2017 Retirement Plan Sponsor Forum. Presented by Union Bank & Trust Company

Transcription

1 2017 Retirement Plan Sponsor Forum Presented by Union Bank & Trust Company

2 Retirement Plan Sponsor Forum Agenda 8:00 8:30 Registration & Continental Breakfast 8:30 8:45 Samantha Mosser, Omaha President Union Bank & Trust Tim Gregan, First Vice President, Retirement Plan Services Union Bank & Trust 8:45 9:45 Trade, Agriculture and the Regional Economy: Black Swans & Golden Geese-Surveys of Businesses and Banks Dr. Ernie Goss, PhD, Professor of Economics Creighton University 9:45 10:15 Health Savings and Benefit Accounts Updates Tanya Martin-Dick, CHCC, Vice President, Health Benefit Solutions Union Bank & Trust 10:15 10:30 Break 10:30 11:30 The Fiduciary Planning Process and DOL Investigation Preparedness Tim Rosewicz, AIF, Vice President, Senior Retirement Consultant Federated 11:30 12:30 Retirement Plan Management Insight & Updates Tony Verheyen, MA, CEBS, Executive Director Plan Sponsor Council of America 12:30 1:30 Lunch, Greater Omaha Chamber Initiatives David Brown, President and CEO Greater Omaha Chamber of Commerce

3 Welcome! Samantha Mosser, Omaha President Union Bank & Trust Tim Gregan, First Vice President, Retirement Plan Services, Union Bank & Trust

4 Welcome to A Retirement Plan Sponsor Forum

5 Fun Facts Local Ownership: Founded in 1917 Celebrating our 100 th Anniversary Purchased by the Dunlap Family in rd Largest Privately Owned Bank in the State of Nebraska 7 th Largest Bank in Nebraska 38 full service banking offices throughout Nebraska and in Kansas City

6 Financial Facts Bank Assets: Trust Assets: Total Combined Assets: $3.6 billion $16.5 billion $20.1 billion Retirement Plan Service Assets: $2.1 billion Plans serviced: 212 Number of participants: 29,000 Total Deposits: Total Loans: Total Capital: $2.8 billion $2.8 billion $352 million ROA: 1.17% National Peer ROA: 1.02% ROE: 12.43% National Peer ROE: 9.00%

7 What Sets Us Apart We Care about our Clients, Employees, and the Community

8 We offer our clients: Responsive Service Relationship Driven Approach Customized Solutions Service of a small community bank, but the products of a large national bank

9 We offer our employees: An Amazing Culture Growth and Development Competitive Pay and Benefits Family Friendly Environment

10 We offer the community: We give our time, talent, and money All employees are encouraged to give back to the community Bank has donated more than $6 million to the communities we serve over the last 5 years

11 THE NEXT 100

12 Economic Black Swans & Golden Geese: Exports and the Federal Reserve Union Bank & Trust Client Appreciation Champions Club, Omaha, Ne June 7, 2017 Ernie Goss Ph.D. Professor of Economics MacAllister Chairholder Creighton University Web: Twitter.com/erniegoss Web:

13 2017 Jelling Yellen or Tweeting Trump? Watch out for both!!

14 2017 challenges *HIGHER INFLATION *HIGHER INTEREST RATES *HIGHER VALUE OF U.S. DOLLAR *EXPORT HEADWINDS--LESS COMPETITIVELY PRICED ABROAD TRUMP TRADE SKIRMISHES *REPATRIATION OF EARNINGS ABROAD *INFRASTRUCTURE SPENDING INVITES RATE HIKE FROM YELLEN

15 May you live in interesting times. Swiss government bond maturing in 2066: Price July 16, 2016; $1,000 (U.S. dollars) Yield = % Assuming 1% inflation; Net present value = $607

16 Where Are the Price Bubbles? Black Swans? High prices drive ROR down Bond prices? Rate-of-Return = 2.3% (1/2%, 44 basis points up since election) Stock prices? ROR (Case-Shiller S&P) = 3.5% Farm ETF? MOO = 4.56% Ag Land? ROR = -7% Annual growth home prices= 7%

17 The Impacts of QE and Funds Rate (commodities) (Tailwind)! (Headwind)?

18 Federal Reserve balance sheet vs. Funds Rate, % $5, % Funds rate Federal Reserve balance sheet (right axis) $4,500 $4, % $3, % $3,000 $2, % 2.0% Head Winds $2,000 $1, % $1,000 $ % $0

19 Total farm receipts per $1,000 GDP vs. value of $ $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Total farm receipts per $1,000 GDP (left axis) Value of dollar (right axis)

20 Farm receipts per $1,000 GDP & agriculture exports, $26.00 $5,000 $25.00 $24.00 $23.00 Farm receipts per $1,000 GDP (left axis) Ag exports per $100,000 GDP (right axis) $4,500 $4,000 $22.00 $3,500 $21.00 $20.00 $19.00 $3,000 $2,500 $ $2,000

21 Rural Mainstreet export comparisons, and Ranking Yearly growth Growth (QE1, QE2, QE3) (No QE) U.S. * 5.9% -5.2% Arkansas % -8.5% Illinois % -6.3% Indiana % -1.2% Iowa % -9.9% Kansas 40 Minnesota % -7.7% 2.6% -5.1% Missouri % -0.8% Nebraska 7 North Dakota % -9.5% 24.1% -12.1% Oklahoma % -10.3% South Dakota % -11.5%

22 The Rural Mainstreet Economy: Survey of Bank CEOs Average Community Size = 1,300 A Partnership Among Creighton and Bank CEOs in 10 States

23 Creighton s Rural Mainstreet Economy, $ $ Rural Mainstreet Index Farmland price index Agriculture equipment sales index Net farm income (in billions)

24 Bullish on Rural Mainstreet: Long term Fast growth for emerging economies (China, India): Food & energy demand income elastic (e.g. income up 8%, food demand up 12%) Alternative energy production/president s coal initiative: wind farms, ethanol, anaerobic digestion. Greater Fort Dodge infrastructure: education, backward and forward linkages Trade is a powerful agriculture force

25 The Regional Economy: Survey of Purchasing Managers & Business Leaders A Partnership Among Creighton and State Supply Managers Associations

26 U.S., Mid-America (urban), Economic Indicators, U.S. MA

27 Growth in property taxes on farms Property taxes per farm % $30, % 59.2% $25,000 $24, % $20, % 30.0% 20.0% 10.0% 18.6% $15,000 $10,000 $5,000 $9, % Iowa Nebraska $0 Iowa Nebraska

28 $17,000 K-12 spending per student, 2014 $16,000 $15,797 $15,000 $14,000 $13,000 $12,000 $11,726 $11,000 $10,668 $10,000 $9,972 $9,875 $9,000 $8,985 $8,881 $8,000 $7,000 Colorado Iowa Kansas Missouri Nebraska South Dakota Wyoming

29 Property tax assistance Slow the growth in K-12 school spending Base farm property taxes on actual and projected net income Make state aid formula more transparent and fair Expand sales tax base (non-profit, county local option sales tax) Increasing state aid to local units only works for 1-2 years (property taxes go back up in 3 rd year)

30 U.S. Treasury yield curve 1990-May 25, 2017 (10 yr minus 2 yr) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5%

31 Indicators to Watch (June, July) IMS readings: (Creighton & National - July 3) Repatriation signals: (value of U.S. $$s) Yield on 10-yr. Treasury: (yield curve) Jobs: (June 2) May jobs report. FOMC meeting: (June 14) CPI: (June 14) BLS releases CPI. YOY growth (core) > Fed Target of 2.0% past 21 months GDP: Q 2 (July 28) First estimate

32 Questions? Newsletter? ( Free and Well Worth the Price ) Sign up for it at:

33 Realizing the Value of Consumer Driven Healthcare (CDH)

34 SOURCE: Kaiser Family Foundation The Market is Changing Healthcare costs continue to rise, creating a heightened sense of urgency amongst employers to bend the cost curve.

35 Roles & Expectations Are Changing The new world of consumer directed healthcare creates a new buying environment & necessitates a new way of thinking

36 Consumer Healthcare Spending Survey Are they focused on reducing costs? Are the focused on getting better value for the dollars they spend? Does cost influence their decision-making for whether to spend, or what option to choose? Do they understand costs before they purchase? Can they forecast how much they will need to spend this year and into the future? What is the degree of diligence performed before spending? Do they compare options for cost, quality and value? 2016 Alegeus Healthcare Consumerism Index

37 Consumer Healthcare Spending Survey Results BUYING A CAR BOOKING TRAVEL CHOOSING A CELL PHONE PROVIDER BUYING A TV HEALTHCARE SPENDING

38 Consumer Healthcare SAVINGS Survey Questions Do they know how much they need to save? Do they have specific savings goals? Do they have existing savings toward this goal? Have they budgeted an amount to save each month? Do they have dedicated accounts and investments? Are they confident that they are saving at the appropriate rate? 2016 Alegeus Healthcare Consumerism Index

39 Consumer Healthcare Saving Survey Results COLLEGE SAVINGS 29.8 "EMERGENCY FUND" SAVINGS 41.6 RETIREMENT SAVINGS 41.5 HEALTHCARE SAVINGS

40 Tax-Advantaged Accounts Understanding your options

41 HSAs The Other Retirement Savings Account

42 HSA Historical Growth Health Savings Accounts are popular with Employers: 72% of large employers offered them in 2016, up from 40% in 2010 HSAs grew to an estimated $37 billion in assets (2016), up 25% from million accounts by year-end 2016 Devenir Group, LLC

43 Education Most account holders do not yet see their HSA as an important part of their long-term retirement savings. 15% of HSA owners utilize the investment options (2016) Current HSA investors have considerably higher average end-of-year balances than non-investors - $14,971. 7x larger than non-investment holders. Devenir 2016 Year-End Research Report

44 Retirement Health Cost Estimates Hit New High Fidelity Viewpoints. Retiree Health Care Costs Rise, Aug HealthView Services: 2017 Retirement Health Care Costs Data Report

45 Education for Healthcare Savings Unique triple tax savings considerations: Money goes in tax free, interest grows tax free, and withdrawals are tax free At retirement when a couple needs $260,000 for health care expenses, $260,000 comes out tax free. If they were to withdraw $260,000 from their 401(k), that is approx. $340,000 after taxes

46 The Union Bank & Trust Advantage Helping clients win in a rapidly changing marketplace with the industry s largest and most comprehensive consumer healthcare funding platform. Supports 30 million consumer lives Supports 225,000 employer groups Processes more than $9.1 billion in healthcare premiums Tailored employee education Streamlined employee experience Built-in compliance For employer & employee Up-to-date on industry changes Two distinct HSA product options: Deposit HSA Investment HSA

47 Multi-Purse Cards Offer Increased Convenience for Employees Simplified experience leads to enhanced employee satisfaction FSA HSA Dependent care One card to access all accounts for eligible expenses Real time ability to control merchant category codes, view authorizations & denials Single system & real time processing ensure all consumer touch points have the most up-to-date balance Adopting advanced payment functionality, including chip, ApplePay & GoogleWallet

48 Industry-Leading Mobile & Portal Solutions The now-ubiquitous nature of these channels means that employees expect robust online & mobile CDH capabilities

49 The Union Bank & Trust Advantage

50 The Union Bank & Trust Advantage

51 American Health Care Act H.R (as passed the House) Sec Delays Cadillac tax until 2026 Sec 207 Repeal of the tax on OTC Medications Sec 208 Repeal of increase of tax on HSAs (i.e., 10% from 20%) Sec 215 Maximum contribution limit to HSA increased to amount of deductible and out-of-pocket limitation. ($6,650, $13,300) Sec 216 All both spouses to make catch-up contributions to one HSA Sec 217 Special rule for medical expenses incurred prior to establishment of HSA

52 Highlights of Health Benefit Solutions Consumer-Directed Healthcare Platform! Employee Education Investment Options Section 125 Administration Flexible Spending Accounts Limited Purpose Flexible Spending Accounts Dependent Care Accounts Plan Documents Compliance Testing

53 Interested in Learning More? Tanya Martin-Dick Vice President Jennifer Ainsworth Business Development Officer Health Benefit Solutions Team or

54 15 Minute Break

55 46119 (5/16)

56 You recognize that your retirement plan is a critical benefit that can help your company attract and retain quality employees. That means your plan must meet the expectations of your plan participants. It also means you must meet the regulatory expectations as well. We developed this Fiduciary Planning Process guide to help plan sponsors understand their fiduciary roles and responsibilities. It will walk you through a review of your fiduciary responsibilities following a five-step process. This guide complements other Federated materials available through your adviser, including Beyond Gravity A Guide for Fiduciary Meetings and DOL Investigation Preparedness. Beyond Gravity Federated s Beyond Gravity toolkit helps financial advisers train investment committee members how to conduct a fiduciary orientation program, prepare for plan sponsor meetings, proactively schedule fiduciary actions, educate clients on the proper documentation for meetings and provide an annual fiduciary to-do list for committees to track activities. Gold Signature Award Winner DOL Investigation Preparedness Gold Signature Award Winner Federated s Department of Labor Investigation Preparedness guide helps plan sponsors understand what happens in a typical DOL investigation. This guide and any support tools you might be provided are general in nature and should not be considered legal, tax, or investment advice or a guarantee that following them will ensure your plan will comply with ERISA Section 404(c) and other applicable laws. This guide is intended to be a resource for you as you work with your adviser and legal counsel to ensure your plan s compliance. It is not intended to be a comprehensive guide explaining all fiduciary responsibilities. Federated s Fiduciary Planning Process, Beyond Gravity and DOL Investigation Preparedness guides were awarded the Fiduciary and Plan Decision Resources Signature Award from Plan Sponsor Council of America in 2013, 2012 and 2013 respectively. This award acknowledges marketing literature designed to provide retirement plan committees with the information they need to act with care, skill and prudence as they manage their retirement plans. Bronze Signature Award Winner 56

57 About the Authors Eugene F. Maloney serves as executive vice president and corporate counsel of Federated Investors. Since he joined the company in 1972, he has provided legal, regulatory and management counsel to Federated s sales divisions. His expertise includes regulatory and legal requirements relating to the use of mutual funds in banks, wealth management, broker-dealer, retirement and investment adviser environments. The Hon. Bradford P. Campbell is a nationally recognized figure in employer-sponsored retirement plans. The former Assistant Secretary of Labor for Employee Benefits and head of the Employee Benefits Security Administration (EBSA), Mr. Campbell served as ERISA s former top cop and primary federal regulator. As an attorney in private practice, Mr. Campbell advises financial service providers and plan sponsors with insight and knowledge across a broad range of ERISA plan-related issues. Mr. Campbell is a frequent keynote speaker at business, professional and trade association events, has testified extensively on employee benefits issues before the Congress, and has been consistently nominated for 401kWire s 401(k) Industry s Most Influential. Ann Schleck s career in the retirement industry has spanned almost 30 years serving as a plan sponsor, service provider and industry consultant. Ann Schleck & Company LLC is an independent consulting firm providing industry research, advisor practice management and strategic consulting services to investment management firms and retirement service providers. The firm has built a proprietary practice management database that tracks trends and best practices for retirement specialist advisers. Ann is a frequent speaker at industry conferences. She has been recognized in 401kWire s 401(k) Industry s Most Influential, and she was also named a top-rated consultant in Global Investors Magazine. 57

58 Five-Step Process Review your fiduciary roles and goals with our five-step process S T E P O N E Establish and document fiduciary goals S T E P T W O Understand your role as a fiduciary S T E P T H R E E Review the past year s committee minutes, your investment policy statement (IPS) and existing committee charter and bylaws S T E P F O U R Develop a fiduciary calendar for the coming year S T E P F I V E Monitor the investments and key fiduciary activities with a checklist to ensure your fiduciary house is in order 58

59 Step One: Establish and document fiduciary goals Establish fiduciary committee goals

60 Establish and Document Fiduciary Goals Let s take a few minutes to set your fiduciary goals for the coming year Goal categories Fiduciary roles and responsibilities Fiduciary governance Investment oversight Participant communications Fee and service reviews Regulatory updates New tools and resources 60 60

61 Establish Fiduciary Committee Goals They re all important. But which ones to focus on in the coming year? TOPIC PRIORITY LEVEL COMMENTS Understand Fiduciary Roles & Responsibilities Review plan sponsor roles Review outside adviser/consultant roles Review Fiduciary Governance & Bylaws Develop/review meeting bylaws Audit existing governance procedures to ensure process is defined Review Committee Meeting Topics & Process Modify meeting format and topics Review frequency and method of conducting meeting Develop a better process for documenting minutes and action items Investment Oversight Review and update the IPS Document the history of fund changes Review fund menu design: options, asset classes, etc. Change the frequency of conducting fund performance reviews Participant Communication Program Develop a participant communication policy Document materials delivered to participants Provider Management Document service provider fees and services Conduct a due diligence review of service providers Benchmark plan fees to industry norms Monitor Regulatory Understand new regulations affecting the plan Review fee disclosure rules and requirements Plan Sponsor Resources, Tools & Training Conduct annual fiduciary training Review tools and resources available to plan management Other 61

62 Step Two: Understand your role as a fiduciary Who is a fiduciary? What are the duties of a fiduciary? Consequences of fiduciary breach ERISA bond and fiduciary coverage requirements

63 Who is a Fiduciary? ERISA says a person is a fiduciary with respect to a plan to the extent that he/she: (i) exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets; (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority of such plan, or has any authority or responsibility to do so; or (iii) has any discretionary authority or discretionary responsibility in the administration of such a plan. Types of Fiduciaries Anyone who exercises discretion or control with regard to the plan may be a fiduciary: Plan sponsors Investment committees Investment consultants, if they render investment advice Investment managers, if they have the control over the management and disposition of the assets Each plan must have a named fiduciary identified in the plan document 63

64 ERISA Fiduciary Duties Act in the best interest of participants Discharge your plan duties solely in the interest of the participants and beneficiaries and for the exclusive purpose of: Providing benefits to participants and their beneficiaries Defraying reasonable expenses of administering the plan Act with 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 Avoid prohibited transactions and be free from conflict You must refrain from specific prohibited transactions including: Furnishing of goods, services or facilities between the plan and an interested party An interested party includes any plan fiduciary and any person providing services to the plan You can t deal with the assets of the plan for your own account Or receive compensation from any party dealing with the plan in a transaction involving plan assets Diversify the investment options to minimize the risk of large losses The only exception is if, under the circumstances, it is clearly prudent not to do so, and The burden of proof as to whether it is clearly prudent is on you, the fiduciary 64

65 ERISA Fiduciary Duties Follow the plan documents and instruments governing the plan Insofar as they re consistent with ERISA, but Not if following the documents would be imprudent Consequences of fiduciary breach You re personally liable to the plan to make good any losses resulting from the breach, and To restore any profits you might have made by improperly using plan assets You may also be subject to other penalties a court may impose, such as: An excise tax of 15% of the amount per year until correction, and An additional 100% on uncorrected transactions, and A potential additional penalty of 20% if the Department of Labor (DOL) is involved in the case Co-fiduciary liability for participating in, concealing or not stopping the breach of another fiduciary ERISA fiduciary bond and errors & omissions (E&O) insurance coverage A fiduciary bond provides insurance protection against the possibility of fraud or embezzlement by a fiduciary ERISA requires that every fiduciary of, and every person who handles funds or other property of, an employee benefit plan, be bonded So if the loss is greater than $500,000, all the fiduciaries of the plan may have co-fiduciary liability for the loss Every fiduciary of an ERISA plan should consider having additional fiduciary liability insurance For ERISA purposes the fiduciary bond is limited to 10% of plan assets at the beginning of the calendar year, up to $500,000 (up to $1,000,000 if employer securities are a plan option) 65

66 Step Three: Manage your committee meetings, processes and bylaws Committee meeting roles Setting the committee meeting agenda Recommended agenda

67 A Formal Committee Structure & Meeting Process Are Essential to Fiduciary Governance Consultant role in committee oversight Prepare the agenda Facilitate the meeting Document the minutes Communicate outstanding items Role of the committee members Review the minutes Follow the guidelines specified in the IPS Make decisions regarding investments in the plan Monitor the performance of service providers Your meeting agenda Based on your goals A typical meeting covers the following topics Review minutes of previous meeting Provide an update on the economy and markets Review the performance of plan investments including funds on the watch list Present plan trends Update and review the fiduciary checklist And the following topics are covered in the annual review Review of the plan s IPS Review of service provider fees and services Committee governance process review Fiduciary training and education Topics of interest to each committee member 67

68 Discuss Committee Meeting Topics of Interest Review potential meeting topics Pick the ones that are relevant to you Contact your adviser for an online version of this tool. 68

69 Step Four: Develop an annual fiduciary calendar Key dates for your plan

70 Fiduciary Calendar Contact your online adviser for an online version of this tool. 70

71 Step Five: Investment monitoring and oversight process Investment Policy Statement (IPS) Investment fund menu design and selection Ongoing investment monitoring process Monitoring fees for reasonableness Keeping fiduciaries on track with a fiduciary checklist

72 The Investment Policy Statement (IPS) What it does and why it s important Outlines the process that a plan sponsor intends to use in selecting and monitoring investments within the company s retirement plan Outlines the issues and criteria used in creating a prudent investment philosophy Serves as a benchmark for a plan sponsor in overseeing the investment policy on an ongoing basis Provides objective criteria for removing a fund, which takes the emotion out of the decision and makes it truly objective By continually comparing the plan to the original goals and assumptions laid out within the IPS, the plan sponsor can be assured that the goals of the plan are fulfilled The elements of an effective IPS Statement of purpose and rules for amending Roles, responsibilities and procedures Plan investment philosophy Select and monitor investment options Select and monitor performance of service providers Coordinate with plan documents 72

73 Risk/Return Spectrum Investment fund menu design and selection High A diversified fund menu covers International Single funds investments across the risk and return spectrum Small Cap Potential Return Bond Balanced Large Cap Mid Cap Target 2040 Target 2050 Model portfolios Stable Value Target 2030 Money Market Target 2020 Low Risk High The risk/potential reward spectrum is intended to provide a general evaluation of the risk and potential return of each asset category. It is not meant to predict future performance or the volatility of any investment option or category. Investors should carefully consider the investment objectives, risks, charges and expenses before investing. 73

74 The Ongoing Investment Monitoring Process for Your Plan 74

75 Monitoring Fees for Reasonableness In order to exist, 401(k) plans require a variety of services to be performed by: Plan administrators Recordkeepers Custodians Investment advisers Consultants Broker-dealers Generally, in order to be reasonable, fees must match the services provided and must not be duplicative or excessive To an unknown extent the dynamic marketplace helps ensure that fees are reasonable DOL disclosure requirements help with fee transparency The DOL website includes a detailed worksheet that enables plan sponsors to evaluate and compare fees of 401(k) vendors A fiduciary has an ongoing duty to monitor fees to ensure they remain reasonable and to provide plan participants with sufficient information about fees to enable them to make informed investment decisions 75

76 The Annual Fiduciary Checklist Contact your adviser for an online version of this tool. 76

77 INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public (4/17)

78 About the Authors Eugene F. Maloney serves as executive vice president and corporate counsel of Federated Investors. Since joining the company in 1972, he has provided legal, regulatory and management counsel to Federated s sales divisions. His expertise includes regulatory and legal requirements relating to the use of mutual funds in banks, wealth management, broker-dealer, retirement and investment adviser environments. Bradford P. Campbell is a nationally recognized figure in employer-sponsored retirement plans. The former Assistant Secretary of Labor for Employee Benefits and head of the Employee Benefits Security Administration (EBSA), Mr. Campbell served as ERISA s former top cop and primary federal regulator. As an attorney in private practice, Mr. Campbell advises financial service providers and plan sponsors with insight and knowledge across a broad range of ERISA plan-related issues. INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public. 78

79 The Department of Labor Through enforcement of ERISA, investigators with the DOL are responsible for ensuring the integrity of private employer benefit plans. These plans cover about 143 million workers and their dependents and include assets of more than $8.7 trillion Results 2 Total Recoveries $777.5 M Recoveries from Enforcement Actions $352.0 M Voluntary Fiduciary Correction Program Recoveries $9.5 M Abandoned Plan Program Recoveries $21.8 M Benefit Recoveries from Informal Complaint Resolutions $394.2 M Civil Investigations Closed 2,002 Criminal Investigations Closed 333 Informal Complaints Closed 193,000 Abandoned Pension Plans Closed As of October 2, Source: U.S. Department of Labor fact sheet as of fiscal year 2016 (October 1, 2015 to September 30, 2016). INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public. 79

80 DOL Investigating Your 401(K) Plan? Get organized Review sample letter announcing DOL investigation Review checklist of material the DOL may request from you Take a deep breath Length of investigations vary; you will receive a notice when it s completed Review sample letter announcing investigation completion and results INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public. 80

81 Tips for Getting through a DOL Investigation 1. Call an expert 2. Clarify the document request and consider asking for a deadline extension 3. Be respectful, courteous and professional 4. Coordinate the process and be efficient 5. Stay ahead of the process review the documents before you provide them 6. Prepare for interviews 7. Be patient 8. Know how to close INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public. 81

82 View Federated s Sample Investment Committee Meeting Individuals who are members of a plan sponsor s investment committee serve in a fiduciary capacity and should be familiar with the rules and responsibilities that accompany fiduciary status. Federated s sample meeting is designed to acquaint and instruct individuals who serve as ERISA fiduciaries with best practices on the conduct of an investment committee meeting. FederatedInvestors.com/InvestmentCommittee INSTITUTIONAL SALES MATERIAL. Not for Distribution to the Public. 82

83 Retirement Plan Insights: The Plan Sponsor View Presented by Tony Verheyen, MA, CEBS Executive Director June 7, Plan Sponsor Council of America

84 The Plan Sponsor Council of America (PSCA) ORGANIZATIONAL OVERVIEW

85 PSCA Overview Our Mission The Plan Sponsor Council of America (PSCA) is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change, and expand on the success of the employer-sponsored retirement system. With members representing employers of all sizes, we offer a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media, and other stakeholders as part of our commitment to improving retirement security for millions of Americans.

86 PSCA Purpose Lobbying Provide timely legal, legislative and compliance insights Engage in legislative advocacy Ex. The Pension Protection Act of 2006 Ex. The Economic Growth & Reconciliation Relief Act of 2001 Your voice in Washington, D.C. Research Produce unbiased annual Plan Sponsor surveys 401(k)/Profit Sharing Plans 403(b) and Non-ERISA Plans Non Qualified Deferred Compensation Provide custom benchmarking Your unbiased resource

87 PSCA Purpose Education Events 71 st Annual National Conference May 1-2 (Phoenix) Annual local symposiums and topical webinars Certified Fiduciary Training program Publications Defined Contribution Insights Magazine Executive Report Monthly electronic Legal & Legislative Update The PSCA Knowledge Center mobile site Timely Updates and News Alerts Members-Only Help Desk Find unbiased help when you need it most Access vast library of tools and resources Your source for unbiased information and insight

88 The Plan Sponsor Council of America (PSCA) DC INSIGHTS: QUANTITATIVE VIEW

89 Eligibility Plans with Immediate Eligibility Participant Contributions 48.5% 51.0% 55.1% 57.4% 59.2% 60.3% 62.0% 64.4% 64.8% 60.6% Matching Contributions 34.1% 36.7% 38.0% 40.7% 44.5% 45.9% 46.2% 45.6% 51.0% 43.5% Non-Matching Contributions 16.7% 18.4% 21.8% 21.3% 28.1% 25.8% 27.6% 25.7% 29.6% 31.4% Employees Eligible to Participate in Plan Plan Type ,000-4,999 5,000+ All Plans Combination 95.9% 92.3% 91.6% 90.6% 87.4% 92.0% 401(k) 83.6% 87.3% 87.8% 94.0% 82.5% 87.3% All Plans 90.9% 89.5% 89.4% 92.4% 84.0% 89.4%

90 Contributions Percentage with an Account Balance Over Time Average 84.7% 85.4% 85.5% 87.3% 86.3% 85.9% 87.6% 88.6% 87.2% 87.6% Deferrals Over Time (ADP Results) Higher-Paid 6.9% 7.0% 6.6% 6.7% 6.6% 6.4% 6.6% 6.6% 6.9% 7.0% Lower-Paid 5.4% 5.6% 5.5% 5.2% 5.3% 5.2% 5.2% 5.3% 5.8% 5.5% Average Company Contributions as a Percentage of Annual Payroll Average 4.4% 3.8% 4.1% 3.9% 3.7% 4.1% 4.5% 4.7% 4.7% 4.7% Action: Consider stretch match to incent higher participant savings rates.

91 Contributions Percent of Plans that are Top Heavy ,000 4,999 5,000+ All Plans Top Heavy 13.6% 9.7% 5.2% 3.4% 0.0% 6.5% Non Top Heavy (Because of Safe Harbor Design) Not Top Heavy (40 Percent of Assets Held by Non- Key Employees) 46.6% 33.1% 31.9% 32.8% 29.8% 34.6% 39.8% 57.3% 63.0% 63.8% 70.2% 58.9% If you are not Safe Harbor, have you explored and discussed: Tax-Efficiency of Employer Contributions (FICA, FUTA, Work Comp) Cost-Efficiency of Match Utilization (non-safe Harbor Plans) Other Cost-Saving Design Options: Vesting Schedule, Definition of Compensation, Last Day Requirement, Annual True-Up

92 Contributions Roth 401(k) Percentage of Plans 18.4% 30.3% 36.7% 41.3% 45.5% 49.0% 53.8% 58.2% 62.0% 59.9% Participant Usage 11.6% 12.6% 15.6% 13.0% 16.1% 17.4% 19.5% 19.2% 19.3% 20.1% Percent of Plans Permitting Roth 401(k) Deferrals Plan Type ,000-4,999 5,000+ All Plans 401(k) 47.6% 60.0% 47.0% 59.7% 59.3% 54.8% Combination 66.2% 66.7% 71.4% 58.9% 67.4% 66.2% All Plans 58.9% 62.2% 57.1% 59.3% 62.7% 59.9% Action Box: May be time to consider adding Roth feature to your plan.

93 Investments Average Number of Investment Options (Type of Contribution) Company Participant Number of Investment Options Available to Participants ,000 4,999 5,000+ All Plans 1 3.7% 2.2% 0.9% 0.0% 1.1% 1.5% 2 to % 3.3% 6.3% 8.7% 10.1% 8.0% % 2.2% 5.4% 1.9% 7.9% 4.0% 11 to % 24.4% 18.0% 23.1% 32.6% 23.9% 16 to % 25.6% 26.1% 32.7% 27.0% 27.3% 21 to % 16.7% 20.7% 16.3% 11.2% 16.2% 26 or More 19.5% 25.6% 22.5% 17.3% 10.1% 19.1% Action: Assess number of funds in plan lineup.

94 Investments Target-Date Funds Percentage of Plans 33.4% 44.4% 57.7% 62.3% 63.6% 68.6% 64.5% 66.6% 69.9% 63.2% Professionally Managed Accounts Percentage of Plans 29.8% 32.4% 26.2% 31.4% 34.2% 33.9% 36.6% 35.4% 33.7% 37.4%

95 Investments Plans with Investment Policy Statements Percentage of Plans 80.1% 83.5% 84.8% 85.8% 86.4% 88.8% 89.1% 87.3% 87.1% 82.5% Investment Monitoring Frequency Annually 27.2% 21.6% 18.0% 17.9% 15.7% 15.9% 17.2% 16.1% 15.9% 18.0% Semi-Annually 14.6% 12.6% 14.2% 14.0% 14.1% 13.7% 12.6% 13.3% 14.6% 15.8% Quarterly 52.9% 60.3% 61.6% 64.4% 66.2% 67.2% 67.1% 66.6% 65.9% 63.0% Monthly 3.5% 4.1% 3.8% 3.0% 3.4% 2.6% 2.7% 3.6% 3.4% 2.7 % Other 1.8% 1.4% 2.3% 0.7% 0.7% 0.6% 0.5% 0.3% 0.2% 0.5% Action: Implement and/or review IPS, and enroll in fiduciary training program.

96 Auto Features Percent of Plans with Automatic Enrollment ,000-4,999 5,000+ All Plans Percentage of Plans 25.5% 47.2% 59.5% 75.3% 66.7% 57.5% Plans with Automatic Enrollment Feature Over Time Percentage of Plans 23.6% 35.6% 39.6% 38.4% 41.8% 45.9% 47.2% 50.2% 52.4% 57.5%

97 Auto Features Reasons Companies Do Not Auto Enroll ,000 4,999 5,000+ All Plans Cost 6.7% 7.8% 18.2% * * 16.8% Corporate Philosophy 22.2% 37.3% 60.6% * * 39.5% Satisfied with Participation Rates 64.4% 52.9% 33.3% * * 46.1% Added Administrative Work 17.8% 9.8% 24.2% * * 14.4% Other 0.0% 2.0% 3.0% * * 1.8% * Sample size too small to calculate. Plans with a Default Deferral of More than 3 Percent Percentage of Plans 23.1% 27.4% 27.2% 26.0% 25.8% 32.2% 35.2% 40.2% 40.4% 51.4% Action Box: Evaluate default deferral percentage and consider a rate more than 3 percent.

98 Auto Features Plan Participation Rates: Auto-Enroll vs. No Auto Enroll ,000-4,999 5,000+ All Plans Automatic Enrollment * 91.2% 90.6% 88.5% 82.9% 88.6% No Automatic Enrollment 90.0% 78.6% 67.6% 66.1% 63.9% 75.1% Auto-Enrolled Participants Opting Out of Plan ,000-4,999 5,000+ All Plans Average Percentage 2.5% 8.5% 5.2% 7.6% 7.6% 6.8% Plans Allowing Participants to Auto-Rebalance Portfolios ,000-4,999 5,000+ All Plans Average Percentage 76.4% 81.9% 83.1% 85.8% 79.0% 81.5%

99 Education Plans Suggesting Savings Rates to Participants ,000-4,999 5,000+ All Plans Percentage of Plans 25.0% 32.5% 30.8% 34.5% 19.8% 29.1% Saving Rate Suggested by Plan 3% or Less 4-5% 6% 7-9% 10% 10%+ Other Percentage of Plans 7.4% 18.4% 17.8% 8.6% 28.2% 14.7% 4.9% Comprehensive Financial Wellness Programs ,000-4,999 5,000+ All Plans Percentage of Plans 9.5% 7.9% 15.2% 24.4% 35.1% 17.8% Attention: Experts recommend higher savings rate for adequate retirement income.

100 Education Best Practice We are in an evolving marketplace. Many employers are focusing education on topics such as: Baby Boomers and Millennials Women In Retirement Holistic financial wellness Many employers are searching for new ways to engage participants: Targeted communications Retirement readiness solutions Financial wellness solutions Many employers are encouraging higher savings rates through: Setting higher auto-enrollment default deferrals Encouraging higher target savings rates Redesigning communication materials addressing retirement consumption

101 Fees Information Used In Evaluating Plan Fees ,000 4,999 5,000+ All Plans Total Expense Ratio for Each Plan Investment 68.6% 63.9% 72.1% 73.2% 77.4% 70.8% Expense Ratio for Components for Each Plan Investment 32.4% 22.1% 39.0% 38.4% 29.0% 32.4% Total Dollar Value of Fees Derived from Plan Investments 35.3% 28.7% 34.6% 43.8% 47.3% 37.3% Dollar Value of Any Plan Level Fees Assessed on Participants Beyond Those Derived from 31.4% 16.4% 20.6% 23.2% 39.8% 25.3% Plan Investments Total Dollar Value of Any Plan-Paid Fees 46.1% 32.8% 32.4% 39.3% 48.4% 38.9% Breakdown of The Total Fees of The Plan By Each Investment Manager and Service 30.4% 31.1% 33.1% 35.7% 52.7% 35.9% Provider A Third-Party Benchmark 39.2% 38.5% 55.1% 60.7% 65.6% 51.5%

102 Fees Expenses Paid by the Company Audit Fees 78.0% 74.5% 73.0% 69.6% 69.0% 71.0% 70.3% 70.2% 70.1% 65.1% Communication to Employees 66.4% 64.2% 60.4% 55.1% 53.9% 53.1% 51.4% 53.2% 53.6% 53.3% Compensation of Internal Administrators 91.0% 90.4% 89.4% 86.9% 90.1% 90.3% 88.6% 90.2% 89.6% 86.8% Investment Management Fees 24.4% 22.9% 20.8% 16.9% 19.2% 18.0% 18.5% 17.9% 17.2% 18.6% Investment Consultant Fees 57.5% 58.2% 55.3% 48.1% 51.2% 51.9% 51.9% 52.9% 50.0% 44.3% Other Consultant Fees % 66.8% 68.3% 71.0% 69.5% 69.3% 67.1% 59.7% Legal Fees 81.5% 81.1% 77.6% 75.2% 76.1% 76.6% 77.0% 78.7% 78.2% 74.5% Plan Recordkeeping Fees 53.1% 48.7% 46.5% 41.5% 36.4% 35.2% 35.9% 34.3% 34.9% 31.2% Trustee Fees 60.8% 56.7% 53.3% 48.6% 46.0% 46.5% 47.9% 44.8% 45.7% 42.8% Action: Review plan fees and investment expenses, and listen to ERSIA advisor podcasts.

103 Measuring Plan Success Companies Evaluating Plan Success (Meet Corporate Objectives) ,000-4,999 5,000+ All Plans Percentage of Plans 67.3% 75.8% 83.6% 82.2% 80.9% 78.3% Benchmarks Used to Determine Plan Success ,000 4,999 5,000+ All Plans Participation Rates 91.7% 92.7% 96.2% 92.0% 90.5% 92.9% Deferral Rates 61.7% 67.1% 86.5% 84.1% 77.0% 76.7% Avg. Account Balances 50.0% 42.7% 46.2% 56.8% 62.2% 51.2% Income Replacement Ratios 26.7% 9.8% 16.3% 31.8% 27.0% 21.8% Other 5.0% 4.9% 1.9% 4.5% 5.4% 4.2%

104 The Plan Sponsor Council of America (PSCA) DC INSIGHTS: QUALITATIVE VIEW

105 Qualitative Insights What our members are discussing Rothification [defend 402(g)] DOL Fiduciary Regulation 3(21) v. 3(38) Advisors Defend ERISA pre-emption Guaranteed Income Health Savings Accounts Integrated Financial Wellness Robo-Advisors Remember: Process is prudence, and prudence is process. Litigation against: American Airlines Anthem Avon Boeing Edison IBM Intel MIT New York University Novant Health Oracle Verizon Whole Foods Yale University

106 The Plan Sponsor Council of America (PSCA) THANK YOU

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121 Thank You! On Behalf of Union Bank & Trust Company and Retirement Plans Services We sincerely THANK YOU for joining us today!!