Fiduciary Responsibilities Regarding Your Retirement Plan By R.L. “Dick” Billings, CPC, CEBS, ERPA * * enrolled to practice before the IRS as a retirement plan agent Texas NAHRO - April 11, 2018

Disclaimer The views in this presentation are the opinions of Billings and Company for education purposes only. No other party or governmental agencies has reviewed or approved the content of this presentation. Texas NAHRO - April 11, 2018

Questions/Discussion Today’s Topics Fiduciary Liability Industry Trends Recommendations Questions/Discussion Texas NAHRO - April 11, 2018

Who is a Fiduciary and what are one’s duties? ERISA vs. non-ERISA Fiduciary Liability Who is a Fiduciary and what are one’s duties? ERISA vs. non-ERISA Due Diligence Best Practices Texas NAHRO - April 11, 2018

Who is a Fiduciary? A plan’s fiduciaries will ordinarily include: A fiduciary is anyone “exercising discretion or control over the plan.” A plan’s fiduciaries will ordinarily include: the Trustee (directed or discretionary?) investment advisers (maybe or maybe not) all individuals exercising discretion in the administration of the plan (including but not limited to): elected officials employees Board Members/Commissioners all members of a Plan’s Administrative Committee (if one exists) Texas NAHRO - April 11, 2018

Fiduciary Duties – under ERISA Fiduciary Duties - ERISA Section 404(a)(1)(B) A. Prudent Person (or Expert?) Rule 1) A fiduciary shall discharge his duties with respect to a plan sole in the interest of the participants and beneficiaries; and 2) With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters* would use in the conduct of an enterprise of a like character and like aims. * emphasis added Texas NAHRO - April 11, 2018

Fiduciary Duties – Non-ERISA, but a common State Statute The duty of care involves discharging one’s duties with the care an ordinary prudent* person in a like position would exercise under similar circumstances. * emphasis added Texas NAHRO - April 11, 2018

ERISA versus Non-ERISA Generally speaking: Private sector retirement plans are subject to the Employee Retirement Income Security Act of 1974 (ERISA) 501(c)(3) Corporations would be considered Private Sector Governmental retirement plans are, for the most part, not subject to ERISA If not subject to ERISA, subject to state fiduciary statutes Either way, as the Plan Sponsor, YOU are responsible! Texas NAHRO - April 11, 2018

Due Diligence 2. standard of proper disclosure 1. appropriate review and procedure the degree of care that a prudent person would exercise 2. standard of proper disclosure the disclosure to potential buyers (participants?) of all relevant information that applies to a security issue Texas NAHRO - April 11, 2018

Typical Duties under State Fiduciary Law Duty of Competence Duty to exercise reasonable discretion Duty of Loyalty Duty of Full Disclosure 10 Texas NAHRO - April 11, 2018 10

Practical things to worry about! Plan Document Recordkeeper/Custodian Plan Investment Offering Investment Expertise Employee Education Plan Competitiveness 11 Texas NAHRO - April 11, 2018 11

Plan Document Compliance Is your plan document current with all required amendments and updates? Is your plan being administered in accordance with your plan documents? Eligibility and contributions Loan and hardship requests In-service withdrawals, etc. WHERE is your document? Texas NAHRO - April 11, 2018

Recordkeeper/Custodian Who is holding (has custody) your retirement plan assets? Is custodian audited? (SSAE 16) Formerly SAS 70 Do you receive independent reporting? 13 Texas NAHRO - April 11, 2018 13

Plan Investment Offering Mutual Fund or Variable Annuity? Multi-manager platform? Asset class representation? Fixed/Stable Value Option? 14 Texas NAHRO - April 11, 2018 14

How is your Plan being served? Employee Education Web-based? Onsite? Investment Expertise Plan level – who is monitoring the performance of the plan investment option? NOT just the return! Participant level – do plan participants have access to personalized investment advice? If so, online or in person? 15 Texas NAHRO - April 11, 2018 15

Overall Plan Competitiveness Price – only relevant in the “absence of value”! Services – what you want – what you do NOT want Performance – again, not just the return! 16 Texas NAHRO - April 11, 2018 16

Industry Trends Hiring of 3(21) or 3(38) Fiduciary Establishing an Investment Policy Statement (IPS) Quarterly Investment Monitoring Providing Participants Enhanced Employee Education Lifestyle/Target Date Investments Independent Investment Advice Managed Accounts Texas NAHRO - April 11, 2018

Recommendations Establish a formal “Plan Committee” Even if Committee of one person Insert Committee “Minutes” to Board Minutes on a regular (semi-annual?) basis Exclude any Plan details from Personnel Manual Mention the plan’s existence, but refer reader to “Summary Plan Description” for details Remit employEE contributions EVERY payroll, whether pre-tax, or post-tax contributions Document the process… Texas NAHRO - April 11, 2018

Recommendations - continued Implement a “Due Diligence” Program Check with your current provider Investment Policy Statement (IPS) Criteria used to add/delete funds Review Plan for Competitiveness Compare services, fees, performance, etc. Electronic deposit and payouts Increase Employee Awareness Plan Provisions Wholistic Investment Education Document the process… Texas NAHRO - April 11, 2018

Billings and Company, Inc. Our Contact Information Billings and Company, Inc. www.billingsco.com 800-713-4015 R.L. “Dick” Billings – Extension 3002 Trey Becker – Extension 3023 Keri Zachmann – Extension 3020 Texas NAHRO - April 11, 2018

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