A focus on ERISA §408(b)(2) Regulatory developments affecting covered plans, such as defined contribution plans HR Benefit Advisors I N S I G H T I N N O V A T I O N I N T E G R I T Y

What is Retirement?  Retirement is the point in a person's life when they have the luxury of deciding how they will spend their day. Presentation prepared for BNHRA

Federal Government Concerns Current personal savings rate is 5.0% Average 401(k) account balance is $70,000. Over half of Americans have less than $50,000

The Simple Fact  Many 401(k) plans are too expensive.  70% of participants think they aren’t being charging anything.  There is an incredible fee-reduction opportunity. Presentation prepared for BNHRA

Plan Sponsor Fee Disclosure 408(b)(2) Participant Level Fee Disclosure 404(a)(5) Trend towards focusing on “Participant Outcomes” Broadening the definition of “Fiduciary” Department of Labor’s Focus

What is your role?  A plan fiduciary’s responsibilities include the following: Act in participants’ best interests Pay only reasonable plan expenses Carry out duties prudently Presentation prepared for BNHRA

ERISA §408(b)(2) empowers you with information You will have the information to:  Understand your service provider’s compensation and services, and  Identify potential conflicts of interest Presentation prepared for BNHRA

Fund Fee Discrepancy  Fees are the most important determinant of long-term performance.  Vanguard S&P 500 Index Fund  Fund Charge: 0.15%  Principal S&P 500 Index Fund  Fund Charge: 1.04% Presentation prepared for BNHRA

Fund Fees Matter!  Over time, higher mutual fund fees lead to lower returns.  A 401k with a balance of $100,000 invested over 20 years, returns being equal but fees, the lower fund fees generate a return of $448,000 vs. the higher fund fees generating$311,000. Presentation prepared for BNHRA

What is your responsibility?  Review information to determine if plan fees are reasonable  Protect yourself from the prohibited transaction rule by satisfying the class exemption requirements Presentation prepared for BNHRA

Criteria for class exemption for plan fiduciaries  Did not know that service provider failed to provide the required information  Reasonably believed that such information was provided  Make written request for required information from covered service provider upon discovery of disclosure failure Covered service provider must respond within 90 days of your written request  Notify the DOL within 30 days of the earlier of: The covered service providers failure to comply; or 90 days after the written request A sample notice from the DOL is available to you in order to report the non-compliance  AND … Presentation prepared for BNHRA

Class Exemption cont….  Acting prudently, make a determination whether to terminate or continue the contract If information requested relates to future services and is not disclosed promptly after the 90-day period, “terminate as expeditiously as possible, in a prudent manner” Presentation prepared for BNHRA