee. This will either be a dollar amount, or a percentage amount, depending on your selection in the Allocate By column. The amount is multiplied by either the number of participants in the plan with a balance (in the case of dollar-denominated fees), or the total dollar value of the plan (in the case of percentage of assets) as entered on the Allocate tab. The Paid By column is used to determine who is paying for each fee. Note that you can use the Paid Percent column to split the costs between plan sponsors and plan participants. The Paid Percent field indicates the percent being paid by the value in the Paid By field. You can use this field to split costs between plan sponsors and participants. This field is calculated based on your entries in the Allocate By, Amount, Paid By and Paid Percent fields. You cannot edit this field. This field is calculated based on your entries in the Allocate By, Amount, Paid By and Paid Percent fields. You cannot edit this field. This field is calculated based on your entries in the Allocate By, Amount, Paid By and Paid Percent fields. You cannot edit this field. 8 Version 1.0

11 Creating a DC Plan How do I use the Report Options tab? The Report Options tab in the Defined Contribution Plan window allows you to do the following: include a cover page for the DC Plan Status Report choose which sections to include on the DC Plan Status Report select the fields for the Investment Option section of the DC Plan Status Report set the order in which the sections will appear on the DC Plan Status Report set a benchmark for the plan, and choose the page orientation for the DC Plan Status Report. How do I use the Report Options tab? The Defined Contribution Plan window can generate only the DC Plan Status report; you cannot generate the DC Plan Comparison Report from here. When you do generate the DC Plan Comparison Report, though, you will not have an option to select a benchmark for the DC plan. If you intend to use a custom benchmark, you must select it from the Report Options tab. To set a custom benchmark for a DC plan, do the following: 1. On the Report Options tab, scroll down to the Select Plan Benchmark area. 2. The default option is the S&P 500 TR index. You can select any other single benchmark from the top drop-down field.the other drop-down field allows you to create a custom, blended benchmark. The benchmark can be based on one of the following: the Asset Allocation of the plan the Morningstar Category of the plan constituents an institutional custom benchmark, or a custom benchmark you created. The components and weightings of a custom benchmark are disclosed at the end of the DC Plan Status Report. To use a custom benchmark, select this option button The custom benchmark is seen on the Plan Summary and Stock Sectors and World Regions sections of the DC Plan Status Report. Version 2.0 9

How do I save a DC plan? Creating a DC Plan How do I save a DC plan? Be sure to save the DC Plan when you create it. You can save it at any point in the creation process.

12 How do I save a DC plan? Creating a DC Plan How do I save a DC plan? Be sure to save the DC Plan when you create it. You can save it at any point in the creation process. You can also use the Save As button to save the same (or a modified version of a) plan with a different name. To save a DC plan, do the following: 1. At the top of the Defined Contribution Plan window, click Save. The Save dialog box opens. 2. Select either As Model or To Group. 3. If saving to a group, select the name of the group in the field to the right of the To Group option. If saving as a model, go to step Type a name for the plan, then click OK. When saving a DC plan to a group, choose the name of the group from this drop-down field Type a name for the DC plan here 10 Version 1.0

13 Constructing Alerts to Monitor DC Plans Overview Constructing Alerts to Monitor DC Plans This section explains the way alerts work in Advisor Workstation, and shows you how to create, set, modify and reset alerts for a defined contribution plan. Alerts allow you to monitor the criteria in a plan sponsor s Investment Policy Statement Note the following rules about alerts for the DC Plan Status Report: The alerts you set are created and applied to the defined contribution plan itself. The Frequency for all of these alerts should be Monthly. This is the default value. You could select Daily or Weekly as the Frequency, but the IPS calls for the funds to be monitored on a quarterly basis, and monthly is the closest you can get to that. Monthly alerts are processed on the seventh business day of the month. You can add multiple DC plans to the same alert, as long as the values for the alert apply to all of the plans. For example, if you have two plans with different holdings, but both plans calls for the 1-Year % Rank Category to be < 33, you do not need to create a new alert for each portfolio. If you replace a fund in a plan, the alert will update automatically. By default, the system is set to send you an notification when an alert is triggered. If you do not wish to receive these s, you can turn off this feature. This is an all-or-nothing option: either you receive an for all alerts that are triggered, or you do not receive an at all. You cannot select at the alert level whether to turn the notification on or off. Overview Version

14 How are alerts processed? Constructing Alerts to Monitor DC Plans How are alerts processed? Two types of alerts can be set in Advisor Workstation: One-time period alerts, which automatically reset when they are triggered, and Two-time period alerts, which also automatically reset when triggered, but can be deactivated as well. One-time period alerts look only at the present value of an item to determine whether the alert should be triggered. These alerts can be evaluated immediately, and do not need to wait until month-end processing before they run. The majority of alerts are one-time period alerts, and you will not need to reset them once they are triggered. Two-time period alerts are called such because they compare the value for an alert over two time periods. For instance, with the Fund Manager Name Change alert, the value of the Fund Manager data point compares the current value to the value present in the database after month-end processing occurs. If the values differ, the alert is triggered. Two-time period alerts can be activated or deactivated by checking or unchecking this box The Alerts section of the DC Plan Status Report does not display the beginning value for twotime period alerts. If your report includes two-time period alerts, please also reference the Triggered Alerts screen, as it displays beginning and trigger values for the triggered alert. This should provide a better understanding on why the alert was triggered. The following alerts are examples of two-time period alerts in the application: Fund Manager Name Change Equity Style Box Change Fixed-Income Style Box Change Fund/VA Star Rating Change, and Morningstar Category Change. 12 Version 1.0

15 Constructing Alerts to Monitor DC Plans When are alerts processed by the system? The timing as to when an alert is processed depends, in part, on the type of alert you create and the frequency with which you monitor the alert. Depending on the alert type, you can monitor it on a daily, weekly or monthly basis. For monthly alerts, note that the values for the securities or portfolios are processed during month-end production. It is only after that time that the alerts will be triggered if a security or portfolio fails to meet the criteria for the alert. Weekly alerts are processed based on the values of the end of the previous week. Alerts processing is shared across all users. Alerts are processed on a first-come, firstserved basis, and could take up to 24 hours to process. The below warning message will appear notifying you that any alerts appearing on the report are as of the last processing date, and therefore might not include the most current alerts. Once all alerts are processed, this message will no longer appear. When are alerts processed by the system? This message lets you know that the alerts are still being processed Version

16 How will I know when an alert has been triggered? Constructing Alerts to Monitor DC Plans How will I know when an alert has been triggered? To see if an alert was triggered (and what the value was that triggered the alert), go to the Clients & Portfolios module and select the Alerts page. The triggered alerts appear automatically. You can scroll to the right to see the defined contribution plan affected by each alert. (It will appear under the Portfolio column.) Use these fields to select and reset triggered alerts Take note of the Initial Trigger Value and Current Trigger Value columns. These show you the value which triggered the alert, as well as the current value. 14 Version 1.0

17 Constructing Alerts to Monitor DC Plans How do I create and apply alerts for a DC plan? To create alerts for a defined contribution plan, do the following: 1. From the menu bar at the top of the window, select Tools...Set Alerts...Clients & Portfolios Alerts. The Alerts Settings dialog box opens. Under the Alert Rules heading near the bottom of the box, five fields are available for you to construct your alert rule. Move from left to right when selecting criteria for these fields. How do I create and apply alerts for a DC plan? 2. In the Alert drop-down field, select the type of alert you want to set. The choices are divided into four main categories: Performance Modern Portfolio Theory Portfolio Operations 3. In the Operator drop-down field, select the operand. Options differ depending on the type of alert you select. Options include: Greater than Less than Greater than or equal Less than or equal Less than category average Greater than category median Less than primary benchmark Less than category benchmark Less than A, B, C or D (Stewardship Grade Overall only) In the Value field, type in a value. In the Frequency field determine how often the alert is run. Daily: The system checks for changes after the market closes each day. Weekly: The system runs the alert after the market closes each Friday. Monthly: The system runs the alert after monthly data production is complete, which is on or about the seventh day of the month. Version

How do I create and apply alerts for a DC plan? Constructing Alerts to Monitor DC Plans 4. In the Apply to drop-down field, select the DC plans to which you want to apply the alert.

18 How do I create and apply alerts for a DC plan? Constructing Alerts to Monitor DC Plans 4. In the Apply to drop-down field, select the DC plans to which you want to apply the alert. You can choose either All DC Plans or Selected DC Plans. 5. If you choose Selected DC Plans, the Find Items dialog box opens. In the Find field, type the name of the group whose plan you want to include in the rule. (Alternatively, you can select the option button for Model.) 6. Click Find, then move the plan you want to use to the Items Added to the Final List area. Type the name of the group here, then click Find When the plan(s) appear, select the one(s) you want to use and add them to the Items Added for Final List area 7. Click OK to close the Find Items dialog box. 8. On the Alerts Settings dialog box, click Add Rule. The rule appears in the area at the top. 9. Repeat steps 3-10 to add more alerts. 16 Version 1.0

19 Constructing Alerts to Monitor DC Plans How do I compare a fund s return to a benchmark? You can create an alert to compare with two different benchmarks: a fund s primary benchmark, or a fund s category benchmark. How do I compare a fund s return to a benchmark? A fund s primary benchmark is tied to the type of fund it is at a high level. For instance, a large-cap domestic equity fund will use the S&P 500 TR index as its primary benchmark, while fixed-income funds will use the BarCap Aggregate Bond index as their primary index. The category benchmark, in contrast, is tied to the Morningstar Category a fund belongs to. For example, funds in the Large Blend category will use the S&P 500 TR index as their category benchmark as well. Large Value funds, though, will use the Russell 1000 Value index as their category benchmark. Note: the Morningstar Category for a fund could change. These are reviewed twice each year for accuracy by Morningstar s Analysts. To compare a fund s return to a benchmark with an alert, do the following: 1. From the Alert drop-down field, select the time period you want to cover (e.g., 1 Year Total Return). 2. From the Operator drop-down field, select less than prim BM. 3. You do not need to enter a Value. 4. Set the Frequency to the value you d like to use to monitor the plan. 5. Click the Apply to drop-down field and select Selected DC Plans. A dialog box appears. 6. In the Find field, type the name of the group whose plan you want to monitor, then click Find. 7. Click Add to move the group to the Items Added to Final List area. 8. Click OK to close the dialog box. 9. Click Add Rule to save this alert. When comparing an alert to a benchmark, you do not need to enter a value Version

How do I correct an alert? Constructing Alerts to Monitor DC Plans How do I correct an alert? You might need to correct an alert if you input or selected a wrong value when it was created.

20 How do I correct an alert? Constructing Alerts to Monitor DC Plans How do I correct an alert? You might need to correct an alert if you input or selected a wrong value when it was created. To correct an alert, do the following: 1. At the top of the window, select Tools...Set Alerts...Clients & Portfolios Alerts. The Alerts Settings dialog box appears. 2. At the top, click once on the name of an alert to select it. It will be highlighted in yellow. 3. Modify the field(s) in the Alert Rules area to reflect the change(s) you need to make. 4. Click Update. Click once on an alert to select it. After changing the appropriate field(s), click Update. How do I apply an alert to a new fund in a DC plan? If you add a holding to a DC plan covered by an existing alert, you do not need to update the rule in order for the alert to be triggered for the new holding. The new holding is automatically processed. Also, any time you click the Update button, the alert is reprocessed, thus updating the values for the following: initial trigger date initial trigger value current trigger value current comparison value, and current comparison subject. 18 Version 1.0

21 Constructing Alerts to Monitor DC Plans How do I monitor and reset triggered alerts? Alerts, once triggered, will automatically become active again. The Alerts page in the Clients & Portfolios module shows you all alerts that have been triggered. To clear these items, do the following: 1. Go to the Clients & Portfolios module, then select the Alerts page. The Triggered Alerts page appears automatically. 2. You can either select certain items by clicking once on its row, then click the Reset Selected button beneath the spreadsheet area, or simply click the Select Items on Page button, then the Reset All button. How do I monitor and reset triggered alerts? You can click the column header for any column on the Triggered Alerts page. To reset the alerts for a particular group, for instance, you can click once to sort by the Group column. Version

Generating Defined Contribution Plan Reports in Advisor Workstation 2.0

Generating Defined Contribution Plan Reports in Advisor Workstation 2.0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 Generating the DC Plan Status Report..............................