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Investment products: No bank guarantee I Not FDIC insured I May lose value The new retirement reality Is your plan prepared for 2012 and beyond? PRESENTER.

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Presentation on theme: "Investment products: No bank guarantee I Not FDIC insured I May lose value The new retirement reality Is your plan prepared for 2012 and beyond? PRESENTER."— Presentation transcript:

1 Investment products: No bank guarantee I Not FDIC insured I May lose value The new retirement reality Is your plan prepared for 2012 and beyond? PRESENTER NAME LOCATION, DATE

2 Investment products: No bank guarantee I Not FDIC insured I May lose value Your complete checklist for 2012 Agenda – An annual health checkup for your plan 1 5 Trends you cant afford to ignore 3 Actions to take now 10 Considerations for the coming year

3 Investment products: No bank guarantee I Not FDIC insured I May lose value 5 Trends You cant afford to ignore

4 Investment products: No bank guarantee I Not FDIC insured I May lose value Fee awareness 2012 is the year for plan sponsors to understand your new fiduciary liabilities called 408(b)(2) – Fee/service transparency 61% do not feel prepared for the new rules 1 79% of sponsors want to improve understanding of (and potentially reduce) plan fees 2 71% rated the new 408(b)(2) fee disclosure requirements as important 2 (29% have no idea how important they are) In addition, dont miss the August 30, 2012 deadline for 404(a)(5) – fee disclosures to participants 404(a)(5) puts the burden of participant disclosure on the fiduciary – The plan sponsor 3 Trend Verisight and McGladrey 2011/2012 Compensation, Retirement and Benefits Trends Survey 2.Deloitte Annual 401(k) Benchmarking Survey, 2011 Edition 3.Plan Advisers Should Urge Sponsors to Prepare for 404(a)(5), April 9, 2012, PlanAdviser.com.

5 Investment products: No bank guarantee I Not FDIC insured I May lose value Trend 2 4 Source: Deloitte Annual 401(k) Benchmarking Survey, 2011 Edition, PSCA Annual Survey, 53 rd Annual Edition PLANS OFFERING AUTO ENROLLMENT From enrollment to QDIA to step-up contributions, everythings going automation Auto everything

6 Investment products: No bank guarantee I Not FDIC insured I May lose value Custom portfolios Target date funds have become widely adopted within defined contributions plans, but the demand for plan-specific custom target date portfolios is rapidly accelerating Almost 25% of plan sponsors with target date funds are likely to switch to customized approaches by 2015… …almost double from about 13% today Trend 3 5 The target date is the approximate date when investors plan to start withdrawing their money in the fund. As the fund approaches its target year, the fund will decrease its emphasis on growth of capital and increase its emphasis on current income. Please note that the principal value of the funds is not guaranteed at any time, including at the target date. There is no guarantee that the fund will provide adequate income at and through retirement. 1.Verisight and McGladrey 2011/2012 Compensation, Retirement and Benefits Trends Survey 2.Deloitte Annual 401(k) Benchmarking Survey, 2011 Edition 3.Plan Advisers Should Urge Sponsors to Prepare for 404(a)(5), April 9, 2012, PlanAdviser.com. Customized Target date Plan- specific

7 Investment products: No bank guarantee I Not FDIC insured I May lose value Trend 4 6 Source: Poll Finds More Pensions Using Investing Alternatives, August 25, 2011, PLANSPONSOR.com – Using SEI data PENSION PORTFOLIOS WITH ALLOCATION TO ALTERNATIVES 401(k) plans can learn from the best practices of pension professionals – The majority have already added alternative investments to their portfolio options Alternative investments 401(k) plans can learn from the best practices of pension professionals the majority have already added alternative investments to their portfolio options

8 Investment products: No bank guarantee I Not FDIC insured I May lose value PLANS CHANGING LINEUP IN THE LAST YEAR Trend (k) plans can learn from the best practices of pension professionals – The majority have already added alternative investments to their portfolio options Increasing the strength of plan investment lineups Sponsors are becoming faster and more willing to change funds in their investment lineups Source: PlanAdviser.com, Nov. 29, 2011 Identify a resource to work with, either your financial advisor or plan provider, to help you screen options by performance, management team, style purity and fees

9 Investment products: No bank guarantee I Not FDIC insured I May lose value 10 Considerations For the coming year

10 Investment products: No bank guarantee I Not FDIC insured I May lose value Consideration 1 9 Are plan fees reasonable for services received? How much do the investments cost? How much does plan administration/recordkeeping cost? What are the industry standards? Who pays the fees? Lowest cost option not always the best – What matters is reasonable value for services desired and received Best practices: Compare current plan fees against relevant benchmarks for similar plans. Request proposals from providers to find best prices for desired services. Document plan fees

11 Investment products: No bank guarantee I Not FDIC insured I May lose value Best practices: Regularly ask your provider: Is there anything that I should know regarding a change in service? Consideration 2 10 The services available through your plan providers change from year to year New tools and resources can make your life easier – Even at no additional cost Any aspect of plan management may be enhanced: Administration and compliance Procedures and automation Plan design and documentation Participant education and communication Investment monitoring and analysis Take advantage of new provider services

12 Investment products: No bank guarantee I Not FDIC insured I May lose value Best practices: Forward-looking plans are moving beyond auto enrollment, and using auto step-up as a means of seeking to enhance retirement readiness Consideration 3 11 Automatic services are growing in wide acceptance Plans that embrace automatic features see higher rates of participation and deferral – building a better long-term situation for both participants and plan fiduciaries Implement auto enrollment and auto re-enrollment

13 Investment products: No bank guarantee I Not FDIC insured I May lose value POPULARITY OF TYPES OF QDIA Consideration 4 12 Source: PSCA, 54 th Annual Survey of Profit Sharing and 401(k) Plans – Reflecting 2010 Plan Experience. Make sure you have a QDIA QDIA – An important piece of the auto puzzle Automatic deferrals need a Qualified Default Investment Alternative (QDIA) to receive auto contributions

14 Investment products: No bank guarantee I Not FDIC insured I May lose value Best practices: Conducting your own audit can help you avoid painful and costly process of responding to a DOL violation Consideration 5 13 Self-audit administration and procedures DOL will most likely review your plan document and administrative procedures in a plan audit Most common mistakes Failure to amend the plan for tax changes by the end of the period required by law. Failure to follow the plans definition of compensation for determining contributions. Failure to include eligible employees in the plan or failure to exclude ineligible employees from the plan. Failure to follow proper procedures for loans and hardship withdrawals Benchmark your plan administrative procedures

15 Investment products: No bank guarantee I Not FDIC insured I May lose value Best practices: Any changes you make in your plan design or administrative procedures should be documented, signed, dated and maintained as a permanent part of the plan records. Your plan may require individual amendments for each change, or it may require that your plans prototype document be amended. Consideration 6 14 Evaluate potential plan design changes Does your plan meet the needs of your workforce? Changes in employee demographics Changes in legislation or regulations Changes in your business objectives

16 Investment products: No bank guarantee I Not FDIC insured I May lose value Consideration 7 15 That so many plans sponsors are reviewing and reworking their investment lineups demonstrates the importance they see in delivering the very best investment opportunity as part of the 401(k) plan benefit for their employees, especially in these unusual times. – David Wray, President of PSCA Give participants better opportunities to diversify by improving plan lineup Default investments (QDIA) Core options Alternative investments By using a step-by-step roadmap, you can optimize your plans menu to match the needs and the sophistication of your participants Source: PlanAdviser.com, Nov. 29, 2011 Review current fund lineup

17 Investment products: No bank guarantee I Not FDIC insured I May lose value Consideration 8 16 Do you have enough investment options? Do you have too many? Has there been style drift? Are you consistent with your investment policy statement? Protect your plan fiduciaries by regularly reviewing your investment policy, making necessary changes to your investment lineup – QDIA, core options, alternative investments, and so on – And documenting them Renew your investment policy statement Best practices Three steps for evaluating funds: 1. Review fund performance 2. Review fund characteristics against original selection criteria 3. Place fund in alert or watch status if factors warrant

18 Investment products: No bank guarantee I Not FDIC insured I May lose value #1 Concern of plan sponsors PERCENT OF ALL PLANS INCREASING EMPLOYEE EDUCATION IN LAST 12 MONTHS 2 Participant retirement readiness 1 The key to communication is its effectiveness to... Engage participants: Enroll, educate and/or advise Explain investment options: The right lineup can provide the right diversification opportunities Changes in investment policy may suggest the types of changes needed in participant communication Consideration Deloitte Annual 401(k) Benchmarking Survey, 2011 Edition 2.PSCA, 401(k) and Profit Sharing Plan Response to Current Conditions (2011). Revamp your communication strategy

19 Investment products: No bank guarantee I Not FDIC insured I May lose value Best practices: Visit irs.gov/retirement/sponsor for helpful tools and checklists Consideration Model documentCustom document Offered by service providers Less expensive to update Standard language: Makes it easier to comply with legislative changes Individually drafted by ERISA attorneys Expensive Generally used when desired provisions are not available in a model document If you already have a custom document… do you really need it? Model or custom? Keep document current to avoid jeopardizing the plans status and tax benefits Keep plan document up to date

20 Investment products: No bank guarantee I Not FDIC insured I May lose value 3 Actions To take now

21 Investment products: No bank guarantee I Not FDIC insured I May lose value Understand and document your plans fee profile MOST POPULAR FEE INFORMATION GATHERED BY PLAN SPONSORS AND THEIR ADVISORS... Action 1 20 Source: PSCA, 54 th Annual Survey of Profit Sharing and 401(k) Plans – Reflecting 2010 Plan Experience. Focus on fees

22 Investment products: No bank guarantee I Not FDIC insured I May lose value Action 2 21 Your home should fit your familys needs and demographics Your retirement plan should suit your company needs and participant demographics Align plan features to: The real needs of your workforce, Changes in legislation and regulations, and Changes in your business objectives Focus on plan design

23 Investment products: No bank guarantee I Not FDIC insured I May lose value Action 3 22 Investment diversification is an important key to retirement readiness Ensure that your lineup offers the right mix of attributes Respectable performance Style consistency Professional, tenured management Reasonable fees Opportunities for diversification among different investment asset classes Focus on investments

24 Investment products: No bank guarantee I Not FDIC insured I May lose value Conclusion: Your checklist for Trends10 Considerations3 Actions Fee awareness Auto everything Custom portfolios Alternative investments Lineup strength Fee documentation New provider services Self-audit Auto enroll/re-enroll Possible design changes QDIA Review lineup Renew IPS Revamp communication Revisit plan document Focus on fees Focus on plan design Focus on investments

25 Investment products: No bank guarantee I Not FDIC insured I May lose value Conclusion: Your checklist for Trends10 Considerations3 Actions Fee awareness Auto everything Custom portfolios Alternative investments Lineup strength Fee documentation New provider services Self-audit Auto enroll/re-enroll Possible design changes QDIA Review lineup Renew IPS Revamp communication Revisit plan document Focus on fees Focus on plan design Focus on investments

26 Investment products: No bank guarantee I Not FDIC insured I May lose value Additional resources 25 Helpful sources of information for plan sponsors: US department of labordol.gov/ebsa IRSirs.gov/retirement/sponsor Profit sharing/401(k) council of Americapsca.org 401(k) answer bookaspenpublishers.com PlanSponsor magazineplansponsor.com401khelpcenter.com DWS investmentsdws-investments.com

27 Investment products: No bank guarantee I Not FDIC insured I May lose value 26 QUESTIONS?

28 Investment products: No bank guarantee I Not FDIC insured I May lose value Important information OBTAIN A PROSPECTUS To obtain a summary prospectus, if available, or prospectus, download one from talk to your financial representative or call Retirement Plans Sales Support at (800) We advise you to carefully consider the products objectives, risks, charges and expenses before investing. The summary prospectus and prospectus contain this and other important information about the investment product. Please read the prospectus carefully before you invest.

29 Investment products: No bank guarantee I Not FDIC insured I May lose value Important information DWS Investments Distributors, Inc. 222 South Riverside Plaza Chicago, IL Tel (800) DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company. NOT FDIC/NCUA INSURED MAY LOSE VALUE NO BANK GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY The information provided is for educational purposes only and is not intended to serve and should not be relied upon as tax, legal or security advise or construed as such. Specific questions and application of specific rules should be addressed by competent ERISA counsel. Neither DWS Investments nor its affiliates can give tax advice. All investments involve risk including potential loss of principal. © 2012 DWS Investments Distributors, Inc. All rights reserved. R (06/12)


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