I 7717-GE 05/10 - 17717FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 1 John Hancock Life Insurance Company (U.S.A) and John Hancock Life Insurance.

I 7717-GE 05/10 - 17717FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 1 John Hancock Life Insurance Company (U.S.A) and John Hancock Life Insurance Company of New York are not affiliated with Marcia S. Wagner and The Wagner Law Group and neither are responsible for the liabilities of the other.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. What’s up in Washington? Outlook on U.S. Private Retirement System –Retirement security is a major priority. –Pushing for reform through Congress and DOL. White House Task Force on the Middle Class –Newly created by President Obama in 2009. –Chaired by Vice President Biden, and includes Secretaries of Labor and Treasury. –Used to coordinate Administration’s agenda. Diverse, broad initiatives set by White House –Expected to impact plan sponsors, participants and providers.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Improving the DC Savings System Obama Administration’s proposals target 401(k) plans and providers. -Proposals are in the form of DOL regulations. -Blurring of lines between White House and DOL. -Coordinated actions to improve retirement security. Washington is focusing on: 1.Broader “fiduciary” definition 2.408(b)(2) disclosures from service providers 2.Fee disclosures to participants 4.Lifetime income options 5.Automatic IRA legislation

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 1. Broader “Fiduciary” Definition 2. 408(b)(2) Disclosures 3. Fee Disclosures to Participants 4. Lifetime Income Options 5. Automatic IRA legislation 6. Effects on Clients

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. ERISA and Conflicts Fiduciary standards under ERISA are the highest known to the law: -Conflicts can not be mitigated through disclosure. -Must eliminate conflict or meet conditions of a PTE. Administration’s campaign to reduce conflicts: -DOL releases proposed reg’s on October 21, 2010. -Proposed reg’s broaden existing regulatory definition of “investment advice fiduciary.”

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Existing Definition of Investment Advice DOL’s current definition for investment advice is based on 5- factor test: -Advice on value or advisability of investments, -that is provided on a regular basis, -pursuant to a mutual agreement or understanding, -that such services will serve as a primary basis for investment decisions, and -that individualized advice will be based on the particular needs of the plan. DOL definition of investment advice is more narrow than federal securities law definition.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 2 Specific Changes to Existing Definition Existing definition of investment advice requires: –Mutual understanding or agreement that advice will serve as primary basis for plan investment decisions. –Advice provided on regular basis. DOL proposal for new investment advice definition merely requires: –Any understanding or agreement that advice may be considered for plan investment decisions. –Advice no longer needs to be provided on regular basis.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Safe Harbor for Avoiding Fiduciary Status Proposed reg’s introduce new safe harbor. –Non-fiduciary advisor must be able to demonstrate that plan client knows, or reasonably should know…. –…that advice is being made by advisor in its capacity as purchaser or seller of securities, and… –…that advisor is not providing impartial investment advice. 2 specific activities are exempted under safe harbor. –Non-fiduciary “investment education” under DOL Interpretive Bulletin 96-1. –Platform provider’s marketing of investment alternatives to plan (and providing related info) if it discloses that it is not providing impartial advice.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Potential Impact on Providers Financial advisors - brokers –Brokers would need to change their service model and re-define their role. –If serving non-fiduciary role, must disclose they are not providing impartial advice. –If serving fiduciary role, must avoid variable compensation (and prohibited transactions). –To eliminate conflict of interest, broker could dual-register as RIA and charge a level, asset-based fee. Other service providers –Platform providers must disclose they do not provide impartial advice (to avoid fiduciary status). –TPAs that provide advisory services in exchange for variable compensation must also provide disclaimer.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Outlook for DOL Proposed Reg’s Proposal is consistent with Administration’s aim to reduce conflicts. –If adopted, many advisors would be forced to adopt fee-leveling or change nature of advisory services. Proposed reg’s expected to draw heavy comments. –Written comments may be submitted to DOL on or before January 20, 2011.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. DOL’s Reg. Project Three-pronged project to improve disclosure. –Form 5500: Reg’s finalized and effective from 2009 plan year. –Service providers: Interim final 408(b)(2) reg’s published on July 16, 2010. –Participants: Final reg’s released on Oct. 14, 2010. Rationale for proposed 408(b)(2) reg’s. –DOL efforts to educate plan sponsors about 401(k) plan fees started with Nov’ 97 hearing. –Plan sponsors still not asking the right questions. –DOL will now require providers to furnish the info sponsors should be requesting.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Current Requirements for Service Providers PT rules under ERISA prohibit use of plan assets with respect to many activities. –Fortunately, PT exemption allows use of plan assets to pay for services if: (1) Contract or arrangement is reasonable, (2) Services are necessary for plan operation, and (3) No more than reasonable compensation. Current DOL regulations. –Plan must be able to terminate the contract without penalty on reasonably short notice. –Statute and current reg’s do not impose significant burden on service providers.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Interim Final 408(b)(2) Regulations Covered Plans –All pension plans, including defined contribution and defined benefit plans. –Welfare plans and IRA-based plans are not subject to disclosure under the final rule. Covered Service Providers –Fiduciaries (including fiduciaries to investment products and registered investment advisers). –Providers of recordkeeping and brokerage services. –Providers of accounting, actuarial, legal and other professional services if they receive indirect fees.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Required Disclosures Under Interim 408(b)(2) Regulations Service provider must disclose compensation in writing. –Disclosure must be provided before entering into contract. –Formal contract and disclosure of conflicts of interest are no longer required. Indirect compensation requires more detailed disclosure. Service-by-service disclosure of fees is generally not required.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Compensation Disclosure Under Interim 408(b)(2) Regulations Format and manner of disclosure. –Dollar amount, formula, percentage of plan assets, per capita charge, or any other reasonable method. –Whether fees will be billed or deducted and any other manner of receipt must be disclosed. Compensation paid among providers affiliates and subcontractors. –Generally, compensation of affiliate or subcontractor does not have to be separately disclosed. –However, commissions, soft dollars and 12b-1 fees must be separately disclosed and the payers and recipients identified.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Platform Providers and Interim 408(b)(2) Regulations Special Rules for Platform Providers –Applies to recordkeepers and brokers that make designated investment alternatives available to plan. –Provider must provide basic fee information for each alternative. –Required information includes expense ratios, ongoing expenses (e.g., wrap fees), and transaction fees (e.g., sales charges, redemption fees). –Disclosure obligation can be met by passing through fund prospectus.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Timing of Disclosures Under Interim 408(b)(2) Regulations Timing requirements for disclosures. –Disclosure must be made reasonably in advance of entering into, extending or renewing the service contract. –Changes to information must be made no later than 60 days after the service provider becomes aware of the change. –Erroneous information will not result in a violation if the service provider has acted in good faith and with reasonable diligence. –Errors and omissions must be disclosed within 30 days after coming to light.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Prohibited Transactions and Interim 408(b)(2) Regulations If provider fails to make disclosure, plan’s payment of fees is a prohibited transaction. –Disclosure failures can be cured. –Plan must make written request for information, and provider must respond within 90 days. –Refusal or inability to comply with request requires plan fiduciary to notify DOL. No conflict of interest for fiduciaries. –408(b)(2) disclosure does not cure self-dealing violations. Outlook –Effective date of the regulations is July 16, 2011, but further changes may be on the horizon.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. DOL Finalizes Participant Fee Disclosure Regulations DOL issues final reg’s on Oct. 14, 2010. –Generally consistent with 2008 proposed reg’s. –DOL press release explained that existing law did not require plans to provide necessary information. Types of plans covered –New reg’s apply to DC plans with participant-directed investments. –Covers plan even if not designed to comply with ERISA Section 404(c). Coverage of participants –New reg’s apply to all eligible employees.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Annual and Quarterly Disclosure of Plan-Related Information Must disclose general info about plan. –Must include explanation of general admin. service fees and individual expenses on annual basis. –Must disclose dollar amount of fees/expenses charged to participant accounts on quarterly basis. Disclosure only required for fees/expenses not embedded in expenses of investments. –If service provider only receives indirect compensation from investments, provider’s fees are not subject to this disclosure requirement. –But must disclose that a portion of general admin. service fees is paid from expenses of investments.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Annual Disclosure of Investment-Related Information Must disclose fee and performance-related info for plan’s investment alternatives. –This disclosure must be in comparative format. –Must be provided on annual basis. Required information for disclosure in comparative format includes: –Name and type of investment option –Investment performance data –Benchmark performance data –Total annual operating expenses for each investment and any extra shareholder-type fees. –Internet website address

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Other Requirements Info that must be available upon request –Prospectuses, shareholder reports and financial statements provided to plan. Form of disclosure –Separate or combined with SPD and/or statements. –Must be understood by average participant. Impact on sponsor’s other fiduciary duties –No relief for duty to prudently select/monitor plan’s providers and investments. –New reg’s modify ERISA 404(c) disclosures. Effective date –Plan years beginning on or after Nov. 1, 2011

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Potential Impact on Providers Administrative service providers –New reg’s will impact TPAs and bundled providers. –Automatic delivery of fund prospectuses will no longer be required under ERISA 404(c). Financial advisors –No special disclosure requirement for fees of brokers receiving indirect compensation only. –RIA fees presumably must be disclosed on annual and quarterly basis as “general administrative” fee. –Plan participants are likely to scrutinize plan’s investments and fees, impacting sponsors and advisors.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Retirement Security and Annuitization Obama Administration believes lifetime income options facilitate retirement security. –Initiative to reduce barriers to annuitization of 401(k) plan assets. –DOL / IRS issued a joint release with requests for information on Feb 2, 2010. –RFI addresses education, disclosure, tax rules, selection of annuity providers, 404(c) and QDIAs. The Retirement Security Project –Released 2 white papers on DC plan annuitization. –Proposed use of annuities as default investment.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Other Recent Developments in DC Plan Annuitization Two types of legislative proposals. –Encourage annuitization with tax breaks: Lifetime Pension Annuity for You Act, Retirement Security for Life Act. –Annual disclosure of what 401(k) plan balance would be worth as annuity: Lifetime Income Disclosure Act. IRS addressed qualification requirements for DC plans in PLR 200951039. –Variable group annuity investment options –No “surprise” interpretations on age 70 ½ minimum distribution and QJSA rules.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Lifetime Income Hearing by Senate Special Committee on Aging Senate hearing held on June 16, 2010. –The Retirement Challenge: Making Savings Last a Lifetime. –Start of legislative debate on lifetime income options. DOL and Treasury provide early analysis on RFI concerning lifetime income options. –More than 800 responses to RFI. –Concerns expressed against government takeover of 401(k) plans. –DOL and Senator Kohl clarify that there is no interest in mandating lifetime income options.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Joint Hearing by DOL, IRS and Treasury in September 2010 Purpose is to investigate 5 focused topics. 2 areas of general policy-related interest. –Specific concerns raised by participants. –Alternative designs of in-plan and distribution lifetime income options. 3 areas of specific interest. –Fostering “education” to help participants make informed retirement income decisions. –Disclosure of account balances as monthly income streams. –Modifying fiduciary safe harbor for selection of issuer or product.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Automatic IRA Legislation Proposed Automatic IRA Act of 2010 introduced in both Senate and House. Senate version introduced on Aug. 6, 2010. –After phase-in period over 4 years, employers with 10 or more employees must set up Auto IRAs. –Covers all employees who are age 18 with 3 months. –Choice of Traditional or Roth IRA (Roth is default). –Investment firms not required to sell Auto IRAs. –3 investment options only, which must be low-cost. –Noncompliance results in$100-per-employee penalty. –New tax credit for small employers of $250 for start-up costs, and $1,000 tax credit for 401(k) plans.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Automatic IRA Legislation Proposed House version introduced on Aug. 10, 2010. Differences from Senate version. –All employers with 10 or more employees are immediately covered (and no phase-in over 4 years). –Default choice for employee is Traditional IRA (and not Roth IRA). –3 investment options for Auto IRAs are somewhat different than in Senate version.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. How Can I Use this Information? Final Rules vs. Proposed Rulemaking –Product changes often based on final rules only. –But leveraging your knowledge of current events in Washington can help plan clients. Employer’s Duty of Prudence –Prudent review process entails consideration of all relevant factors. –If Washington announces investigations in an area, plan sponsors should investigate for their own plans. Demonstrating Your Expertise –Use knowledge to distinguish your level of service. –Discuss current DOL priorities: (1) conflicts of interest, (2) disclosures, (3) lifetime income.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Prepare Your Clients Regulatory change is very likely this year. –Retirement security is a priority. –Regulatory changes not subject to Congressional approval. Nobody likes transitioning to new rules. –New agreements and forms. –New fiduciary procedures and practices. Stay ahead of the curve. –Ensure clients will not be surprised when change is required. –Incorporate “best practices” now, ahead of when Washington is likely to mandate them in future.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. What are the “best practices”? Help plan sponsors evaluate “hidden” fees. –Duty to ensure fees paid from plan are reasonable. –All fees must be considered in light of services. –Fee monitoring should be a fiduciary review process, like monitoring the plan’s investment menu. –Required for Form 5500 reporting purposes (beginning with 2009 plan year).

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. Best practices? (continued) Clarifying fiduciary vs. non-fiduciary services. –Policy goal to impose fiduciary standards when there is expectation of impartial advice. –If fiduciary advice (especially to participants) is not intended, be sure to clarify that it is education only.

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 39 Questions?

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 40 Thank you for attending

I 8703-GE 12/10 – 187037 GA1201108829FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 41 Important Notes Both John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York do business under certain instances using the John Hancock Retirement Plan Services name. Group annuity contracts and recordkeeping agreements are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02210 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595. Product features and availability may differ by state. John Hancock Investment Management Services, LLC, a registered investment adviser, provides investment information relating to the contracts. NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT INSURED BY ANY GOVERNMENT AGENCY © 2010 John Hancock. All rights reserved.

I 7717-GE 05/10 - 17717FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 1 John Hancock Life Insurance Company (U.S.A) and John Hancock Life Insurance.

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I 7717-GE 05/10 - 17717FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC. 1 John Hancock Life Insurance Company (U.S.A) and John Hancock Life Insurance.

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