Virginia K. Sutton, QKA Consultant; Account Executive, VKS Consulting; Johnson & Dugan. Am I a Fiduciary?

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1 Am I a Fiduciary? Wednesday, May 4, :30 a.m. 9:45 a.m. Virginia K. Sutton, QKA, QPFC Consultant; Account Executive, Johnson & Dugan; Founder VKS Consulting Virginia K. Sutton, QKA Consultant; Account Executive, VKS Consulting; Johnson & Dugan Virginia K. Sutton specializes in 401(k) defined contribution plans, helping clients regarding all phases of their qualified retirement programs, including plan design, investment selection and review, compliance, vendor assessment, plan conversions, employee education, and mergers and acquisitions. Virginia is a member of ASPPA s government affairs DOL subcommittee and ASPPA s affiliate NAPA, the National Association of Plan Advisors. She is past chair of ASPPA s participant communications and chaired the 401(k) Plans Subcommittee ( ). Virginia is a Investment advisory representative of Global Retirement Partners, LLC, a registered investment advisor. Global Retirement Partners, LLC, VKS Consulting and Johnson & Dugan Insurance Services Corporation are separate and non-affiliated companies. Johnson & Dugan CA Insurance License

2 Investment Provider Roles This session will explore the various roles of service providers and whether or not they may be acting as a fiduciary We will cover: Specific roles of service providers. Distinguishing between a 3(21), 3(38) and 3(16) provider. Recognizing when a service provider is or is not acting in a fiduciary capacity. Fiduciaries and Service Provider Roles FIRST, SOME CONTEXT 2

3 Who is a Fiduciary? Named Fiduciary Functional Fiduciary Written in Plan Doc. Principal Plan Responsibility (ex. Plan Trustee) The Authority for Plan Management & Oversight Actions Define Functional Fiduciaries ABC, Inc. 401(k) Plan Committee Members Have or Exercise Discretionary Authority or Responsibility for: Plan Administration Appoint Trustee; Plan Committee Plan Design (Eligibility) Payment of benefits Plan Management Set Plan Policies Oversight of Service Providers Plan Operations Asset Management & Disposition Engage Investment Managers e.g. Choose Funds Monitor Investments 6 3

4 A Plan Fiduciary must be Loyal to a Plan and its Participants/Beneficiaries A fiduciary, such as a plan sponsor, must discharge its duties solely in the interest of the plan s participants and beneficiaries and for the exclusive purpose of providing benefits to plan participants and beneficiaries and defraying the reasonable expenses of administering the plan. (ERISA Sections 403(c) and 404(a)(1)(A)) Fiduciaries Must Act Prudently with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims (ERISA 404(a)(1)(B)) For plans that permit participants to direct investments, plan sponsors are responsible not only for the prudent selection and monitoring of the plan s investment offerings but also for the prudent utilization of those investments by participants. The standard of care is very high and requires a level of expertise beyond that of a prudent lay person. 4

5 Fiduciaries Must Diversify Plan Assets Investment of plan assets must be diversified so as to minimize the risk of large losses. (ERISA Section 404(a)(1)(C)) Fiduciaries must also avoid conflicts of interest and acts of self-dealing that are known as prohibited transactions. (ERISA Section 406) Give the Money Back! And Pay a Fine A fiduciary that violates any of the duties discussed above is liable to the plan for any losses resulting from such a breach and for the restoration of profits made by the fiduciary through the use of plan assets. (ERISA Section 409(a)) The DOL can also impose statutory penalties (ERISA Section 502(l)) 5

6 Service Providers: Who Are They? Company Types Insurance Companies Mutual Fund Companies Banks Brokerage Firms Schwab, Merrill Lynch, etc. Trust Companies Independent Recordkeepers Partner to provide investments Designated Investment Managers (3(38)Fiduciaries) Third Party Administrators Plan Services/Function Recordkeeping Compliance Services Asset Custody Plan Trustee Asset Management Mutual Fund Separate Accounts/Group Annuity Collective Trusts Annuities Typical 401(k) Structure ABC, INC.: Plan Sponsor ABC, INC. 401(k) PLAN $ ADMINISTRATION INVESTMENTS Mutual Funds Separate Accounts/GVA Collective Trust Fund ASSET CUSTODIAN Holds assets May or may not include institutional trustee services RECORDKEEPING Account balances Remittance & distributions 800#/web/statements Trust reconciliation COMPLIANCE Plan documents IRS LOD or term. Filing Discrimination testing Loans & distributions

7 What/Who is a Trustee? The Designated Plan Trustee Is a Named Fiduciary In the absence of an appointed trustee, the Plan Sponsor is the plan trustee A trustee of a qualified retirement plan is the entity or group of individuals who hold the assets of the plan in trust. Trustees are either designated in the plan document or appointed by another fiduciary, typically the employer who sponsors the plan. The trustees will have exclusive authority and discretion over the management and control of plan assets unless the plan document provides otherwise: Control over investment decisions is delegated to an "investment manager" For 401(k) Plans: participants in self-directed plans are responsible for investment decisions. Institutional Trustee Services A plan can be self-trusteed or a registered Trust company can be named as the plan trustee. ERISA requires that a trustee be named by the plan The Trustee by definition is a fiduciary of the plan A Passive institutional trustee is most commonly named, because this means the plan sponsor retains fiduciary responsibility for disposition & investment of trust assets. The plan s passive trustee is frequently an affiliated bank or strategic bank/trust company partner of the recordkeeper. Plan Trustee services are highly specialized to qualified plans in contrast to trust companies who may provide services for IRAs or real estate transactions, etc. 7

8 Fiduciaries and Service Provider Roles PLAN ADMINISTRATION To the Extent an Investment Provider is engaged to provide Plan Administration, their services agreement will need to clarify their status as a 3(16) Fiduciary 8

9 What is a 3(16) Fiduciary? 3(16) offers a fiduciary definition for individuals who serve as plan administrators. 3(16) Is an Administrative Fiduciary Under this definition, these individuals agree to take full responsibility for the daily operation of the plan or, in some cases, only specific functions. 3(16) Fiduciary Defined: The person specifically designated by the terms of the the instrument under which the plan is operated. If an administrator is not so designated, the plan sponsor 9

10 If A Service Provider (TPA) will be a 3(16) Fiduciary It will be in writing in their services agreement and the plan document will reference. Specific services for which the entity is a 3(16) will be named: Determination on Loans, Hardship or QDROs & directing the trustee to make distributions Filings (e.g. 5500) on behalf of plan sponsor Disclosures 3(16) Administrative Fiduciary: Caution Service Providers who offer 3(16) Administrative Fiduciary Services will frequently identify only those services for which they are a fiduciary: The plan sponsor may not understand it is not all or nothing The service standard for 3(16) services is highly skilled and by extension, personnel concerns over quality control must be considered when offering 3(16) services. It is unusual for large investment advisor institutions to offer 3(16) services. 10

11 Read The Service Agreement When service providers are NOT acting in a Fiduciary Capacity they will use language that indicates that the plan sponsor or participant retains the control over the process. Look for key phrases like: Directed Record-keeper Compliance or Administration Outsourcing or Support Service Asset Allocation Funds are offered as an Education Service The Case for A Multiple Employer Plan A plan sponsor can shift 3(16) responsibility to the sponsor of an MEP by adopting the MEP instead. Form 5500, audit, etc. is the responsibility of the MEP provider/plan sponsor The monitoring of the MEP s investment options fall to the MEP plan sponsor. Investment options may still be mutual funds or may be provided by a 3(38) investment manager A BD/Registered Rep does not need to be named as the plan s investment advisor. No conflict if use an MEP and become investment advisor to participants rollover IRAs 11

12 Investment Provider Roles: ASSET MANAGEMENT & ADVICE Asset Custody Who holds the Plan s Money? Asset custody depends on the type of institution and the plan s investment options: Asset custody by an insurance company can be through an insurance contract. Asset custody of mutual funds is typically through a registered broker-dealer or banking institution. 12

13 Common 401(k) Investment Types $ Fund Fund Fund Fund Mutual Funds Transparent & Independently verifiable Prospectus Requirement Net Asset Value (NAV) in newspaper; shares valued daily Retail or Institutional Separate Accounts Insurance Company/ Group Variable Annuity Unit Pricing: may or may not track underlying mutual fund Collective Pooled Trust Institutional Management Fund is Fiduciary; Fund is Plan Asset Less expensive; less transparent 25 Pooled Investment Fund Types Mutual Funds, Separate Accounts, Collective Trust Accounts These investment structures pool investor dollars and buy assets types Your Money Others Money Fund Company Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Bond Bond Bond Cash 13

14 What is a 3(21) Fiduciary? Under ERISA Section 3(21)(A), a plan fiduciary is defined as anyone who: Has discretionary authority or control regarding management of the plan or disposition of plan assets; Renders investment advice for a fee; or Has discretionary authority or responsibility for the administration of the plan. 3(21)(B) Provides Exception: Typically Registered Mutual Fund Managers are not considered Fiduciaries to the Plan or Participants Most often, a mutual fund s manager will have a fiduciary duty to its shareholders, but not the investors in the fund unless the investors of the fund are considered fund shareholders There can be exception to this: Ex: Vanguard sets up its funds so that investors in their funds are the funds shareholders 14

15 Mutual Fund Company Fiduciary Exception under ERISA: ERISA 3(21)(B) states: If any money or other property of an employee benefit plan is invested in securities issued by an investment company registered under the Investment Company Act of 1940 [i.e., a mutual fund], such investment shall not by itself cause such investment company or such investment company s investment adviser or principal underwriter to be deemed to be a fiduciary... Mutual Fund Companies Hold Exemption Dear Mutual Funds or insurance companies may offer services to 401(k) plan sponsors to remain competitive as a service provider, but will most often provide these services as an outsourcing function, not as a fiduciary service Since investment management & disposition of assets in a 401(k) account is delegated to the participant, the fund company is not compelled to be a fiduciary Plan sponsor may engage a 3(21) investment advisor for help with the set up and review of their plan s investment menu or Plan sponsor can delegate investment decisionmaking to a 3(38) investment manager 15

16 3(21) Limited Scope Fiduciary 3(21) Is an Investment Advisor While 3(21) Defines who is a Fiduciary under ERISA, the marketplace most frequently identifies a Limited Scope Investment Fiduciary as a 3(21) Fiduciary Advisor A registered investment advisor provides investment advice for a fee Shared Investment Fiduciary Responsibility An investment fiduciary is a paid service provider that gives investment recommendations but does not necessarily have discretionary authority to make the actual investment decisions. Instead, the 3(21) investment fiduciary typically provides suggestions to the plan sponsor, who is free to accept or reject those recommendations and who must then execute the investment decisions for the plan. The plan sponsor and the 3(21) investment fiduciary, therefore, share fiduciary responsibility. 16

17 The Rise of the Retirement Plan Investment Advisor Post-Fee Litigation and implementation of the DOL s fee disclosure rules, Plan Sponsors have increasingly engaged plan advisors to help them assess service providers and monitor plan investments. Increasing acceptance by many traditionally direct sold 401(k) plans providers to acknowledge the Advisor s role. Ability for Retirement Plan investment advisors to drop their BD affiliation and still work with most recordkeeper platforms. The Investment Fiduciary Fight Registered Investment Advisors and their representatives will have an agreement that states their fiduciary standing. The RIA Agreement will state the services and fee structure. The plan sponsor can pay the fee or it can be assessed to the plan/participant accounts. The registered representatives of Broker-Dealers who work with plan sponsors may want to be aligned with their clients (the plan sponsor) interests, but the other business that the BD supports may be in conflict. Broker-Dealers have a suitability standard. BD may mandate that they do not have fiduciary status. The Proposed Fiduciary Regulations seek to mandate that services provided to a plan or participants in retirement accounts must adhere to a fiduciary standard. 17

18 Who/What is a 3(38) Fiduciary? 3(38) defines a fiduciary as someone who agrees in writing to be an investment manager for the plan, having the power to manage, acquire or dispose of any assets of the plan. 3(38) Is an Investment Manager This individual must be a registered investment advisor under the 1940 Act. If not registered under the Act, individuals must be registered with the state. A fiduciary can also be a bank or an insurance company. Designated Investment Manager: A 3(38) Fiduciary Can Be Engaged by the PLAN Engaged by the Plan Sponsor and designated in the Plan Document: Determine and oversee the investment line-up and make changes without plan sponsor consent Manage individual funds within the plan E.g. Collective Trusts Can Be Engaged by Participants Appointment by the Participants in writing to manage all or a portion of their accounts. Managed Portfolios/Accounts Discretionary authority over participant s balance May or may not be able to invest participant assets in funds outside of Plan s funds 18

19 Investment Asset Allocation Programs Not A 3(38) Service Recordkeeping function: Asset allocation is an Education service for participants Asset allocation pulls from a core fund line up that was determined by the plan sponsor Asset Allocation funds are not Designated Investment Alternatives ( DIA ) 3(38) Investment Service Investment Provider or Firm that is registered or governed by banking or insurance law Appointed formerly by plan sponsor via the plan document or associated plan service agreement Discretionary authority to change the investment positions. May or may not use the plan s core fund options Can apply to management of a 401(k) line up or asset allocation fund offered within a 401(k) lineup Read the Services Agreement Fiduciary status will be used as a competitive advantage; marketing material will be explicit If acting in a fiduciary capacity, the services agreement will be specific as to which services provide fiduciary status For 3(16) the Administration Services Agreement will typically require the plan sponsor to agree to provide necessary data in a timely fashion For 3(38) the Investment Manager will provide their credentials and indicate their status as such 19

20 What Role do they play? SAMPLE INVESTMENT PROVIDER/ SERVICE PROVIDER PARADIGMS Bundled or Partner Mutual Fund or Insurance Co. Custodian/ Inst. Trustee Services Mutual Fund or Insurance Company The Service Provider Agreement will be explicit as to 3(16) Fiduciary Status & Services Recordkeeping Compliance May be internal or via TPA Partner 3(38) Fund Management may be provided by affiliate or outside third party as an Asset Allocation fund/managed Account Mutual Funds ARE NOT 3(38) Fiduciary Managers Money Market Fund Bond Mutual Fund US Stock Mutual Fund(s) Foreign Stock Mutual Fund SERVICES The Service Provider Agreement will be explicit as to 3(16) Fiduciary Status & Services ABC CORPORATION 401(k) Plan Fiduciary Regs. Typically A Broker- Dealer/Registered Rep will NOT be a 3(21) Fiduciary Broker-Dealer Registered Rep Consultant to Plan Third party 3(38) Inv Mgr.; separate engagement 40 20

21 Independent Recordkeeper DailyVal TPA, INC Record-keeper Compliance Strategic Partnership SERVICES AGREEMENT: Should explicitly state if administration services if DailyVal acts as 3(16) Admin Fiduciary, otherwise administration services are meant to be only outsourcing support for plan items like loans, notices distribution, etc. TRUST Co. (Subject to Banking Regulations) Custodian Institutional trustee Collective Trust Investment Options will be 3(38) Fiduciary Inv Managers Cash Fund Bond Fund US Stock Fund(s) Foreign Stock Fund(s) ABC CORPORATION 401(k) Plan Written Agreement/Disclosure includes 3(21) Fiduciary Status RIA/Consultant Bills or Assesses fee for Services 41 Trending now IN CONCLUSION 21

22 How Much Discretionary Control? The degree to which an institution provides and retains discretionary control over plan assets or administration, determines whether or not they take on a designated fiduciary role under ERISA. If the investment provider takes control of plan administration, investment decisions, or money management, they take a fiduciary role for that function. The big service provider fear is whether or not they are an accidental fiduciary. Look For It In Writing The Plan Document or Trust Agreement The Plan Document must name appointed Fiduciaries: Trustee 3(38) Investment Manager In the absence of a named entity or person in a fiduciary role, the plan sponsor is has the fiduciary responsibility. 22

23 Look For it in Writing The Services Agreement For Investment Providers, look for their acceptance of fiduciary responsibility in writing in their services agreements: Investment advisory agreement (3(21) Status) Investment Manager (3(38) Status) Administrative Fiduciary (3(16)) status or named services Investment Providers Must evaluate their ability to provide fiduciary services: Can the service be competently provided or will it add disproportionate liability for the service provider? Will the marketplace pay the price that they feel can be charged for such services? Will the marketplace pay for outsourcing of services that do not take on fiduciary standing? 23

24 Plan Sponsors: All About Risk Management Plan Sponsors truly concerned about risk management and fiduciary liability will seek to designate third party fiduciaries and will be willing to: Pay more for the fiduciary services Relinquish control to eliminate liability Am I a Fiduciary? Questions? 24

25 Correcting 401(k) Testing and Errors The New EPCRS Charles D. Lockwood, J.D., L.LM ASC Avaneesh Bhaget, Group Manager, IRS Charles D. Lockwood, J.D., L.LM ASC Charles D. Lockwood, J.D., and LL.M. (Taxation), has over 20 years experience in the employee benefits field. Charles is currently a principal with the ASC Institute (ASCi). Prior to joining ASCi, Charles was a principal with the pension consulting firm Global Benefit Advisors, LLC (GBA). Prior to entering private consulting, Charles worked in the Employee Plans Division in the National Office of the Internal Revenue Service (IRS) as a Tax Law Specialist. Charles also was a Vice President with Pension Publications of Denver, Inc. (PPD) and a senior consultant with the benefit consulting practice of Coopers & Lybrand. 1

26 Avaneesh Bhagat, Group Manager, IRS Avaneesh is the Group Manager for the Voluntary Compliance Group in El Monte, California. His responsibilities include assisting with the resolution of applications made under VCP, assisting with the development of the revenue procedure relating to the correction programs for qualified plans, providing information on correction programs, and responding to inquiries relating to plan corrections and potential VCP applications. Avaneesh has worked with the examination, determination letter and voluntary compliance functions of the IRS' Employee Plans Division since Plan Restatements Current PPA restatement period for pre-approved plan adopters ends April 30, 2016 To avoid numerous individual late amender filings = IRS will allow financial institutions and other service providers to submit for umbrella closing agreement to correct non-amender failure for all ERs as a group Umbrella closing agreement parameters: Minimum of 20 plans covered by closing agreement $10,000 fee for the first 20 plans plus $250 for each additional plan. Maximum amount: $50,000 (similar to the Group Submission fee arrangement under VCP) 2

27 Plan Restatements Service provider must certify they have record of: ER s affirmative agreement to participate in the closing agreement program ER s timely adoption of EGTRRA document or proof of correction Execution of PPA restatement using the service provider s pre-approved document Financial institutions or service providers that apply and are approved must provide list of ERs covered by closing agreement by later of 120 days from closing agreement execution date or May 1, 2017 Rev. Proc New correction option for elective deferrals (other than automatic contributions) If missed deferrals begin within 3 months from date of failure = no corrective QNEC required If after 3 months (but before end of 2 nd PY) = corrective QNEC equal to 25% (instead of 50%) of missed deferrals ER must make QNEC for missed match, plus earnings, by end of second PY following failure ER must send 45-day notice to affected EEs 3

28 Rev. Proc Provides new SH correction method for failure to implement automatic contributions on a timely basis No corrective QNEC required if correct error within 9½ months after end of PY or date ER is notified of failure, if earlier o Ties into filing deadline for Form 5500 ER must make QNEC for missed match, plus earnings, by end of 2 nd PY following failure o Must send notice to affected EEs detailing correction within 45 days after correction Rev. Proc Modifies correction process for overpayments o Allows ER to make plan whole (including applicable earnings) without demanding repayment from participant o If applicable, ER may make retroactive amendment allowing for distribution from plan EPCRS allows plan to correct improper hardship distribution or loans by amending plan to add hardship distributions or loans Must ER make plan whole if improper hardship distribution is made to participant and participant does not repay distribution? 4

29 Documentation Requirement Is documentation required for SH hardship? o In recent Employee Plans News, IRS stated plan sponsor must obtain and keep hardship records o Failure to have records available for examination is a qualification failure corrected under EPCRS o Records should be retained in paper or electronic format, including documentation that substantiates EE s immediate and heavy financial need Not sufficient for plan participants to keep their own records of hardship distributions Documentation Requirement Employee Plan News article also advises ERs to keep documentation on plan loans o Records should be maintained in paper or electronic format for each plan loan granted to a participant, including evidence of loan application o If applicable, documentation verifying loan proceeds were used to purchase primary residence If loan will exceed 5 years, should receive documentation regarding purchase of primary residence before loan approved Self-certification not permissible to document eligibility for primary residence loan exception 5

30 ADP/ACP Test Coverage and Nondiscrimination Limits extent to which plans can be designed in favor of HCEs = must pass both coverage and nondiscrimination tests every plan year Coverage measures relative coverage of HCEs and NHCEs at plan level Nondiscrimination measures level of benefits provided to HCEs and NHCEs o 401(a)(4) nondiscrimination test = ER contributions o ADP test = elective deferrals o ACP test = matching contributions / after-tax Slide 12 6

31 ADP Test Tests relative deferrals of HCEs and NHCEs Plan must satisfy one of the following tests: o HCE ADP < 1.25 x NHCE ADP o HCE ADP < Lesser of 2+ or 2x NHCE ADP deferrals ADP = Average of (s) compensation Can use prior year or current year deferral percentages for NHCE group Slide 13 ACP Test Same as ADP test except tests matching and aftertax employee contributions (Code 401(m)) Must satisfy one of following tests: o HCE ACP < 1.25 x NHCE ACP o HCE ACP < Lesser of 2+ or 2x NHCE ACP match / after-tax ACP = Average of (s) compensation Can use prior year or current year deferral percentages for NHCE group Slide 14 7

32 Most Favorable Test NHCE ADP < 2% 2x TEST NHCE ADP 2% - 8% 2+ TEST NHCE ADP > 8% 1.25 TEST Slide 15 ADP / ACP Testing Methods Prior year testing method o Compare prior year ADP/ACP for NHCE group to current year ADP/ACP for HCE group o Allows some predictability of results Current year testing method o Compare current year ADP/ACP for NHCE group to current year ADP/ACP for HCE group o More flexibility in correction methods Must state testing method in plan o Make sure follow plan document Slide 16 8

33 How to Fix a Failed ADP/ACP Test Distribution of excess contributions (ADP) or excess aggregate contributions (ACP) and earnings Making QNECs Shifting QMACs into ADP test or shifting elective deferrals into ACP test Recharacterization (only for ADP violation) Slide 17 Improving ADP/ACP Results XYZ Corp maintains a 401(k) plan for its EEs. The plan defines compensation for deferral purposes as gross compensation for full plan year. The ADP of HCE group for 2015 is 7.5%. The ADP of NHCEs for 2015 is 4.3% and for 2014 is 4.9%. o XYZ Corp has 4 HCEs and 6 NHCEs. The 4 HCEs each make over the $265,000 compensation limit and deferred $18,000 under the plan for o Sally, an NHCE, first becomes a participant in July of 2015 and defers $2,000 (5% of her $40,000 annual compensation). o XYZ declares a bonus twice a year (in June and December). Generally, bonuses are paid to NHCEs. Slide 18 9

34 Creative Testing Options Plan can use any definition of comp for ADP / ACP testing as long as satisfy Code 414(s) o Definition does not need to be stated in plan o Net compensation may provide better results where HCEs earn above compensation limit o Can exclude specific items of comp (e.g., bonuses) Plan can use full year or partial year comp o If have NHCEs who become participants during year = use partial year compensation (regardless of definition in plan) May be able to use top-paid group test Slide 19 Must have compensation > dollar amount in lookback year and must be in top-paid group o Top 20% of EEs ranked by compensation o o Election must be made in plan Can use any reasonable tie breaking method Allows plan to treat HCEs not in the top 20% as NHCEs o Be careful when defining allocation groups to ensure HCEs do not lose benefits o Once become NHCE = must receive gateway When must top paid group election be made? o Top Paid Group Test Before end of current plan year Slide 20 10

35 Corrective Distributions Correction period - 12 months following the close of the plan year Amount to be distributed -- leveling method o Based on highest dollar amount of deferrals o Two-step method o Must recharacterize as catch-up contributions prior to making corrective distributions Allocable earnings o Gap period earnings o Treatment of net loss Slide 21 Refunds of Excess Contributions Black & Blue, Inc. maintains a calendar year 401(k) plan. For 2015, the ADP of the NHCEs is 5% and the HCE deferrals are as follows: HCEs Age Comp. Deferrals Deferral Percentage 1 55 $265,000 $18, % 2 61 $265,000 $18, % 3 50 $200,000 $16,000 8% 4 42 $150,000 $13,500 9% 5 41 $125,000 $10,000 8% 6 55 $120,000 $12,000 10% $1,125,000 $87, % Slide 22 11

36 Refunds of Excess Contributions HCEs Age Comp. Deferrals Deferral Percentage Adjusted Percentage 1 55 $265,000 $18, % 6.79% 2 61 $265,000 $18, % 6.79% 3 50 $200,000 $16,000 8% 7.105% 4 42 $150,000 $13,500 9% 7.105% 5 41 $125,000 $10,000 8% 7.105% 6 55 $120,000 $12,000 10% 7.105% $1,125,000 $87, % 7% The ADP of the NHCEs for 2015 is 5%. The plan uses current year testing method. To correct ADP test, must bring HCE-3, HCE-4, HCE-5 and HCE-6 down to 7.105%. Slide 23 Refunds of Excess Contributions HCE Age Comp. Deferral Deferral % Adjusted % 1 55 $265,000 $18, % 6.79% 2 61 $265,000 $18, % 6.79% Correction Amount 3 50 $200,000 $16,000 8% 7.105% $1, $150,000 $13,500 9% 7.105% $2, $125,000 $10,000 8% 7.105% $1, $120,000 $12,000 10% 7.105% $3,474 $1,125,000 $87, % 7% $9,226 The total amount to be returned is $9, $1,790 to correct HCE-3 [.895% x $200,000] + $2,843 to correct HCE-4 [1.895% x $150,000] + $1,119 to correct HCE-5 [.895% x $125,000] + $3,474 to correct HCE-6 [2.895% x $120,000]. Slide 24 12

37 Refunds of Excess Contributions HCE Age Comp. Deferral Correction Amount Refund Amount Adjusted Deferrals 1 55 $265,000 $18,000 $18, $265,000 $18,000 $18, $200,000 $16,000 $1,790 $16, $150,000 $13,500 $2,843 $13, $125,000 $10,000 $1,119 $10, $120,000 $12,000 $3,474 $12,000 $1,125,000 $87,500 $9,226 $83,500 Refunds are returned based on highest dollars of deferrals. Level to next lowest dollar amount. Slide 25 Refunds of Excess Contributions HCE Age Comp. Deferral Correction Amount Refund Amount Adjusted Deferrals 1 55 $265,000 $18,000 $2,000 $16, $265,000 $18,000 $2,000 $16, $200,000 $16,000 $1,790 $16, $150,000 $13,500 $2,843 $13, $125,000 $10,000 $1,119 $10, $120,000 $12,000 $3,474 $12,000 $1,125,000 $87,500 $9,226 $4,000 $79,500 Refunds are returned based on highest dollars of deferrals. Level to next lowest dollar amount. $2,000 refunded to HCE- 1 and HCE-2. Remaining refund = $5,226 [$9,226 - $4,000] Slide 26 13

38 Refunds of Excess Contributions HCE Age Comp. Deferral Correction Amount Refund Amount Adjusted Deferrals 1 55 $265,000 $18,000 $3,742 $14, $265,000 $18,000 $3,742 $14, $200,000 $16,000 $1,790 $1,742 $14, $150,000 $13,500 $2,843 $13, $125,000 $10,000 $1,119 $10, $120,000 $12,000 $3,474 $12,000 $1,125,000 $87,500 $9,226 $9,226 $78,274 Refunds are returned based on highest dollars of deferrals. Level to next lowest dollar amount. $1,742 refunded to HCE- 1, HCE-2 and HCE-3. Remaining refund = $0 [$5,226 - $5,226] Slide 27 Refunds of Excess Contributions HCE Age Comp. Deferral Correction Amount Refund Amount Adjusted Deferrals 1 55 $265,000 $18,000 $3,742 $14, $265,000 $18,000 $3,742 $14, $200,000 $16,000 $1,790 $1,742 $14, $150,000 $13,500 $2,843 $0 $13, $125,000 $10,000 $1,119 $0 $10, $120,000 $12,000 $3,474 _ $0 $12,000 $1,125,000 $87,500 $9,226 $9,226 $78,274 Refunds are returned based on highest dollars of deferrals. Level to next lowest dollar amount. $1,742 refunded to HCE- 1, HCE-2 and HCE-3. Remaining refund = $0 [$5,226 - $5,226] Slide 28 14

39 Application of Catch-Up Contributions HCEs Age Comp. Deferrals 1 55 $265,000 $24, $265,000 $20, $200,000 $16, $150,000 $13, $125,000 $10, $120,000 $12,000 $1,125,000 $95,500 Catch-Up Contribution ADP Deferrals Suppose the B&B plan permits catch-up contributions. How would the availability of catch-up contributions affect the ADP refunds under the plan? Slide 29 Application of Catch-Up Contributions HCEs Age Comp. Deferrals Catch-Up Contribution ADP Deferrals 1 55 $265,000 $24,000 $6,000 $18, $265,000 $20, $200,000 $16, $150,000 $13, $125,000 $10, $120,000 $12,000 $1,125,000 $95,500 Suppose the B&B plan permits catch-up contributions. How would the availability of catch-up contributions affect the ADP refunds under the plan? Slide 30 15

40 Application of Catch-Up Contributions HCEs Age Comp. Deferrals Catch-Up Contribution ADP Deferrals 1 55 $265,000 $24,000 $6,000 $18, $265,000 $20,000 $2,000 $18, $200,000 $16, $150,000 $13, $125,000 $10, $120,000 $12,000 $1,125,000 $95,500 Suppose the B&B plan permits catch-up contributions. How would the availability of catch-up contributions affect the ADP refunds under the plan? Slide 31 Application of Catch-Up Contributions HCEs Age Comp. Deferrals Catch-Up Contribution ADP Deferrals 1 55 $265,000 $24,000 $6,000 $18, $265,000 $20,000 $2,000 $18, $200,000 $16,000 $0 $16, $150,000 $13,500 $0 $13, $125,000 $10,000 $0 $10, $120,000 $12,000 $1,125,000 $95,500 Suppose the B&B plan permits catch-up contributions. How would the availability of catch-up contributions affect the ADP refunds under the plan? Slide 32 16

41 Application of Catch-Up Contributions HCEs Age Comp. Deferrals Catch-Up Contribution ADP Deferrals 1 55 $265,000 $24,000 $6,000 $18, $265,000 $20,000 $2,000 $18, $200,000 $16,000 $0 $16, $150,000 $13,500 $0 $13, $125,000 $10,000 $0 $10, $120,000 $12,000 $1,125,000 $95,500 HCE-6 deferred 10% for The ADP of the NHCEs is 5%. To pass the ADP test, the ADP of the HCEs may not exceed 7%. May B&B treat any of HCE-6 s deferrals as catch-up contributions and exclude them from the ADP test? Slide 33 Application of Catch-Up Contributions HCEs Age Comp. Deferrals Catch-Up Contribution ADP Deferrals 1 55 $265,000 $24,000 $6,000 $18, $265,000 $20,000 $2,000 $18, $200,000 $16,000 $0 $16, $150,000 $13,500 $0 $13, $125,000 $10,000 $0 $10, $120,000 $12,000 $0 $12,000 $1,125,000 $95,500 $8,000 $87,500 HCE-6 deferred 10% for The ADP of the NHCEs is 5%. To pass the ADP test, the ADP of the HCEs may not exceed 7%. May B&B treat any of HCE-6 s deferrals as catch-up contributions and exclude them from the ADP test? Slide 34 17

42 Application of Catch-Up Contributions HCE Age Comp. Deferral Catch-Up Contribution Refund Amount 1 55 $265,000 $24,000 $6,000 $3, $265,000 $20,000 $2,000 $3, $200,000 $16,000 $0 $1, $150,000 $13,500 $0 $ $125,000 $10,000 $0 $ $120,000 $12,000 $0 $0 $1,125,000 $93,500 $8,000 $9,226 Adjusted Refund Slide 35 Application of Catch-Up Contributions HCE Age Comp. Deferral Catch-Up Contribution Refund Amount Adjusted Refund 1 55 $265,000 $24,000 $6,000 $3,742 $3, $265,000 $20,000 $2,000 $3, $200,000 $16,000 $0 $1, $150,000 $13,500 $0 $ $125,000 $10,000 $0 $ $120,000 $12,000 $0 $0 $1,125,000 $93,500 $9,226 Slide 36 18

43 Application of Catch-Up Contributions HCE Age Comp. Deferral Catch-Up Contribution Refund Amount Adjusted Refund 1 55 $265,000 $24,000 $6,000 $3,742 $3, $265,000 $20,000 $5,742 $3,742 $ $200,000 $16,000 $0 $1, $150,000 $13,500 $0 $ $125,000 $10,000 $0 $ $120,000 $12,000 $0 $0 $1,125,000 $93,500 $9,226 Slide 37 Application of Catch-Up Contributions HCE Age Comp. Deferral Catch-Up Contribution Refund Amount Adjusted Refund 1 55 $265,000 $24,000 $6,000 $3,742 $3, $265,000 $20,000 $5,742 $3,742 $ $200,000 $16,000 $1,742 $1,742 $ $150,000 $13,500 $0 $ $125,000 $10,000 $0 $ $120,000 $12,000 $0 $0 $1,125,000 $93,500 $9,226 Slide 38 19

44 Application of Catch-Up Contributions HCE Age Comp. Deferral Catch-Up Contribution Refund Amount Adjusted Refund 1 55 $265,000 $24,000 $6,000 $3,742 $3, $265,000 $20,000 $5,742 $3,742 $ $200,000 $16,000 $1,742 $1,742 $ $150,000 $13,500 $0 $0 $ $125,000 $10,000 $0 $0 $ $120,000 $12,000 $0 $0 $0 $1,125,000 $93,500 $13,484 $9,226 $3,742 Slide 39 What if EE Makes Excess Deferrals? If EE defers more than Code 402(g) limit (i.e., $18,000 for 2015/2016) = must distribute excess deferrals from plan o Distribution must occur before April 15 of next calendar year to avoid adverse tax consequences o Corrective distribution must include allocable earnings or loss Excess deferrals are taxable in year of deferral and if distributed after April 15 are taxable again in year of distribution 402(g) limit is applied on individual basis Slide 40 20

45 What if EE Makes Excess Deferrals? If EE defers to more than one plan = limit applies to all deferrals made in same year EE is responsible for determining whether 402(g) limit has been exceeded and taking appropriate corrective steps o If EE makes deferrals under multiple plans = EE must decide which plan holds the excess o EE must give notice to plan by March 1 following calendar year so distribution can be made by April 15 o Excess deferrals will not disqualify a plan if excess is made under plans of unrelated ERs Slide 41 Affect of Code 402(g) Limit If HCE has excess deferrals = excess amount is included in ADP test (even if distributed) o Catch-up contributions not included for purposes of determining whether have excess deferrals o Excess deferrals of NHCEs are not included in ADP test When apply two-step leveling method = include excess deferral in HCE s deferral percentage (even if refunded to correct 402(g) violation) Slide 42 21

46 Affect of Code 402(g) Limit What if HCE is entitled to distribution of both excess deferrals and excess contributions? o Excess contributions distributed to correct ADP failure are reduced by any corrective distribution of excess deferrals for calendar year ending in plan year o Plan gets credit for distributing full amount of ADP correction even though reduced by excess deferral correction o For taxation purposes, treat portion of distribution attributable to excess deferrals as distribution of excess deferrals Slide 43 Forfeiture of Related Contributions If excess aggregate contributions are not fully vested = non-vested portion (including earnings) is forfeited instead of distributed If matched deferrals are distributed as excess contributions = related match (plus earnings) may be forfeited to prevent discriminatory rate of match (even if vested) o How do forfeited match affect ADP/ACP test? Forfeit match first, then run ACP test = forfeited match not taken into account under ACP test Run both ADP/ACP tests, then forfeit, if necessary = no forfeiture required to extent distributed under ACP Slide 44 22

47 Allocable Earnings Excess contributions or excess aggregate contributions must be adjusted for allocable earnings Plan may use any reasonable method to calculate allocable earnings for plan year PPA eliminated gap period earnings for post-2007 plan years If allocable earnings are a net loss, amount distributed is reduced by loss amount and is not taxed to HCE Slide 45 Correction After 12-Month Period Must correct ADP/ACP test within 12 months following end of plan year If do not correct, what are ER s options? o Do nothing and hope don t get audited by IRS Should give ER correction options (in writing?) and decision to not correct should be ER decision o Self correct = IRS suggested correction is to use one-to-one correction method Self-correction available through last day of second plan year following failure Failure occurs at end of 12-month period = allows for 3-year correction period May correct anytime if de minimis (probably not) Slide 46 23

48 Correction After 12-Month Period If correct after end of 12-month period = what is correction method? o IRS suggested correction method = one-to-one correction Determine excess for HCEs (including earnings) and make appropriate refunds Make QNEC on behalf of all NHCEs equal to refunded amount and allocate on basis of compensation Does ER have to give QNEC to terminated EEs? Could ER just give refunds to HCEs? Could ER use targeted QNECs? Can ER disaggregate otherwise excludible EEs? Slide 47 Using QNECs in ADP Test ER contribution that looks like deferral o 100% vested when made o Subject to 401(k) distribution restrictions o Special nondiscrimination rules Must be made within 12 months following end of plan year o Current year method o Prior year method Bottom-up QNECs eliminated o Can now provide for targeted QNECs Slide 48 24

49 Using QNECs in ADP Test Plan must satisfy nondiscrimination requirements with and without QNECs used in ADP test Example: ER makes 3% QNEC to all EEs. May ER treat 1% of NHCE QNECs in ADP test? o Plan must be able to satisfy 401(a)(4) after carving out QNECs o Could test by imputing permitted disparity or using crosstesting If use cross-testing = must satisfy minimum gateway based on contributions being tested Slide 49 Use of QNECs with Prior Year Testing Employer X maintains a 401(k) plan and runs its 2015 ADP test on 3/1/16 and fails ADP test based on prior year testing. Employer X would like to correct the ADP test by making a QNEC to the NHCEs. By when must Employer X contribute the QNEC to correct the 2015 ADP test? End of 2015 plan year (12 months following end of 2014 plan year) Not permitted to use QNEC to correct prototype / VS plans that use prior year testing Slide 50 25

50 Targeted QNECs Targeted QNEC = can only use QNEC in ADP or ACP test to extent does not exceed greater of: o 5% of compensation o 2x plan s representative contribution rate The lowest QNEC rate of any NHCE, taking into account at least 50% of total eligible NHCEs The lowest QNEC rate of any NHCE employed as of the last day of the plan year Slide 51 Example ABC Corp. has 44 NHCEs eligible for plan. For 2015 PY, ABC plan fails the ADP test. ABC Corp. would like to make a QNEC for Joe, the lowest paid EE. How much may ABC Corp. give Joe (and include in ADP test) without making a QNEC for any of the other NHCEs? o 5% of compensation If ABC Corp. gives Joe 15% QNEC, how much must it give to the other NHCEs? o At least 22 NHCEs must receive a QNEC of at least 7½% of compensation Slide 52 26

51 Correcting Coverage Failures Coverage Tests Three coverage tests = only need satisfy one test under Code 410(b) Percentage test At least 70% of NHCEs benefit Ratio test % of NHCEs > 70% % of HCEs Average benefits test Minimum coverage tests also used to determine if rate groups are nondiscriminatory under Code 401(a)(4) Slide 54 27

52 Ratio Percentage Test NHCE ratio > 70% HCE ratio NHCEs benefiting NHCE ratio = total NHCEs HCEs benefiting HCE ratio = total HCEs Only include nonexcludable employees in ratio percentage test = may exclude certain excludable employees from coverage tests Slide 55 Average Benefits Test Two parts to average benefits test = must satisfy both parts to pass test Nondiscriminatory classification test Average benefit percentage test Different rules apply for coverage / nondiscrimination o o Reasonable classification test does not apply for nondiscrimination test = changed under proposed regs Can use midpoint between safe and unsafe harbors Slide 56 28

53 Nondiscriminatory Classification Test Reasonable classification o Based on business criteria = e.g., job classification, nature of compensation, geographic location o Naming individuals is not reasonable classification o Reasonable classification test does not apply under nondiscrimination tests (unless proposed regs become final) Nondiscriminatory classification o Use same ratio as under ratio test o Must satisfy safe harbor percentage = see chart o If between safe harbor and unsafe harbor = facts and circumstances Slide 57 Safe Harbor / Unsafe Harbor Safe harbor / unsafe harbor based on NHCE concentration percentage NHCE concentration percentage is determined by dividing total number of NHECs of ER by total number of EEs of ER o When determining number of EEs, disregard NHCEs and HCEs who are excludable EEs If two or more plans are permissively aggregated = determine excludable EEs as if the plans are a single plan Slide 58 29

54 Nondiscriminatory Classification Test NHCE concent. SH % UH % Midpoint NHCE concent. SH % UH % Midpoint Slide 59 General Nondiscrimination Test Each HCE is in his/her own rate group for purposes of general nondiscrimination test Each HCE rate group must satisfy a minimum coverage test under Code 410(b) o Rate group includes all equal or higher allocation or equivalent benefit rates Rate groups may be expressed as allocation rates or equivalent benefit rates If using average benefits test = special rules apply o May use midpoint between safe and unsafe harbors o Reasonable classification test does not apply = but see new proposed regulations Slide 60 30

55 New Proposed Regulations Potentially eliminates some of the flexibility to use every EE in own group o Modifies average benefits test to apply reasonable classification test to rate group test o To satisfy average benefit test, rate group must be based on reasonable objective business criteria or rate group must satisfy ratio test (i.e., benefit percentage must be 70% or higher) Naming of individual EEs is not reasonable Not effective until final regulations issued Slide 61 Average Benefit Percentage Test NHCE average benefit percentage > 70% HCE average benefit percentage Include benefit percentages of all non-excludable EEs (even if not benefitting) May test on basis of allocation rates or benefit rates o Determine allocation or benefit rates as percentage of 414(s) compensation Must include benefits under all plans of the employer -- including 401(k)/401(m) plans Slide 62 31

56 What if Fail Coverage / Nondiscrimination Test? If fail coverage or nondiscrimination test = may make retroactive corrective amendment within 9½ months after end of PY [ 1.401(a)(4)-11(g)] o May not bring EEs in by name for coverage test unless satisfy ratio test = can bring in EEs by name to correct nondiscrimination violation (for now) o Amendment must expand coverage or increase benefits o 401(k)/401(m) plan = must make QNECs to make up deferrals/match based on ADP or ACP for plan year Special 50%/25% rule for determining QNECs does not apply May QNECs be provided to lowest paid EEs? What if not corrected within 9½ months? Slide (a)(4)-11(g) Amendment Can amend plan within 9½ months after end of Plan Year to correct violation o Amendment may not reduce benefits under Plan Increase in benefits must satisfy 401(a)(4) independently o Always satisfied if increase is for NHCEs only Amendment must have substance cannot apply increase to terminated non-vested EEs Can amend plan to provide additional contribution necessary to pass nondiscrimination Slide 64 32

57 Correcting 415 Violations Correct under EPCRS = regulatory correction methods may still apply under EPCRS o If excess relates to elective deferrals or after-tax EE contributions = correction is to distribute excess amount (with earnings) o If excess relates to ER contributions or match = reallocate to other EEs (if discretionary) or suspense account (if fixed) and reduce future contributions o Distribution is reported as distribution on Form 1099-R for year of distribution (Code E ) o Amounts distributed as excess annual additions are disregarded for ADP/ACP test and Code 402(g) Slide 65 Correcting 415 Violations Is there a deadline for making corrective distributions to correct 415 violation? No formal deadline under EPCRS Need to make corrective distributions before can properly correct ADP/ACP test = within 12 months after close of plan year Must make corrective distribution by end of second plan year in order to use SCP Earnings continue to accrue until corrective distribution is made from plan Slide 66 33

58 Correcting 415 Violations Can ER use SCP to correct Code 415 violation in multiple years? o In order to use SCP = must have established procedures in place to prevent repeat violations o If fail Code 415 under plan that has both elective deferrals and ER contributions = can use SCP to correct excess by distributing elective deferrals each year to correct Code 415(c) violation within 2½ months after end of limitation year Plan will be treated as having established procedures even if it has repeated violations Slide 67 34

59 Cultivating Durable Loyalty Tom Warren, National Speaker American Funds Tom Warren, National Speaker American Funds In challenging audiences to look at things differently, American Funds Senior Vice President Tom Warren draws on extensive experience as well as his diverse educational and professional background. The result is an insightful and refreshingly practical perspective on the retirement plan world. Tom s roots in the retirement plan industry run deep, having joined American Funds in 1993 as an original member of its workplace retirement group. His programs are steeped in realworld experience, complete with stories and analogies aimed at helping his audience get results. Above all, he maintains a passion for helping working Americans prepare for their biggest financial challenge, retirement. 1

60 Tom Warren, National Speaker American Funds After earning his bachelor s degree in microbiology from the University of Oklahoma, Tom worked for two years at the Mayo Clinic as a clinical microbiologist before joining his family s oil and gas exploration business, where he helped originate institutional joint ventures. From there, Tom went on to Smith Barney s Asset Consulting and Evaluation group, which helped pioneer the use of separately managed accounts. Tom lives in Sarasota, Florida, with his wife and enjoys boating, alpine skiing and four-wheeling. American Funds Distributors, Inc. Photo: United States Marine Corps RPGEPO / 9638s

61 American Funds Distributors, Inc. V1 AI A American Funds Distributors, Inc. V1 AI A 3

62 Cultivating Durable Loyalty Figures are past results and are not predictive of results in future periods. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value American Funds Distributors, Inc. RPGEPO / 9638s47061 The TPA Challenge The Building Blocks of Loyalty An Action Plan for Cultivating Loyalty American Funds Distributors, Inc. V1 AI A 4

63 The TPA Challenge American Funds Distributors, Inc. V1 AI A Retirement Plan Relationships Are Complex Centers of influence TPA Advisors Plan sponsors American Funds Distributors, Inc. V1 AI A 5

64 You Invest Significant Time Up Front Effort Endorsements and referrals Plan compensation (Examples are hypothetical) American Funds Distributors, Inc. V1 AI A For the Goal of Long-Term Profitability Effort Endorsements and referrals Plan compensation (Examples are hypothetical) American Funds Distributors, Inc. V1 AI A 6

65 Plan Retention Is Rewarding Effort Endorsements and referrals Plan compensation (Examples are hypothetical) American Funds Distributors, Inc. V1 AI A American Funds Distributors, Inc. V1 AI A 7

66 3 Credibility Attributes of Loyalty Consistency Connection American Funds Distributors, Inc. V1 AI A Credibility American Funds Distributors, Inc. V1 AI A 8

67 Credibility American Funds Distributors, Inc. V1 AI A Credibility American Funds Distributors, Inc. V1 AI A 9

68 Credibility American Funds Distributors, Inc. V1 AI A Credibility American Funds Distributors, Inc. V1 AI A 10

69 Consistency Photo courtesy Fedex American Funds Distributors, Inc. V1 AI A Consistency American Funds Distributors, Inc. V1 AI A 11

70 Consistency 80 % of client interactions with your practice are not directly with you Photo courtesy Fedex American Funds Distributors, Inc. V1 AI A Consistency American Funds Distributors, Inc. V1 AI A 12

71 Consistency American Funds Distributors, Inc. V1 AI A Connection Photo: Bikeroutes.co.za American Funds Distributors, Inc. AI A 13

72 Retirement Plan Relationships Are Complex American Funds Distributors, Inc. V1 AI A Build a Level of Authenticity and Transparency Into Your Relationships American Funds Distributors, Inc. V1 AI A 14

73 Connection American Funds Distributors, Inc. V1 AI A Connection American Funds Distributors, Inc. V1 AI A 15

74 Connection Photo: Avon Foundation for Women Matt Mendelsohn/Avon American Funds Distributors, Inc. V1 AI A American Funds Distributors, Inc. V1 AI A 16

75 American Funds Distributors, Inc. V1 AI A Stewardship in Action Effective investments American Funds Distributors, Inc. V1 AI A 17

76 Focus on Outcomes Real-life results for participants Do-it-yourselfers Target date fund users Source: Matthew Greenwald & Associates study for JPMorgan, Evolving Toward Greater Retirement Security, Median standardized three-year personal rates of return based on a sampling of participant data aggregated by investment strategy. The measurement period is December 31, 2009, through December 31, Do-it-yourselfers are participants who constructed their own portfolios, and Target date fund users are participants who invested in target date funds. This study covers a three-year period. Results should be evaluated based on longer time frames. American Funds Distributors, Inc. AI Stewardship in Action Effective investments Purposeful plan design American Funds Distributors, Inc. V1 AI A 18

77 Level o f equity as a % of total assets Re-enrollment with Target Date Funds Real-life investment mixes for participants 100% 80% 60% Plan Sponsor ABC (1,500 participants each identified by a data point symbol ) 40% 20% 0% Note: This is a hypothetical example that doesn t reflect actual data. Age of each participant American Funds Distributors, Inc. V1 AI A Optimizing the Company Match Standard Match: 100% of employee s contribution up to 3% Total Contributions: Many employees will contribute only up to 3%, leading to total savings of : 6 % Stretch Match: 50% of employee s contribution up to 6% Total Contributions: Many employees will contribute 6% to get company match, leading to total savings of : 9 % American Funds Distributors, Inc. V1 AI A 19

78 Stewardship in Action Effective investments Purposeful plan design High value vs. low cost American Funds Distributors, Inc. V1 AI A Price is what you pay. Value is what you get. Warren Buffett American Funds Distributors, Inc. V1 AI A 20

79 Loyalty Stewardship Consistency Connection Credibility American Funds Distributors, Inc. V1 AI A Loyalty Dividends Recommendations embraced Longer plan retention Referrals and testimonials American Funds Distributors, Inc. V1 AI A 21

80 Stewardship Photo: Funny-pictures.picphotos.net American Funds Distributors, Inc. V1 AI A Cultivating Durable Loyalty Figures are past results and are not predictive of results in future periods. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value American Funds Distributors, Inc. V1 AI A 22

81 Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. American Funds Distributors, Inc. V1 AI A Multiple Perspectives. One Approach American Funds Distributors, Inc. RPGEPO / 9638s

82 THE LIFE OF A PLAN CASE STUDY Plan Termination Charlie Steingas, EA, MSPA, MAAA President, Cash Balance Actuaries, LLC Charlie Steingas, EA, MSPA, MAAA President, Cash Balance Actuaries, LLC Charlie is an enrolled actuary with over 15 years of experience working on all types and sizes of defined benefit plans. For the last 5 years he has been the owner and chief actuary of Cash Balance Actuaries, LLC. CB Actuaries is based in Minnesota but has employees and clients all over the country. Charlie s specialty is designing and explaining tax-focused cash balance and defined benefit plans to plan sponsors, TPAs, financial advisors, accountants, and attorneys in an accurate, easy-to-understand manner. He has been speaking to various industry groups about cash balance plans since Starting in 2016 he is one of the actuarial experts answering defined benefit questions for the Technical Answer Group (TAG). 1

83 Case Study Assumptions Last of a six part case study going through a sample life of a retirement plan (setup, testing, acquisition, corrections, cash balance and termination) The current IRS limits for 2016 will be used for all of the case study sessions Not focusing on the choice of investment provider or recordkeeper but will assume non-bundled TPA platform using a third party actuarial firm. The Initial Test Subject Sample Company, LLC LLC taxed as a partnership with husband and wife 50/50 members Started with a SIMPLE plan (match) because advisor buddy said it would be easy to have a plan with no costs Successful years prompt their CPA to encourage them to find a way to shelter more income from taxes They added a 401(k) plan, maxed out their contributions, merged with another company, added a cash balance plan, and now they are done with the plans and want to terminate them 2

84 Now We re Done With The Plans, Let s Get Rid of the CBP First Questions to ask before terminating How long has the plan been around (i.e. does it meet the permanency requirement)? Why is the plan terminating (change in ownership, change in business conditions, etc.)? Should we apply for a determination letter? When does the client want to stop making contributions? When do they want to pay benefits? Is the plan properly funded to terminate? How much is all of this going to cost? Permanency Requirement A common question we get is how long do I have to sponsor my cash balance plan before I can terminate it? The answer is of course that it depends The technical answer is only that it was intended to be permanent when it was originally set up Informal guidance has indicated that 3-5 years is a safe time period, but I lean toward the higher end of that range if you don t have an unexpected reason for termination Good unexpected reasons are: A change in ownership due to merger, bankruptcy, retirement, disability, or death of an owner Material change in business conditions beyond the plan sponsor s control There could be others, but those are the big ones that shouldn t raise any red flags 3

85 Determination Letter We are always asked if we recommend getting a determination letter upon plan termination or not and my answer is always yes But when you really think about it, the right answer depends on how soon the plan sponsor wants to pay benefits, how much extra cost is involved, how much risk the plan sponsor wants to take (i.e. how much money is in the plan), and if the plan currently has a letter or not With the lack of submissions allowed going forward, getting a letter upon termination will probably become more and more common Reasons to get a Letter The nice thing about getting a determination letter is that it provides peace of mind for the plan sponsor and participants If the IRS does find any issues, they will be cheaper to correct now than they would be upon audit That s about it 4

86 Reasons not to get a Letter Time the determination letter process can add 6-12 months to the plan termination timeline Cost the IRS charges at least $2,000 to review the submission and the TPA / Actuary / Attorney isn t going to prepare things for free either. And that doesn t even count the cost of sponsoring the plan for an extra 6-12 months Risk the IRS could find a problem that might never have been found if the plan wasn t submitted What s all of this going to cost? First, you ll need to consider if any additional contributions will be required to fund benefits Non-PBGC covered plans can pay out to the extent funded so only the minimum required contribution for the year should be a concern for those plans PBGC covered plans will need to fully fund all employees with less than a 50% ownership stake in the plan sponsor We re not doing this work for free either so there will be added administration costs on top of regular annual fees Plan document work Distribution packages, processing, 1099R Forms, etc. PBGC Form 500 and related forms if applicable Consulting 5

87 Yes, let s shut it down So we ve made the decision to terminate. Let s go through the steps and timeline Step 1 Pick a plan termination date and provide notice The plan termination date is probably not the same date that checks are mailed, it s probably earlier You need to be aware of the notice requirements If the plan is not yet frozen, a 204(h) notice will need to be provided to notify participants of the reduction in future accruals. That is a 15 day notice for plans with fewer than 100 participants and a 60 day notice for plans with at least 100 participants If the plan is covered by the PBGC, a Notice of Intent to Terminate will need to be provided at least 60 days before but no more than 90 days before the termination date (see the attached sample on the next page if you re curious) 6

88 Yes, let s shut it down Step 2 Amend the plan document for the termination If there have been any laws passed since the last amendment that need to be incorporated into the plan document, you ll need to amend for them now All participants will need to be 100% vested Plan entry and benefit accruals should be frozen You ll want to consider what to do with excess assets or the shortfall as applicable and amend the document accordingly If the plan doesn t currently allow for lump sums, you ll probably want to amend for those and any other payment options the plan sponsor wants to offer (possibly in-kind distributions) The amendment will probably be accompanied by a company resolution officially terminating the plan This needs to be done by the plan termination date Yes, let s shut it down Step 3 let s assume the plan wants a determination letter, if not, skip to step 4 Prepare the Notice to Interested Parties and provide it to the necessary people between 10 and 24 days prior to sending in the application (see sample on the next page if you d like) Prepare Form 5310 and all attachments Mail everything to the IRS within 180 days of the plan termination date and before filing Form 500 with the PBGC if applicable Keep administering the plan as usual until you hear back from the IRS 7

89 Yes, let s shut it down Step 4 let s assume the plan is also covered by the PBGC, if not, skip to step 5 Prepare and provide Notices of Plan Benefits for everyone with a benefit in the plan after the termination date but before filing PBGC Form 500 and still within 180 days of the termination date (you can see a sample NOPB on the next page) Prepare and file PBGC Form 500 after the above notices have been provided to participants (still within 180 days of the termination date) Get a waiver from majority owners if plan assets are expected to be less than plan liabilities or a sufficiency commitment if no participants will be waiving benefits 8

90 Yes, let s shut it down Step 5 Wait You can begin paying benefits on the latest of the following: Receipt of an IRS determination letter Expiration of the 60 day review period after the PBGC receives the Form 500 The earlier of the receipt of all completed distribution packages or at least 30 days since the packages were received by participants 45 days after the Notice of Annuity Information is provided if any participant elects an annuity You must pay benefits by the latest of the following: 1 year after the termination date 240 days after the PBGC receives the Form days after receipt of the IRS determination letter 9

91 Yes, let s shut it down While you re waiting The plan should operate as usual. So if a participant terminates, dies, retires, has a QDRO, etc. and requests a distribution, you ll need to process it 5500s still need to be filed as do any PBGC Annual Premium forms/payments and 8955-SSAs Actuarial valuations aren t required starting with the plan year after the plan year that includes the termination date, so there are no quarterly contribution requirements or minimum required contributions in the following year The plan sponsor should make sure all participants can be located to avoid any missing participant situations Yes, let s shut it down Step 6 Prepare the Distribution Packages Distribution packages for a plan termination are very similar to the ones that get prepared when a participant terminates. They should include the following information: Basic demographic info used to determine the benefit Assumptions, interest rates, and Mortality tables used to determine and adjust benefit forms Optional benefit forms and the relative value of each of those forms QJSA Notice Spousal consent form (we also recommend a signature if single) Election Form, withholding information, and possibly a W-4 Special Tax Notice Must give at least 30 days to return forms before purchasing an annuity on the participant s behalf Can choose to give more time if desired 10

92 Yes, let s shut it down Step 7 Pay Benefits, Buy Annuities, Withhold Taxes Once you re ready to pay people out you ll want to move all of the plan assets to cash (might have done that earlier) If anyone elected an annuity (they never do) you ll need to get quotes from insurance companies, provide the appropriate notice to the affected participants, and then transfer the purchase price from the plan to the chosen insurance company Make sure that all distribution forms were completed correctly Be ready to withhold taxes as appropriate (electronically, mandatory state and federal, W-4s) PBGC is now requiring documentation of the payouts which includes an asset statement or cancelled checks showing the amount and the participant s name for all payouts Fund shortfall, allocate any excess plan assets, or roll excess assets to a qualified replacement plan (QRP) Yes, let s shut it down Step 8 File the Final Forms PBGC Form 501 is due within 30 days of distributing assets It can be filed within 90 days with no penalty though, so don t sweat it if the 30 day requirement is too tough Form 5500 and final 8955-SSA are due by 7 months after the payout month It can be extended with a Form 5558 to 9 ½ months after the payout month if necessary Make sure to mark the filing as final It is due even if the plan is eligible for a 5500-EZ with less than $250,000 of assets Final PBGC Premium Payment and Filing is due by the normal statutory due dates, but you might be filing an amended return to show it as final and request a refund of premiums paid 11

93 Yes, let s shut it down Step Rs and R Forms and the 945 are due the January following the distributions It s best to make sure the distribution forms included all of the information you ll need to do the 1099s Participant Name SSN Current Address You re done, yay! Well, at least until you receive an audit notice from the IRS, DOL, or PBGC, boooo! Good thing you chose to get that DL Now let s get rid of the 401(k) Plan The two plans can be terminated at the same time In fact, unless the 401(k) is going to continue after the CBP is gone, picking the same termination date is usually a good idea A 401(k) is much easier to terminate than a PBGC covered CBP Many of the steps and issues are the same so we ll try to go through them more quickly (and you guys have probably done more of these in the last 12 months than I have in my entire life) 12

94 What is the same as the CBP? Questions to ask before terminating How long has the plan been around (i.e. does it meet the permanency requirement)? Why is the plan terminating (change in ownership, change in business conditions, etc.)? Should we apply for a determination letter? When does the client want to stop making contributions? When do they want to pay benefits? Timeline Similar to a non-pbgc Cash Balance Plan Must provide notice to participants Must amend the plan by the plan termination date Participants have 30 days to complete distribution forms All filing due dates are the same What is the same as the CBP? Plan Document 100% vesting is required A resolution should be done to officially terminate the plan You might want to consider amending for in-kind distributions Logistics Withholding requirements are the same 1099Rs and 945 Forms are still due 13

95 What is different than the CBP? Questions to ask before terminating Do they want to replace it with a new DC plan (there is a 12 month minimum waiting period that doesn t apply to CBPs) Is there insurance in the plan or any other assets that a rollover IRA will not accept If the plan is pooled, we ll need to plan for a special valuation date What will be done with outstanding loans? Timeline Safe harbor plans require a 30 day notice to stop the safe harbor contributions No shortfall or excess asset issues Probably no annuity purchase issues What is different than the CBP? Plan Document No allocation of excess assets Freeze may not be necessary depending on the plan type Logistics Final contributions and allocation of forfeitures need to be dealt with and can t be waived You can t simply transfer money to the PBGC or buy an annuity for missing participants, but you can set up a rollover IRA (not an option for CBPs) Distribution forms look quite a bit different Might not need to get a waiver of the QJSA Might not have annuity options More likely to offer in kind distributions Distribution amounts vary with returns until payout date 14

96 Miscellaneous Plan Termination Items Record Retention Most audits happen within 3 years, but I d recommend keeping records forever since you never know when proof of distribution or documentation of prior distributions will be required Dividends or Insurance Proceeds After All Assets Have Been Distributed If large enough, these should probably be paid pro rata to the affected participants If too small to do that and there is another qualified plan in place, they could be rolled into that plan and allocated to participants in there If no plans exist and it s too small to pay to everyone, revert to the employer and pay taxes and probably excise taxes on it Miscellaneous Plan Termination Items Missing or Unresponsive Participants A diligent search must be performed first PBGC covered plans can send their money to the PBGC and the PBGC will take it from there if not found Any CB plan could choose to buy an annuity on behalf of participants who can t be found or won t return forms DC plans can set up rollover IRAs on behalf of participants who can t be found or won t return forms There are other options as well, but why not just do the rollover? CB plans cannot set up a rollover IRA We ve had success hiring private detectives to find missing participants in extreme situations, you d be surprised how reasonably priced they can be 15

97 Questions? THANK YOU FOR STICKING WITH US FOR 6 SESSIONS! 16

98 Dealing with Defined Benefit and Combo Plan Testing Failures Lauren R. Okum, ASA, EA, MAAA, MSPA Owner and Actuary, Premier Actuarial Solutions Page 1 Lauren R. Okum, ASA, EA, MAAA, MSPA Owner and Actuary, Premier Actuarial Solutions Lauren is the founder of Premier Actuarial Solutions, an actuarial firm that specializes in the design and administration of defined benefit plans. She has practiced in the pension actuarial arena for over 20 years. She currently focuses on the small and midsized markets, consulting with employers maintaining defined benefit plan as well as other third-party administrators that are looking to outsource their actuarial needs. Lauren is an Associate of the Society of Actuaries, an Enrolled Actuary, a Member of the Academy of Actuaries, and a Member of the Society of Pension Actuaries. She graduated summa cum laude in Actuarial Science from the University of Illinois and attended Harvard Business School for her MBA. Page 2 1

99 Major Issues to Discuss Basics of 410(b) and 401(a)(4) testing Otherwise excludable testing Adjustments to testing compensation Accrued-to-date testing method Restructuring Fail-safe language Corrective amendments Page 3 Coverage Basics 410(b) requires that either: Plan satisfies the Ratio Percentage Test; Plan satisfies the Average Benefits Test; Plan does not benefit any HCEs; or The employer has no non-excludable NHCEs To determine the plan being tested, you start with a plan The plan is then mandatorily disaggregated with certain benefits within that plan, and then (maybe) permissively aggregated with other plan(s) of the Employer Page 4 2

100 Coverage Basics Mandatory disaggregation (1.410(b)-7(c)) 401(k) plans must be separated from non-401(k) plans 401(m) plans must be separated from non-401(m) plans ESOPs must be separated from non-esops Plans covering employees of a SLOB, if such employees are treated as excludable Plans covering union employees must be separated from plans covering non-union employees If the plan covers employees of more than one employer (i.e. a multiple employer plan), those different employers are separated Page 5 Coverage Basics Permissive aggregation (1.410(b)-7(d)) Plans (or part of plans) must not be mandatorily disaggregated Plans must have the same plan year (not just the same plan year end) Test as a single plan Single coverage test Single 401(a)(4) test Must use consistent testing methodology (i.e. benefits or contributions basis) May use restructuring under 401(a)(4) Must test BRFs as a single plan Page 6 3

101 Coverage Basics To satisfy the Ratio Percentage Test, a plan must have a Ratio Percentage of at least 70% Ratio Percentage = NHCE ratio % HCE ratio % NHCE ratio % = number of NHCEs benefiting under the plan total number of non-excludable NHCEs HCE ratio % = number of HCEs benefiting under the plan total number of non-excludable HCEs For this purpose, the amount someone is benefiting is irrelevant Page 7 Coverage Basics To satisfy the Average Benefits Test (ABT), the plan must pass both: Nondiscriminatory Classification Test; and Reasonable classification test; and Easier Ratio Percentage Test Average Benefits Percentage Test (ABPT) Page 8 4

102 Coverage Basics Nondiscriminatory Classification Test Part 1 of ABT Reasonable classification test Classification for identifying eligible employees must have some reasonable business purpose Job function, location, salaried vs. hourly, etc. are all OK A list of names (or something having the same effect) or other arbitrary selection is not OK Plans that satisfy the Ratio Percentage Test do not have to meet this requirement (even if they are included in the ABPT) Easier Ratio Percentage Test Ratio Percentage must be safe harbor %; or Ratio Percentage must be between safe harbor % and unsafe harbor %, and there are good facts and circumstances Page 9 Coverage Basics Easier Ratio Percentage Test (continued) NHCE concentration percentage (CP) = % of non-excludable employees who are NHCEs Safe harbor % = 50% - ¾ (CP 60%), min 20%, max 50% Unsafe harbor % = 40% - ¾ (CP 60%), min 20%, max 40% Example 6 non-excludable NHCEs, 3 non-excludable HCEs CP = 6 9 = % 66% Safe harbor % = 50% - ¾ (66% 60%) = 45.50% Unsafe harbor % = 40% - ¾ (66% 60%) = 35.50% Page 10 5

103 Coverage Basics Average Benefits Percentage Test Part 2 of ABT Average benefits for NHCEs must be at least 70% of the average benefits for HCEs Look at all plans of the employer (1.410(b)-7(e)) Include 401(k) plans, 401(m) plans, and ESOPs; Exclude union plans and plans of other QSLOBs (if doing ABPT within a QSLOB); and Use plan years ending in the same calendar year (not just those with the same plan year) Accrual or allocation rates (EBAR) used for ABPT = EBAR used for Rate Group Testing + EBAR for elective deferrals (ignoring catch-up) + EBAR for matching contribution Page 11 Nondiscrimination Basics To pass 401(a)(4), a plan must: Satisfy 401(k) in case of a 401(k) plan; Satisfy 401(m) in case of a 401(m) plan; Not benefit any HCEs; Have no non-excludable NHCEs; Have a safe harbor formula (including use of permitted disparity); or Satisfy the General Test Page 12 6

104 Nondiscrimination Basics General Test For each HCE tested on a benefits basis, a rate group is defined that includes all employees with the same or higher aggregate normal accrual rate and same or higher aggregate most valuable accrual rate Each rate group must satisfy 410(b) by either: Passing the Ratio Percentage Test (i.e. each rate group has a Ratio Percentage of at least 70%); or Passing a modified Average Benefits Test Each rate group must pass the nondiscriminatory classification test; and Currently, each rate group is deemed a reasonable classification proposed regs might change this! Ratio Percentage must be the midpoint between the plan s safe harbor and unsafe harbor percentages The plan must pass the Average Benefits Percentage Test Page 13 Cross Testing Basics DC plans may be aggregated with DB plans and tested on a benefits basis if: The aggregated plans are primarily defined benefit in nature (i.e. the percentage of NHCEs benefiting primarily in the defined benefit plan is at least 50%); The aggregated plans consist of Broadly Available Separate Plans (will likely never use); The aggregated plans provide a specified minimum allocation ( Gateway Test ); or In combination, the lowest NHCE allocation rate is 7.5% or greater based on 415(c) compensation Page 14 7

105 Cross Testing Basics The Gateway Test is satisfied if: The highest HCE allocation rate is less than 15% and is no more than 3 times the lowest NHCE allocation rate; The highest HCE allocation rate is 15% to 25%, and the lowest NHCE allocation rate is 5%; or The highest HCE allocation rate exceeds 25%, and the lowest NHCE allocation rate is at least 5% plus 1% for each 5% increment (or portion thereof) that the highest HCE allocation rate exceeds 25% May use the average Equivalent Allocation Rate of all NHCEs benefiting under the DB plan, rather than using the individual rates of the NHCEs Page Proposed Regulation Adds a reasonable business classification requirement for each DB or DC plan formula if Modified Average Benefits Test is used for rate group testing 1.410(b)-4(b) states a reasonable classification is one that: is reasonable and is established under objective business criteria that identify the category of employees who benefit under the plan. Reasonable classifications generally include specified job categories, nature of compensation (i.e., salaried or hourly), geographic location, and similar bona fide business criteria. An enumeration by name or other specific criteria having substantially the same effect is not considered reasonable. If classification test is not met, then each rate group must have a Ratio Percentage 70% Page 16 8

106 2016 Proposed Regulation Adds adjustments to Gateway Test Permits averaging of allocation rates for NHCEs for DC benefits, in addition to DB benefits current allowed Averaging allowed for DB/DC combos only, not stand-alone DC plans Generally, each DB and DC individual allocation rate (or equivalent allocation rate) is limited to 15% If the DB plan provides a benefit under which the equivalent allocation rate increases with age, then the limit is increased to 25% Allows the average of matching contributions for NHCEs to be counted towards meeting the gateway requirement Applies to DB/DC combos only, not stand-alone DC plans Average is capped at 3% of compensation Page Proposed Regulation Adds adjustments to Gateway Test (continued) Gateway Test is eliminated if the DB/DC combo plan passes the General Test on a benefits basis using an interest rate of 6% Current standard interest rate is 7.5%-8.5% Applies to DB/DC combos only, not stand-alone DC plans Other changes apply, but not discussed here Closed Plan Rule Defined Benefit Replacement Allocations (DBRAs) BRFs for closed plans and closed formulas Page 18 9

107 Accrual Rate Basics The basic formula for an accrual rate (EBAR) is: Increase in benefit over the Measurement Period Testing Service Testing Compensation The Measurement Period is the period over which the increase in benefits is considered Current year (Annual Method) Current and prior years (Accrued-to-Date Method) Current, prior, and future years (Projected Method) rarely used Page 19 Accrual Rate Basics The increase in benefit is change in the normalized normal retirement benefit over the Measurement Period For a DC plan, it s the actuarial equivalent of the increase in account balance due to employer contributions and forfeitures If Annual Method, earnings may be ignored If Accrued-to-Date Method, include allocations of trust earnings For a DB plan, it s the increase in the accrued benefit If Annual Method, it s the increase in the accrued benefit from BOY to EOY If Accrued-to-Date Method, it s the accrued benefit Page 20 10

108 Accrual Rate Basics Testing Service (1.401(a)(4)-8(b)(2)(i)) When using the Annual Method, Testing Service is 1. When using the Accrued-to-Date Method, Testing Service means: (DC plan) The number of years in the Measurement Period in which the employee benefited under the plan (DB plan) The number of years used in the benefit formula, the years in which the employee is treated as benefiting, or any other reasonable period What to do when doing combined plan testing and the number of years above are different? We ll discuss later. Page 21 Accrual Rate Basics Testing Compensation must be a 414(s) definition of compensation Any 415 definition of compensation satisfies 414(s) : 415 long 415 short W-2, Box 1 Wages for income tax withholding May make certain modifications to 415 compensation: Exclude ALL: fringe benefits, taxable welfare benefits, expense allowances, moving expenses, and deferred compensation Include or exclude ALL elective deferrals Page 22 11

109 Accrual Rate Basics Other reasonable definitions are considered 414(s) compensation if: Modifications are reasonable ; and It passes a compensation ratio test Modifications are reasonable only if they re applied to a category of compensation consistently to all employees Safe harbor for reasonable modifications include bonuses, shift differential, overtime, call-in premium May exclude compensation over a threshold (e.g. > $100K) Page 23 Otherwise Excludable Testing IRC 410(a)(1) identifies the statutory eligibility requirements: May exclude employees who have not attained age 21 May exclude employees who have not completed 1 year of service (2 years of service if 100% immediate vesting) IRC 410(a)(4) requires plan participation to begin no later than the earlier of: First day of plan year after the employee satisfied the 410(a)(1) statutory eligibility requirements; or 6 months after completion of the 410(a)(1) statutory eligibility requirements Page 24 12

110 Otherwise Excludable Testing Example Facts Plan year is calendar year Plan entry is first of quarter following age 21 & 1 year of service Plan does not have immediate vesting Participant is over age 21 Participant s DOH = 7/15/2014 Participant s DOP = 10/1/2015 Result Participant meets statutory eligibility requirements on 7/15/2015 Entry date must be the earlier of: First day of plan year following 1/1/2016; or Six months after 1/15/2016 Participant is an OEX for 2015 Page 25 Otherwise Excludable Testing When the plan has more liberal eligibility, the employees who could legally be excluded but are not are Otherwise Excludable Employees Separate testing is optional. Split into 2 groups: 410(a) group Otherwise Excludable Employees (OEX) group If there are no HCEs, then this group automatically passes Page 26 13

111 Otherwise Excludable Testing Regular Ratio Percentage = 60% 100% = 60% NHCE ratio % = 6/10 = 60% HCE ratio % = 2/2 = 100% Non-excludable employees Benefiting Total 410(a) group Benefiting Total OEX group Benefiting Total HCEs NHCEs Page 27 Otherwise Excludable Testing 410(a) Ratio Percentage = 85.71% 100% = 85.71% NHCE ratio % = 6/7 = 85.71% HCE ratio % = 2/2 = 100% Non-excludable employees Benefiting Total 410(a) group Benefiting Total OEX group Benefiting Total HCEs NHCEs Page 28 14

112 Otherwise Excludable Testing OEX Ratio Percentage = It doesn t matter, since there are no HCEs in this group No gateway contribution required! Non-excludable employees Benefiting Total 410(a) group Benefiting Total OEX group Benefiting Total HCEs NHCEs Page 29 Compensation Inclusion/Exclusion Compensation ratio test compares the definition to an automatic definition Inclusion percentage = percentage of the employee s compensation included in the automatic definition Passes if the average inclusion percentage for HCEs does not exceed the average inclusion percentage for NHCEs by more than a de minimis amount Informally, the IRS has said within 3% is OK 401(a)(17) compensation limit applied after reduction Page 30 15

113 Compensation Inclusion/Exclusion Average NHCE inclusion % = 88.10% Average HCE inclusion % = 89.74% PASSES Total Comp Bonus Plan Comp Ratio HCE 190,000 20, , % HCE 150,000 15, , % NHCE 85,000 10,000 75, % NHCE 75,000 10,000 65, % NHCE 50,000 5,000 45, % NHCE 40,000 5,000 35, % Page 31 Compensation Inclusion/Exclusion Average NHCE inclusion % = 88.10% Average HCE inclusion % = 95.00% FAILS Total Comp Bonus Plan Comp Ratio HCE 315,000 20, , % HCE 150,000 15, , % NHCE 85,000 10,000 75, % NHCE 75,000 10,000 65, % NHCE 50,000 5,000 45, % NHCE 40,000 5,000 35, % Page 32 16

114 Compensation Inclusion/Exclusion There s a special rule buried in the definition of 414(s) compensation in the 401(a)(4) regs. Permitted disparity may not be imputed where compensation used for testing results in a significant under-inclusion of compensation May occur where classes of compensation are excluded, even if it s an otherwise acceptable 414(s) definition May occur where elective deferrals are excluded Page 33 Entry Date Compensation When testing on a benefits basis, must use Average Compensation However, may use Plan Year Compensation if using Annual Method When using Plan Year Compensation, may limit to period of participation Important to note that plan compensation may differ from testing compensation Plan may use any definitely determinable definition of compensation (even a discriminatory definition) to allocate contributions or accrue benefits Nondiscrimination testing must use 414(s) compensation Page 34 17

115 Entry Date Compensation Example Employer maintains 2 calendar year plans: 401(k) profit sharing plan that excludes pre-participation comp Cash balance plan that includes pre-participation comp Plans are permissively aggregated for testing If participant enters both plans on 7/1, you may use 7/1-12/31 compensation for testing If participant enter one plan on 1/1 and the other plan on 7/1, then you must use full year s compensation for testing Page 35 Average Compensation When using Average Compensation, average must be over at least 3 years (or actual period if less than 3 years of history) Average period may begin at anytime and must end in current year Must use highest consecutive 3 (or more) years during averaging period Average Compensation often improves testing on a benefits basis Comp for NHCEs increase for both inflation and merit Comp for HCEs over the comp limit increase only for inflation Page 36 18

116 Average Compensation Examples Average Compensation for NHCE Comp for : $34,000, $37,000, $40,000 Average = $37,000 Assume equivalent benefit from profit sharing allocation = $2,000 EBAR using Plan Year Comp = $2,000 $40,000 = 5.00% EBAR using Average Comp = $2,000 $37,000 = 5.41% Average Compensation for NHCE with short year Employee was hired in late 2013 Comp for : $5,000, $37,000, $40,000 Average = $27,333 Assume equivalent benefit from profit sharing allocation = $2,000 EBAR using Plan Year Comp = $2,000 $40,000 = 5.00% EBAR using Average Comp = $2,000 $27,333 = 7.32% Page 37 Accrued-to-Date Testing 1.401(a)(4)-8(b)(2)(ii) The accrued-to-date method can generally provide more favorable testing results in the following circumstances: When younger HCE has short service; or When long-service NHCE has a large account balance Average compensation must be used If the measurement period includes prior years, testing service is generally the number of years of service during the measurement period, as defined in the plan for purposes of applying the benefit formula (1.401(a)(4)-3(d)(1)(iv)) Cannot use accrued-to-date testing in the determination of whether the gateway has been met Page 38 19

117 Accrued-to-Date Testing Example Dr. Young buys a medical practice from Dr. Old Dr. Old sponsored a cash balance plan and profit sharing plan for several years Profit sharing contributions for the staff were 10% of pay every year Name Owner DOP Age Average Comp Plan Comp Employer Contributions Profit Cash Sharing Balance Total Profit Sharing Account Balance Years Benefiting Dr. Young Y 1/1/ $265, $265, $53, $75, $128, $53, NHCE 1 1/1/ $29, $30, $3, $1, $4, $40, NHCE 2 1/1/ $29, $30, $3, $1, $4, $21, NHCE 3 1/1/ $29, $30, $3, $1, $4, $25, NHCE 4 1/1/ $30, $30, $3, $1, $4, $3, Total for Owners $265, $53, $75, $128, Total for Non-Owners $120, $12, $4, $16, Grand Total $385, $65, $79, $144, Page 39 Accrued-to-Date Testing Rate group test failed when tested on an annual basis: NAR: 28.24% Name OEX HCE Rank NAR MVAR MVAR: 36.85% Dr. Young Y % 36.85% 1 NHCE % 11.73% * NHCE % 17.61% * NHCE % 26.45% * NHCE % 39.72% 1 Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 1 Total number of NHCE's: 4 ABPT: PASS Percent of NHCE's: 25.00% NHCE concentration: 80.00% Safe harbor: 35.00% Ratio percent: 25.00% Unsafe harbor: 25.00% Midpoint: 30.00% FAIL Page 40 20

118 Accrued-to-Date Testing Rate group test passed when tested on an accrued-todate basis: NAR: 28.24% Name OEX HCE Rank NAR MVAR MVAR: 36.85% Dr. Young Y % 36.85% 1 NHCE % 14.89% * NHCE % 21.16% * NHCE % 37.42% 1 NHCE % 39.72% 1 Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 2 Total number of NHCE's: 4 ABPT: PASS Percent of NHCE's: 50.00% NHCE concentration: 80.00% Safe harbor: 35.00% Ratio percent: 50.00% Unsafe harbor: 25.00% Midpoint: 30.00% PASS Page 41 Accrued-to-Date Testing Testing Compensation = Average Compensation over at least 3 years (or actual period if < 3 years of history). Testing Service (DC plan) The number of years in the Measurement Period in which the employee benefited under the plan (DB plan) The number of years used in the benefit formula, the years in which the employee is treated as benefiting, or any other reasonable period What to do when doing combined plan testing and the number of years above are different? Page 42 21

119 Accrued-to-Date Testing To determine Testing Service, let s look at the regs (a)(4)-9(b)(2) Aggregate accrual rates ((ii)(a)). Accrual rates are determined by: Treating all defined contribution plans that are part of the DB/DC plan as a single plan; Treating all defined benefit plans that are part of the DB/DC plan as a single plan; and Summing the equivalent accrual rates of the two Consistency rule ((iv)(a)). Aggregate accrual rates must be determined in a consistent manner for all employees for the plan year. Thus, for example, the same measurement periods and interest rates must be used,, for the entire DB/DC plan Page 43 Accrued-to-Date Testing To determine Testing Service, let s also look at the Gray Book Question A DB and DC plan are aggregated for 410(b) and 401(a)(4) testing. The DC plan was effective on January 1, 2001, and the DB plan was effective on January 1, Benefits are tested on the basis of accrual rates using the accrued-todate method. Which of the following methods of determining testing service are acceptable? (a) One testing service amount is used for calculating both DB and DC accrual rates for each participant and is determined by counting all years in which the participant benefited in either the DB plan or the DC plan. (b) Separate testing service amounts are used for calculating the DB accrual rates and DC accrual rates. Testing service for determining DB accrual rates includes years in which the participant benefited in the DB plan, and testing service for determining DC equivalent accrual rates includes years in which the participants benefited in the DC plan. (c) One testing service amount is used for calculating both DB accrual rates and DC equivalent accrual rates for each participant and is determined by counting all years in which the participant benefited in both the DB plan and the DC plan (i.e., only years after January 1, 2013 are counted). Page 44 22

120 Accrued-to-Date Testing Gray Book (continued) Paraphrase A DB and DC plan are aggregated for coverage and nondiscrimination testing The DC plan was effective 12 years before the DB plan Which methods of determining testing service are acceptable? (a) One testing service amount using years in which the participant benefited in either plan (i.e. the DC plan) (b) Separate testing service amounts for each plan (c) One testing service amount using years in which the participant benefited in both plans (i.e. the DB plan) Answer Option (b) is the appropriate method, subject to modification for a subsequent fresh start date Page 45 Accrued-to-Date Testing Consider the following census and plan benefits: Name Owner Age Average Comp Plan Comp Employer Contributions Profit Cash Sharing Balance Total Profit Sharing Account Balance Years Benefiting HCE 1 Y 57 $260, $265, $53, $200, $253, $650, NHCE 1 38 $50, $55, $4, $1, $5, $32, NHCE 2 42 $42, $45, $3, $1, $4, $25, Total for Owners $265, $53, $200, $253, Total for Non-Owners $100, $7, $2, $9, Grand Total $365, $60, $202, $262, Page 46 23

121 Accrued-to-Date Testing Rate group test failed when tested on an annual basis: NAR: 11.14% Name OEX HCE Rank NAR MVAR MVAR: 12.42% HCE 1 Y % 12.42% 1 NHCE % 7.42% * NHCE % 5.55% * Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 0 Total number of NHCE's: 2 ABPT: FAIL Percent of NHCE's: 0.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 0.00% Unsafe harbor: 35.50% Midpoint: 70.00% FAIL Page 47 Accrued-to-Date Testing Assuming testing service option (a) is correct: NAR: 5.20% Name OEX HCE Rank NAR MVAR MVAR: 5.34% HCE 1 Y % 5.34% 1 NHCE % 5.47% 1 NHCE % 4.59% * Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 1 Total number of NHCE's: 2 ABPT: PASS Percent of NHCE's: 50.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 50.00% Unsafe harbor: 35.50% Midpoint: 40.50% PASS Page 48 24

122 Accrued-to-Date Testing Assuming testing service option (b) is correct: NAR: 12.17% Name OEX HCE Rank NAR MVAR MVAR: 13.48% HCE 1 Y % 13.48% 1 NHCE % 6.62% * NHCE % 5.55% * Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 0 Total number of NHCE's: 2 ABPT: FAIL Percent of NHCE's: 0.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 0.00% Unsafe harbor: 35.50% Midpoint: 70.00% FAIL Page 49 Restructuring A plan may be restructured into two or more component plans if: The plan passes 410(b) prior to restructuring; and Each of the component plans passes 410(b) Each component plan is then treated as a separate plan, benefiting just those in it, for purposes of satisfying 401(a)(4) You may select the group of employees used for this purpose in any manner Each employee must be included in only one component plan for a plan year Page 50 25

123 Restructuring Composition of the groups may change from year to year There is no consistency requirement for how the component plans satisfy 401(a)(4) One may be tested on a benefits basis, while another may be tested on a contributions basis One may be tested using the Annual Method, while another may be tested using the Accrued-to-Date Method One may be tested using Average Compensation, while another may be tested using Plan Year Compensation Restructuring is simply a testing choice; the plan document does NOT need to reflect it Page 51 Restructuring Restructuring can generally provide more favorable testing results in the following circumstances: When an early retirement window is provided; When greater benefits/contributions are desired for a younger HCE or when equal benefits/contributions are desired for all HCEs; When there are short-service and long-service employees and one testing method doesn t work (e.g. annual method vs. accrued-to-date); or When multiple safe harbor formulas are used Page 52 26

124 Restructuring Recall 410(b) rules 410(b) requires that either: Plan satisfies the Ratio Percentage Test; Plan satisfies the Average Benefits Test; Plan does not benefit any HCEs; or The employer has no non-excludable NHCEs If a plan fails the Ratio Percentage Test, it must pass the Average Benefits Test: Nondiscriminatory classification test; and Reasonable classification test; and Easier ratio percentage test Average Benefits Percentage Test (ABPT) Page 53 Restructuring Reasonable classification test The classification for identifying eligible employees must have some reasonable business purpose (e.g. location, job function, salaried vs. hourly, etc.) A list of names or other arbitrary selection is NOT reasonable Main testing advantage in using restructuring is to have the ability to pick and choose each person for a particular component plan Therefore, it s best to satisfy the Ratio Percentage Test Page 54 27

125 Restructuring Example The employee population consists of 2 HCEs and 3 NHCEs You cannot create 2 component plans that would pass the Ratio Percentage Test (70%): One component plan would have a ratio percent of 2/3 1/2 = 133-1/3% The other component plan would have a ratio percent of 1/3 1/2 = 66-2/3% Page 55 Restructuring Case Study Consider the following census and plan benefits: Name HCE Age Plan Comp Employer Contributions Profit Cash Sharing Balance Total HCE 1 Y 57 $265, $53, $200, $253, HCE 2 Y 35 $265, $10, $50, $60, NHCE 1 62 $20, $3, $1, $5, NHCE 2 30 $40, $3, $1, $4, NHCE 3 35 $40, $3, $1, $4, NHCE 4 45 $40, $3, $1, $4, Total for HCEs $530, $63, $250, $313, Total for NHCEs $140, $12, $4, $17, Grand Total $670, $75, $254, $330, Page 56 28

126 Restructuring Case Study ABPT prior to restructuring: Testing EBARs Name HCE Comp 401(k)/(m) PS DB Total HCE 1 Y 265, % 3.55% 7.38% 10.93% HCE 2 Y 265, % 4.03% 5.40% 9.43% NHCE 1 20, % 1.83% 0.38% 2.21% NHCE 2 40, % 12.44% 0.91% 13.35% NHCE 3 40, % 8.27% 0.72% 8.99% NHCE 4 40, % 3.66% 0.44% 4.10% Total EBARs for HCEs: 20.36% Total number of HCEs: 2 Average EBAR for HCEs: 10.18% Total EBARs for NHCEs: 28.65% Total number of NHCEs: 4 Average EBAR for NHCEs: 7.16% Average benefit percentage test: 70.33% Page 57 Restructuring Case Study Tested on a benefits basis prior to restructuring: NAR: 9.43% 10.93% Employee HCE Age Comp NAR MVAR MVAR: 16.73% 12.28% HCE 1 Y , % 12.28% * 1 HCE 2 Y , % 16.73% 1 * NHCE , % 2.22% * * NHCE , % 14.95% * 1 NHCE , % 9.95% * * NHCE , % 4.41% * * Number of HCE's in group: 1 1 Total number of HCE's: 2 2 Percent of HCE's: 50.00% 50.00% Number of NHCE's in group: 0 1 Total number of NHCE's: 4 4 ABPT: PASS Percent of NHCE's: 0.00% 25.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 0.00% 50.00% Unsafe harbor: 35.50% Midpoint: 40.50% FAIL PASS Page 58 29

127 Restructuring Case Study Tested on a contributions basis prior to restructuring: NAR: 61.61% 8.83% Employee HCE Age Comp NAR MVAR MVAR: 69.22% 15.67% HCE 1 Y , % 69.22% 1 1 HCE 2 Y , % 15.67% * 1 NHCE , % 18.79% * 1 NHCE , % 9.32% * * NHCE , % 9.33% * * NHCE , % 9.35% * * Number of HCE's in group: 1 2 Total number of HCE's: 2 2 Percent of HCE's: 50.00% % Number of NHCE's in group: 0 1 Total number of NHCE's: 4 4 ABPT: PASS Percent of NHCE's: 0.00% 25.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 0.00% 25.00% Unsafe harbor: 35.50% Midpoint: 40.50% FAIL FAIL Page 59 Restructuring Case Study On a benefits basis, there are no NHCEs in HCE 2 s rate group On a contributions basis, there are no NHCEs in HCE 1 s rate group Let s see what happens when we restructure CP1 will consist of HCE 1, NHCE 2, and one other NHCE. We will test on a benefits basis CP2 will consist of HCE 2, NHCE 1, and one other NHCE. We will test on a contributions basis Arbitrarily, we will put NHCE 3 in CP1 and NHCE 4 in CP2 Page 60 30

128 Restructuring Case Study: CP1 Ratio percent = 2 / 4 1 / 2 = 100% Rate group tested on a benefits basis: NAR: 10.93% Employee HCE Age Comp NAR MVAR MVAR: 12.28% HCE 1 Y , % 12.28% 1 NHCE , % 14.95% 1 NHCE , % 9.95% * Page 61 Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 1 Total number of NHCE's: 2 ABPT: PASS Percent of NHCE's: 50.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 50.00% Unsafe harbor: 35.50% Midpoint: 40.50% PASS Restructuring Case Study: CP2 Ratio percent = 2 / 4 1 / 2 = 100% Rate group tested on a contributions basis: NAR: 8.83% Employee HCE Age Comp NAR MVAR MVAR: 15.67% HCE 2 Y , % 15.67% 1 NHCE , % 18.79% 1 Page 62 NHCE , % 9.35% * Number of HCE's in group: 1 Total number of HCE's: 1 Percent of HCE's: % Number of NHCE's in group: 1 Total number of NHCE's: 2 ABPT: PASS Percent of NHCE's: 50.00% NHCE concentration: 66.67% Safe harbor: 45.50% Ratio percent: 50.00% Unsafe harbor: 35.50% Midpoint: 40.50% PASS 31

129 Fail-Safe Language Some plans include fail-safe language Such language prevents plans from failing minimum participation and coverage testing Normally requires passing Ratio Percentage Test (70%) Normally results from end-of-year or hours requirement Plan document includes language describing how to add back a group of employees that would otherwise not benefit for the year Page 63 Fail-Safe Language There is no discretion as to whom to bring in Must follow the terms of the plan Often not the best (i.e. least expensive) result On the other hand, since there is no amendment, a terminee s vested status is irrelevant Page 64 32

130 Corrective Amendments Post year-end amendments may be made to correct failed 410(b), 401(a)(4), or 401(a)(26) tests Amendments may either: Increase benefits for existing participants; or Create benefits for employees that otherwise did not benefit under the plan Page 65 Corrective Amendments Amendments must meet each of the following requirements: Benefits may not be reduced Amendment must be adopted by the 15 th day of the 10 th month after plan year-end (i.e. October 15 for calendar year plan) The increase in benefits must satisfy 401(a)(4) on a standalone basis If only NHCE benefits are increased, then this automatically passes The increase must have substance You cannot increase the benefit of a non-vested terminated employee Page 66 33

131 4/12/2016 Millennials: Who are They and Why You Should Care Sarah Simoneaux, CPC, President, Simoneaux & Stroud Consulting Services Sarah Simoneaux, CPC, President, Simoneaux & Stroud Consulting Services Sarah Simoneaux is the founder and president of Simoneaux Consulting Services. SCS specializes in strategic planning, business consulting, qualified plan technology consulting, retirement plan services firms best practice development, and qualified plan technical and soft skills training. SCS nationwide customer base includes third party administrators, recordkeepers, financial institutions, financial advisors, broker dealers, and other service providers in the retirement services industry. Ms. Simoneaux earned her Certified Pension Consultant designation with the American Society of Pension Professionals and Actuaries (ASPPA) in 1988, and she served as President of ASPPA in

132 4/12/2016 Sarah Simoneaux, CPC, President, Simoneaux & Stroud Consulting Services She served as a Technical Education Consultant for the Enrolled Retirement Plan Agent (ERPA) education program and as an ASPPA Educational Programs Advocate. She is the author of the textbook, Retirement Plan Consulting for Financial Professionals, and is the author of the NAPA Certified Plan Fiduciary Advisor online course. She recorded the ASPPA DC-1 web course used in the ASPPA Qualified 401(k) Administrator (QKA) and Qualified Pension Administrator (QPA) programs. She is a regular columnist in ASPPA s Plan Consultant and NAPA s NAPA Net magazines, and co-authors a quarterly column in The Journal of Pension Benefits on retirement organizations best practices. Simoneaux & Stroud Consulting Services 2

133 4/12/2016 The Generations and Influences Gen Xers born Baby Boomers born Millennials (Gen Y) born Simoneaux & Stroud Consulting Services What happened when you were in junior high and high school? JFK, RFK, MLK; Viet Nam/Cold War; Man on moon; Watergate; Civil & women s rights Gen Xers born Columbine 9/11 terrorism Recession-Housing Difficulty finding work Global economy Social networking/blogs Baby Boomers born Challenger explosion AIDS Parental disruption Clinton administration CNN, USA Today, Internet Millennials (Gen Y) born Simoneaux & Stroud Consulting Services 3

134 4/12/2016 How Each Generation Works Boomers Tell me what to do Gen X Tell me what to do and when to have it done Let me figure out how to do it by myself Let me do it in regular work hours Millennials Tell me what, when and how Also tell me why! I ll see if I can figure out a better way Let me work with my friends I have a fear of failure and conflict Simoneaux & Stroud Consulting Services 4

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136 4/12/2016 We asked Millennials, What are the most important values a business should follow if it is to have long-term success? Simoneaux & Stroud Consulting Services Simoneaux & Stroud Consulting Services 6

137 4/12/2016 This generation evaluates such success in ways that go beyond a focus on financial performance, increasing the focus on activities and behaviors that support long-term sustainability. Millennials are not naive, though. While they certainly wish to see a greater focus on the needs of the individual, whether employees or those who use their products and services, they simultaneously demonstrate an appreciation of business fundamentals. This generation is acutely aware of the impact of the Great Recession and closely attuned to changing economic conditions. They, therefore, recognize the importance of ensuring the long-term success of a business and its ability to support and create jobs. Simoneaux & Stroud Consulting Services When salary or other financial benefits are removed from the equation, work/life balance and opportunities to progress or take on leadership roles stand out. Simoneaux & Stroud Consulting Services 7

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140 4/12/2016 They are more likely to report high levels of satisfaction where there is a creative, inclusive working culture (76 percent) rather than a more authoritarian, rules-based approach (49 percent). Simoneaux & Stroud Consulting Services Simoneaux & Stroud Consulting Services 10

141 4/12/2016 Simoneaux & Stroud Consulting Services Teran and his team learned that traditional markers of success education, experience in the industry, recommendations from employers were not tightly correlated with success at Q. Instead, Teran said, the two crucial personal characteristics are optimism and empathy. Simoneaux & Stroud Consulting Services 11

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143 4/12/2016 Adam Henderson of Millennial Mindset: If you can t trust your employees to work flexibly, why hire them in the first place? A flexible approach to work also helps businesses retain their best talent as they are giving their employees an option to do great work, but in a way that fits their lifestyles, providing a win-win scenario for all. Simoneaux & Stroud Consulting Services Simoneaux & Stroud Consulting Services 13

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145 4/12/2016 Soft Skills Training Management/leadership skills Giving/accepting constructive criticism Dealing with rejection (sales) Dealing with confrontation (difficult customers) Communication styles and etiquette Web hygiene Simoneaux & Stroud Consulting Services Brainstorming Promote Collaboration and Get Buy-in Facilitate; establish rules Create multi-generational groups Brainstorm strategic topics Involve staff in implementation of ideas Simoneaux & Stroud Consulting Services 15

146 4/12/2016 Takeaways Simoneaux & Stroud Consulting Services 16