Jerry Kalish for John Marshall Law School 403(b) Course-Oct2010

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Navigating the New 403(b) and 457 Rules

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NAVIGATING THE NEW RULES: One Year Later : 

NAVIGATING THE NEW RULES: One Year Later Presented by Jerry Kalish President National Benefit Services, Inc. John Marshall Law School “Non-Traditional Retirement Plans” October 8-9, 2010

Our Agenda : 

Our Agenda The New Economic Realities The View From 30,000 Ft. Best Practices

Slide 3: 

The New Economic Realties

Slide 4: 

This Time It’s Different The New Economic Normal The Cautionary Generation

Slide 5: 

What Employers In General Have Done Matching contributions: 16.4% suspended, 9.3% reduced Non-matching contributions: 13.4% reduced, 12.7% reduced Result: Decease in plan participation and deferral rates 3-4 times greater than employers who did not suspend or reduce contributions. Source: 2009 Profit Sharing Council of America Survey: Impact of Economic Conditions on 403(b) Plans

Slide 6: 

Focus on healthcare and education Cutting costs Making retirement plan changes Changing hiring practices

The View From 30,000 Ft. : 

The View From 30,000 Ft.

Slide 8: 

403(b) Market Size and Scope 20% - 25% of defined contribution market $600 - $700 million estimated assets $900 billion estimated assets in 2011 58% < $1 million 31% between $1 million to $10 million 40% ERISA, 60% Non-ERISA Source: Edward Jones 2008 research

Slide 9: 

403(b) Assets at 12-31-2009 $711 billion by Asset Allocation Fixed Annuity: $343 (48%) Variable Annuity: $226 (32%) Mutual Funds $143 (20%) Source: Spectrum Group

Slide 10: 

403(b) Assets at 12-31-2009 $711 billion by Plan Sponsor Public K-12: $183 (26%) Private K-12: $51 (7%) Higher Education: $313 (44%) Healthcare: $137 (19%) Other: $27 (4%) Source: Spectrum Group

Slide 11: 

Who Are The Service Providers Investment providers Investment consultant/broker Common remitter Third party administrator (TPA) Legal counsel Plan auditor

Slide 12: 

Service Models Bundled Alliance Unbundled

Slide 13: 

Plan Requirements Administration Enrollment Employee communication Recordkeeping Compliance Investment Asset groups Funds Investment managers Investment reporting and monitoring

Slide 14: 

What Plan Sponsors Need Better understanding of their new role and responsibilities Identifying and correcting compliance requirements Better understanding of provider and product options

Best Practices : 

Best Practices

Slide 16: 

Fiduciary Best Practices Theory vs. Practice Investment Policy Statement The Retirement Outcome

Slide 17: 

Classic risk management Decide on a plan that could be interpreted as acting in good faith  Review that plan on a periodic basis and take remedial action if necessary  Make decisions based on expert recommendations and advice  Document the decision-making process  Establish directed investment accounts for defined contribution plans  Appoint an investment manager and monitor his or her performance

Slide 18: 

The practical side of being a fiduciary Appoint an individual or committee as plan administrator Consider the financial strength of your service providers Carefully review the principal policy provisions of fiduciary liability insurance you have/are considering Be aware of the scope of indemnification coverage Make sure investment responsibility has been properly delegated Understand that selection of service providers is a fiduciary function Assume your plan will be audited

Slide 19: 

Why have an investment policy statement Presents the strategic vision for the investments Describes a plan’s investment objectives and decisions Helps plan sponsors reduce their fiduciary liability Defines how investments are selected and monitored

Slide 20: 

1988 to 2008 Source: DALBAR Quantitative Analysis of Investor Behavior (QAIB) Study 2009 The Cost of Going It Alone

Slide 21: 

Source: AllianceBernstein

Slide 22: 

The New Economic Realities The View From 30,000 Ft. Best Practices

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