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Only Source / Footnotes below this line 2.68 1.64 1.95 Subtitle 2.64 2.80 Only Source / Footnotes below this line.

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Presentation on theme: "Only Source / Footnotes below this line 2.68 1.64 1.95 Subtitle 2.64 2.80 Only Source / Footnotes below this line."— Presentation transcript:

1 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Benchmarking Your Retirement Plan: Optimizing Fees & Services Presented by: Robert W. Dion and Tad Gray Morgan Stanley Smith Barney © 2011 Morgan Stanley Smith Barney LLC. Member SIPC.

2 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY 2 Shining a Light on Murky 401(k) Plan Fees 401(k) Fees Gain a Bit of Clarity Labor Department Requires 401(k) Fee Disclosure Industry Eyes Lawsuits Over Pension Investment What Your 401(k) Really Costs You Cracking Down on 401(k) Fees

3 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Key Topics for Discussion Current Regulatory Environment What it Really Means to Understand Plan Fees Benchmarking: The Key to a Prudent Process How MSSB Can Help 3

4 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Current DC Regulatory Environment A Spotlight on Fees The Department of Labor and Congress are placing a great deal of emphasis on plan expenses and services Form 5500 Schedule C reporting requirements 408(b)2 reporting requirements Participant level fee disclosure Pending legislation Lawsuits 4 Now, more than ever, it is critical for plan sponsors to understand plan fees.

5 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY What it Really Means to Understand Plan Fees Plan Fiduciaries have:... a specific obligation to... Ensure that fees [and] expenses are reasonable in light of the level and quality of services provided... 5 Source: A Look At 401(k) Plan Fees, U.S. Department of Labor Publication, p.3 Understand how fees are derived Determine whether reasonable in light of services being provided Document a prudent process

6 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY 1. Understand How Fees Are Derived 6 Plan Fees & Expenses Recordkeeping/ Administration Investment Management Plan ComplexityTrustee Services Education & Communications Advisors/ Consultants Its not enough to look at total plan costsmany factors influence plan fees

7 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY 2. Determine Whether Fees Are Reasonable in Light of Services Being Provided 7 In order to determine how reasonable fees are, it is important to understand how to compare your plan to the market. You should consider: Plan and participant level services provided How well the plan is performing – participant success measures Plan size and participant demographics

8 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY 3. Document a Prudent Process 8 Plan fiduciaries should demonstrate that a prudent process was followed, including: Understanding plan fees and expenses Determining reasonableness of fees Documenting the decision-making process when selecting service providers Plan Fees UNDERSTAND DETERMINE DOCUMENT Demonstrate a prudent process

9 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Benchmarking: The Key to a Prudent Process Benchmarking or evaluating and comparing plan fees and services to other similar plans: Helps you understand the fees paid by your plan Helps you determine whether fees are reasonable in light of services being provided Provides documentation for your records 9 Plan Fees UNDERSTAND DETERMINE DOCUMENT Demonstrate a prudent process

10 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY A New Way to Benchmark Your Plan Traditional approaches to benchmarking plan fees have not been entirely effective: 1. Requesting periodic proposals from different vendors Compares your plan to what you can get, not to what similar plans are actually getting Doesnt include plan level data such as participation, deferral rates, etc. Typically very time consuming 2. Using databases from 5500 filings Information may be outdated or incorrect May include fees and plan level data but not services being provided Wide variance in pricing may make it hard to draw conclusions 3. Benchmarking produced by the plan provider Comparative bias Not independent Morgan Stanley Smith Barney can offer you a more efficient way to prudently benchmark your plan and determine reasonableness of fees 10

11 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY MSSB can provide you with a benchmarking analysis: Independent, third party data Use an apples to apples comparison of your plan against other similar plans Factors considered include: plan size, number of participants, company industry, employer match and allocation to index funds Provides the data needed to accurately understand and assess relative plan fees, support, services and success measures How MSSB Can Help

12 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY The MSSB Approach to Benchmarking A comprehensive approach designed to help you determine how reasonable your fees are and to document your review process. 12 EvaluationBenchmarkingConsultationImplementation Understand all of the services being received and the fees being paid Utilize benchmarking capabilities of an independent, third party specializing in retirement plan fee benchmarking Provide comprehensive review of the benchmarking data and consult with you on strategies for enhancement Help you implement and document changes to your plan

13 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY The MSSB Benchmarking Approach Can Help You… 13 Renegotiate with your provider for lower fees, if necessary Identify services that you dont need, or other services that you do need Determine whether your plans success measures need to be improved - participation rates, deferral rates, diversification, etc. Revisit and improve your plan design Provide documentation for your fiduciary audit file

14 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Questions? 14 Robert W. DionTad Gray Senior Vice PresidentFinancial AdvisorMorgan Stanley Smith Barney

15 Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line FOR PLAN SPONSOR USE ONLY Disclosures 15 Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not provide tax or legal advice and are not fiduciaries (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise agreed to in writing by Morgan Stanley Smith Barney. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their tax or legal advisors before establishing a retirement plan and to understand the tax, ERISA and related consequences of any investments made under such plan.


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