Moderator:

- Jim Danaher, Managing Director of Defined Contribution Solutions, Northern Trust

Speakers:

- Robert Capone, Head of BNY Mellon Retirement, BNY Mellon Investment Management

- Kevin Hanney, Director Portfolio Investments, United Technologies Corporation

- Keith Overly, Executive Director, Ohio Deferred Compensation

- Kelly Wapp, Portfolio Administrator, Koch Industries, Inc.

Coping with Change

Coping with Change

• Today’s key topics

1. Selection and monitoring process of DC

investment options

2. Dealing with plan mergers

3. Changing providers

4. Institutionalization of DC fund lineups

1

Reframing “Change”

• Rather than “coping” with change, consider

the opportunity change presents to evolve

1. Focus solely on current participant savings and

accumulation, or

2. Focus more broadly on future participant

outcomes at retirement

• Relate plan design to plan objectives

– What best describes your participant population

– What best describes your 401(k)/DC plan

2

Special thanks to our Diamond Sponsor

Which description best fits the people enrolled in your 401(k)/DC plan

1. Savors

2. Investors

3. Employees & Retirees with limited knowledge on either saving

Special thanks to our Diamond Sponsor

Which term best describes your 401(k)/DC plan

1. Retirement Benefit

2. Investment Portfolio

3. Savings Account

Special thanks to our Diamond Sponsor

Are the answers to these questions in sync?

1. Yes

2. No

Special thanks to our Diamond Sponsor

Did they surprise you?

1. Yes

2. No

Reframing “Change”

• Integrate current participant understanding

– Establish baseline retirement knowledge

• Perceptions and concerns

• (Re)align to harmonize with plan objectives

– Potentially promote more automatic plan features

• The “fuel” of savings is a primary determinant of

outcomes

• Strategically optimize the “user” experience

– Participant communications and education

3

Selection and Monitoring Process of

DC Investment Options

• Post-2008 key themes

– Manage volatility

– Manage downside risk

– Address future impact of inflation

• Menu design that is flexible enough to meet

a majority of participant needs

– Proactively address participant indecision

4

Selection and Monitoring Process of

DC Investment Options

• Evolve from a style box to an objectives-

based, approach

– Participants often don’t understand differences in

asset classes, but they can understand objectives

linked to an outcome

• Advent of target date was a good first step

• Explore a “less is more” approach

– Fewer options that maximize the opportunity for

diversification, arranged by investor type

5

Selection and Monitoring Process of

DC Investment Options

Tier 1: Pre-Mixed Options

Tier 2: Core Funds

Tier 3: Extended Core Funds

Tier 4: Self-directed Brokerage

Pre-Mixed Options Core and Extended Core Fund Options

… Less Participant Involvement … More Participant Involvement

Participant Guidance, Advice and Managed Account Programs

6

Selection and Monitoring Process of

DC Investment Options

• Process of Selection

– Generally consultant-lead

– Issues for consideration

• Impacting the lineup, existing or evolving

• Engaging participant understanding

• Understanding total costs

• Mapping assets

• Determining wrapper and bearing on recordkeeping

and custody services

7

Dealing With Plan Mergers

• Integrating plan objectives and philosophies

• Combining employee/participant cultures

• Evolving the combined plan

• Seizing opportunity for enhancement to:

– Plan design

– Fund menu construction

– Participant engagement

8

Changing Providers

• Maintaining like services or seeking greater

capabilities

• Matching the delivery of services and

identifying potential differences

• Understanding the opportunity for evolution

• Confirming itemized costs, regardless of

arrangement

– Is there such a thing as “bundled” anymore?

9

Institutionalization of DC Fund Lineups

• Reasons for change

• Benefits and challenges to “white-labelling”

• Transition

• Fees

– Combined net impact to investment management,

recordkeeping and custody costs

• Communicating benefits, ongoing access

and transparency to participants

10