Overview of Defined Contribution Plan Design

Transcription

1 Overview of Defined Contribution Plan Design September 6, 2016 Mutual of America Your Retirement Company Chris Conway Sr. Regional Vice President & Abbas Moloo Vice President MUTUAL OF AMERICA California Home Office: 320 Park Ave., New York, NY /10 2 Mutual of America Your Retirement Company This material is not intended to give legal or tax advice, and you should not rely on it for legal or tax advice. You should consult your legal or tax adviser regarding retirement plan rules and regulations. 11/10 3 1

2 Mutual of America Your Retirement Company Founded to provide quality retirement products and related services at a competitive price Established in 1945 One of America s leading retirement plan providers Full-service retirement plan provider Single source for plan sponsors (e.g., contracts, savings and investment options, record-keeping, communications and on-site group and individual meetings/participant education) Provide in-depth experience in the defined contribution marketplace, including 401(a), 401(k), and 403(b) plans. 11/10 4 Today s Discussion Trends In Retirement Plan Design Retirement Plan Considerations Types of Plans and Services Survey Employer & Employee Services and Related Costs Compliance Checklist Compliance Issues Investment Services Helping Employers Satisfy Their Fiduciary Obligations Fee Disclosure 11/10 5 Trends In Retirement Plan Design From Defined Benefit to Defined Contribution Plans From Employer-directed to Participant-directed Emphasizing Employee Education Limiting Employer Fiduciary Responsibility Offering Automatic Enrollment with Default Investment Alternatives Roth Provision 11/10 6 2

3 Retirement Plan Considerations Your organization s mission and philosophy regarding employee benefits and retirement planning Your capacity to comply with administrative and fiduciary obligations entailed in sponsoring a Plan Your budget and funding requirements/limitations Number of employees Whether to require employee contributions Commitment to employee education Maximizing the value and benefits of your Plan 11/10 7 Types of Defined Contribution Plans Simplified Employee Pension (SEP) Plan SIMPLE IRA Plan 403(b) Tax Deferred Annuity (TDA) 403(b) Thrift Plan 401(a) Money Purchase Plan 401(a) Profit-sharing Plan 401(k) Profit-sharing Plan Safe Harbor 401(k)/ 403(b) Plan 457(b) Deferred Compensation Plan for Tax Exempt Organizations 11/ (k) Profit-Sharing Plan Employee and Employer Contributions allowed; Roth contributions Employer Contributions may be Matching or Non-Elective, Fixed or Discretionary, and can be based on Age/Service Weighted formula Vesting IRS Qualification Full Non-discrimination Testing required Plan Document & SPD (ERISA plans) Loans / Hardship Withdrawals allowed 11/10 9 3

4 403(b) Thrift Plan Differences from 401(k) Not available to for-profit entities No Actual Deferral Percentage (ADP) testing requirement No IRS qualification program (currently) Universal Availability requirement Additional catch-up provision Multiple providers requires additional coordination 11/10 10 Additional Features for 401(k) and 403(b) Safe-harbor provision Automatic enrollment provision Same contribution Increasing contribution 11/10 11 Eligible 457(b) Deferred Compensation Plan Certain Tax Exempt Employers may adopt a Section 457(b) Plan Only available to a Select Group of Management or Highly Compensated Employees Employer and/or Employee Contributions allowed Plan Assets are subject to general creditors of the Employer until distributed Distributions available to Plan participants following termination of employment Eligible Plan participants may contribute to 457(b) in addition to any other qualified plan of the employer 11/

5 Types of Retirement Plan Services Bundled (one-stop) Service Provider Vs. Unbundled (multiple) Service Plans 11/10 13 Bundled (one- stop) Service Providers One-stop full service provider Selection of Investment Alternatives coordinated/ monitored by bundled service provider, subject to the plan fiduciary s oversight Advantage to small and medium size organizations where internal Plan management/resources are limited 11/10 14 Un-bundled (multiple) Service Plans Plan Administration handled internally or by third party administrator (TPA) and Investment Services handled by independent investment firm(s) TPA may offer a basic services package for fee and charge additional fees for all other services requested Investment Services may be provided by banks, mutual funds, insurance companies or brokerage firms Additional oversight may be required to coordinate/ monitor services provided by two or more companies Advantage to large employers with expert internal Plan management/ resources 11/

6 403(b) Plan Services 11/10 16 Employer Services Plan Design Consulting Services Plan Document/Amendment Preparation Services Wide array of Investment Options Summary Plan Descriptions (SPD), as appropriate Regulatory Compliance Services 5500 Reporting Assistance if applicable Non-discrimination Testing Services if applicable Loan Administration/ Benefit Payment Services On-line Internet Plan Administration System if applicable 11/10 17 Employee Services On-site Group and Individual Meetings Investment Education Services Toll Free 800 Service Internet Service (Web site) Loan Servicing Department Quarterly Statements Via US Mail or Internet 11/

7 Survey Employer & Employee Services and related costs Do you have a bundled service provider or multiple service plan? Are you satisfied with employee participation? Is your service provider responsive to your requests? Are your employees satisfied with your plan? How do Investment Fund management fees effect your Plan s performance? What is the total cost of your retirement plan? 11/10 19 Check Your Plan Administration/ Investment Fees: Trust Fees Contract Fees Plan Start-up or Conversion Fees Wrap Fees Separate Account Fees Fees by Fund Share Class Administration Fees Distribution Fees Plan Asset Charges Surrender Fees Front End Commissions Contingent Deferred Sales Charge 12b-1 Fees Asset management fees Revenue Sharing Fiduciary Services 11/10 20 Annual Compliance Checklist Each Plan type may have different Plan document, government reporting, and employee notification requirements Conduct annual compliance meetings with your Plan provider(s) Be aware of Consultant/Adviser Project look out for conflicts of interest Conduct regularly scheduled employee meetings (ERISA Section 404(c) compliance) Periodically review plan design features and costs Annual Plan audit requirements may vary depending on Plan type and number of employees 11/

8 Compliance Topics Adherence to plan document Compensation limits [Sections 415, 402(g), 401(a)17] Timeliness of contributions and loan payments/corrective contributions Notices: Summary Plan Description, Qualified Default Investment, Summary Annual Report, Universal Availability Hardships documentation/other resources Fidelity bond 11/10 22 Helping Plan Sponsors with Fiduciary Obligations 11/10 23 Background on Fee Disclosure Department of Labor (DOL) initiative Two disclosure requirements: Service Provider Disclosure to Plan Fiduciaries Participant Disclosure from Plan Fiduciaries The purpose of the regulation is to make it easier for plan sponsors and individuals who have investment discretion under the plan to understand the services and related costs associated with their investment plan. 11/

9 What Must Be Disclosed? Plan Related Information (Administrative and Individual Expenses deducted from or charged to a Participant s account) Investment Related Information (Performance Data, Benchmark Information, Total Annual Operating Expenses) 11/10 25 See Prospectuses For More Information Before investing in our variable annuity contracts, you should consider the investment objectives, risks, charges and expenses (a contract fee, Separate Account expenses and Underlying Funds expenses) carefully. This and other information is contained in the contract prospectus or brochure and Underlying Funds prospectuses. Please read the prospectuses and brochures carefully before investing. These materials can be obtained by calling or visiting mutualofamerica.com. A variable annuity contract is suitable for long-term investing, particularly retirement. The value of a variable annuity will fluctuate depending on the value of its underlying Separate Account funds. At redemption, amounts placed in a variable annuity s Separate Account may be greater or less than the principal amount invested. Generally, an annuity contract provides no additional tax-deferred treatment beyond that provided by a tax-qualified pension or retirement plan. Therefore, the annuity contract should not be selected based on this criterion. 11/10 26 Questions? 9

10 Thank You Mutual of America Life Insurance Company is a Registered Broker-Dealer. Home Office: 320 Park Avenue New York, NY mutualofamerica.com Mutual of America and Mutual of America Your Retirement Company are registered service marks of Mutual of America Life Insurance Company. 11/