1. Proper Corporate Retirement Plan Design Jeffrey Jackson, E.A., M.A.A.A. Principal, Compass Retirement Consulting Group jjackson@compass-cg.com www.compass-cg.com

2. Agenda Safe Harbor Plans Types and features Advantages Timing and notice requirements Automatic Enrollment & Escalation Cash Balance Plans What are they?

3. Safe Harbor Plans A plan sponsor can avoid ADP testing of elective contributions and ACP testing of matching contributions Generally speaking, employers that might benefit from a safe harbor design include the following: Employers with highly paid employees unable to contribute the full 401(k) dollar amount ($17,500 in 2013) because of low participation rates on the part of lower-paid employees Employers required to make top-heavy minimum contributions Employers with plans using a cross-tested profit sharing formula

4. Safe Harbor Plans 3.00% Nonelective contribution 100% vested May be used to satisfy top-heavy minimums Must be used to satisfy minimums in cross testing or new comparability plans SH Match - 100% of the first 3% deferred plus 50% of the next 2% deferred 100% vested May be used to satisfy top-heavy minimums

5. Safe Harbor Plans Newly established 401(k) plans and an existing plan that is NOT a 401(k) plan (i.e. PSP) may be converted after the beginning of a plan year, as long as plan will function as a 401(k) for at least 3 months. Existing 401(k) plan Amendment must be adopted before the plan year the conversion takes effect Notice given to employees at least 30 but not more than 90 days before beginning of plan year

6. Safe Harbor Plans Employer must give its employees at least 60 days’ (November 1) notice that the SIMPLE IRA plan is being terminated Employer does not need to give IRS notice of that SIMPLE plan has been terminated Why consider change? Higher contribution limits for employees Additional benefits available for owners and highly compensated employees Avoiding 100% immediate vesting of employer contributions Increased investment selection and allows for plan loans

7. Auto Enrollment 50% can save through a retirement plan 33% actually save 11% are saving enough

8. Auto Enrollment The goal: 90–10–90 Every American deserves access to a DC plan At least 90% should be saving for retirement Saving rates ought to be more than 10% 90% should let professionals construct their portfolios Call it the 90–10–90 rule

9. Auto Enrollment Behavioral Challenge: Inertia

10. Auto Enrollment Inertia, Auto-Enrollment and Plan Participation

11. Cash Balance Plans Defined Contribution Defined Benefit Plan Cash Balance

12. Cash Balance Plans Qualified Retirement Plan Defined Benefit Plan Definitely Determinable Benefit Increased Deductible Limits (Greater than DC) Looks like Profit Sharing or Money Purchase Plan Communicated as a Notional or theoretical account balance, rather than an annuity like a traditional DB Annual Contributions Interest Credits

13. Cash Balance Plans Introduced by Kwasha Lipton back in 1981 Pension Protection Act of 2006 Lifted the moratorium on determination letter filings Must have certain provisions 3 year cliff vesting Interest crediting interest rate safe harbors Conversions from traditional defined benefit plans 810% increase in cash balance plans in a little under a decade

14. Cash Balance Plans Replacing Traditional Defined Benefit Plans Lower Risk Remove the interest rate volatility when valuing plan liabilities Easier to understand and appreciate Pension obligation of participants Equitable contributions amongst partners, if needed 84% of cash balance plans are in place at firms with less than 100 employees Best when paired with a 401(k) Profit Sharing Plan

15. Cash Balance Plans Maximum Annual Contribution Limits in 2015 for an individual age 53, earning $300,000

16. ANY FINAL QUESTIONS? 16 Remember to Complete the Speaker Survey: sm15.bfbootcamp.net / ‘click’ on speakers / select your speaker Jeffrey Jackson, E.A., M.A.A.A. Principal, Compass Retirement Consulting Group jjackson@compass-cg.com www.compass-cg.com