The opinions expressed in this presentation are those of the speaker. The International Societydisclaims responsibility for views expressed and statements made by the program speakers.

Understanding, Documenting and Negotiating Plan Fees

Joel ShapiroSenior Vice President401(k) AdvisorsAliso Viejo, California

presented by

Joel ShapiroSenior Vice President401(k) Advisors

2B-1

Disclosures

This material is intended to provide general information only and nothing in it should be acted upon without consultation with qualified professional advisors. Receipt of this material

does not create a client relationship between the recipient and 401(k) Advisors

2B-2

Table of Contents

Introduction

Fees and the Litigation/Legislative Front

Making Sense of Retirement Plan Fees

RFP Process

Case Study and Results

Conclusion—Action Steps

2B-3

Is Your Retirement Plan Free?

Retirement Plan Industry Estimates– 500,000 Retirement Plans

– 70 million participants

– $3.5 trillion in Savings (Assets)

– $35 Billion in Annual Investment and Administrative Fees

– $500/Participant/year in costs Are these fees reasonable?

» Why do you care?

» How can you find out?

2B-4

You are a Fiduciary under ERISA if you:

– Exercise discretion and control over plan management or disposition of assets

– Render investment advice

– Have authority over plan administration

– Named fiduciary

– Fiduciary by functions of your responsibilities (not just by name)

Why You Should Care

2B-5

Why You Should Care

A fiduciary must act solely in the interest of the plan participants, their beneficiaries and alternate payees

– Carry out their duties prudently– Follow the terms of the plan document (unless the documents are

inconsistent with ERISA)– Diversify plan assets– Pay only fair and reasonable expenses

When acting on behalf of the plan, exercise the care, skill, prudence and diligence that a prudent person familiar with such matters would exercise

In addition to criminal penalties, ERISA permits participants and beneficiaries to bring civil actions against a fiduciary who breaches their duty

The fiduciary is personally liable for any losses resulting from a breach

2B-6

Fees and the Litigation/Legislative Front

2B-7

Following the Press

“Hidden Fees” have been EVERYWHERE!

– Source: Mainstream press

– Raises sponsor and participant fears

– Reality: Revenue sharing and asset charges (wrap fees)

2B-8

Loomis v. Exelon Corp

Originally filed seeking recovery of “investment losses”—Originally dismissed in February of 2007 because plaintiffs failed to provide a “link between the administrative fees they were charged and their market-based losses.”

In June of 2007 the court approved class action suit based on excessive/unreasonable fees and failure to disclose

2B-9

Hecker v. Deere & Co.

Dismissed on summary judgment for failure to state a claim upon which relief could be granted

“The alleged omitted disclosures are not required by the language of the regulations and would instead require judicial expansion of the detailed disclosure regime crafted by Congress and the Department of Labor pursuant to its authority,”—U.S. District Judge John Shabaz

Deere had complied with ERISA disclosure provisions “[T]here is nothing to suggest that receiving this additional non-

prescribed information would effectively enhance investment decisions.”—Judge Shabaz

ERISA does not require disclosure of revenue-sharing agreements Participants directed their investments and therefore Deere was

availed of 404(c)’s safe harbor protection

2B-10

Hecker v. Deere & Co.

Appeal– Lower Court Decision Upheld– No Judicial expansion (revenue sharing disclosure)– Non-prescribed information not “enhance investment decisions”– 404(c) expansion

Potentially at odds with DOL interpretation of 404(c)—still responsible for prudent selection/monitoring of investments

Supreme Court refused to grant certiori to review allegations of unreasonable fees.

2B-11

Braden v. Wal-Mart Stores, Inc.

Operative Facts: Members of Compensation, Nominating, and Retirement Plan (RPC) committees named as defendants. – RPC selected 10 retail class share funds (more expensive than

institutional class shares).– Funds were predominantly actively managed (verses index). – Funds charged 12b-1 fees.

Allegations: Breach of fiduciary duty because:– Imprudently chose fund options with excessive fees– Failed to inform plan participants of material information – Engaged in prohibited transaction– Failed to monitor plan’s appointed fiduciaries– Failed to prevent co-fiduciaries from breaching duties of

prudence and loyalty

2B-12

Braden v. Wal-Mart Stores, Inc.

Holding:– Plaintiff did not provide evidence that fiduciaries failed consult

professional advisers, conduct meetings, undertake research, or consider all relevant information

– Plaintiff did not provide evidence that fiduciaries failed to provide necessary information to participants

– Plaintiff did not provide evidence that fee arrangements were unreasonable

2B-13

Braden v. Wal-Mart Stores, Inc.

Circuit Court vacated District’s Court’s decision in favor of defendants. Excessive fee suit reinstated.– First major appellate court ruling in favor of plaintiffs– Decisions made prior to participant’s eligibility could cause injury

to participant—standing proper– Circuit Court stated that if assume all facts alleged are true

plaintiff has stated case for fiduciary breach.– Distinguished case from Deere on basis that investment options

limited verses 2,500 options available to Deere in SDBA (!!!).

2B-14

Kanawi v. Bechtel Corp.

Operative Facts: For 10-year period plan sponsor paid investment advisor fees. For brief 4 month period fees paid out of plan assets.

Allegation: Breach of fiduciary duty because participants paid unnecessary and excessive fees.

Holding: – Fiduciaries’ process was prudent– Plaintiffs failed to show fees were unnecessary or unreasonable– Seeking outside expertise, relying on advice of investment

professionals, and meeting regularly resulted in prudent action

2B-15

United Technologies Corp (UTC)

Allegations—excessive fees and choice of investment options Judgment for defendants (fiduciaries)

– Plaintiffs failed to attack any single fee as unreasonable– Plaintiffs just relied on expert testimony that separate

accounts are less expensive than mutual funds– Defendants used prudent process that included

consideration of fees and returns of fees net of expenses– Defendants benchmarked their fees using proposals from

two alternate vendors—court ruled fees not unreasonable– Reiterated burden on Plaintiffs

2B-16

Tibble v. Edison International

Partial victory for participant/plaintiffs Court tossed out claims . . .

– Fund performance verses index funds– Propriety of sponsor receiving revenue sharing from vendor– Propriety of using money market verses stable value– Use of retail funds (SOL barred)

Janus Small Cap Investors Fund Allianz CCM Capital Appreciation Franklin Small-Mid Cap Growth Fund

2B-17

Tibble v. Edison International

Court ruled in favor of claims . . .– Breached duty of prudence by investing in retail verses

institutional share classes—“Unnecessary fees” William Blair Small Cap Growth Fund MFS Total Return Fund PIMCO (Allianz) RCM Global Tech Fund

– Reliance on Hewitt Financial Services not a defense– Institutional minimums not a defense

Court ruled in favor of claims . . .– Court ordered plaintiff attorneys (Schlichter lawfirm) to

recalculate “substantial damages”– “ . . . Damages should run from the date the Plan initially

invested in the funds, July 2002, to the present.”

2B-18

Settlements

Caterpillar– $16.5M– Equitable relief

Employer stock fund only allowed limited cash holdings No retail funds on menu Plan must undertake vendor search

Beverly Enterprises– Excessive fee case—neglect of investments dating from ’96-’06– Conversion resulted in MVA of $2.3M as result of liquidation of

stable value– $6.25 settlement

2B-19

Plan offered unitized stock fund. Plaintiffs claimed unitization caused investment/transactional drag.

Plan had same recordkeeper since 1995. Plan has not been benchmarked with live bids since. Plaintiffs claim imprudence and excessive fees as result.

George v. Kraft Food Global

Seventh Circuit sent unitization issue back to District Court stating they found “nothing in the record indicating defendants ever made a decision on these matters…”—Takeaway: importance of documentation!

Trier of fact could reasonably conclude that defendants failed to satisfy duty to ensure reasonable fees—Takeaway: importance of soliciting competitive bids!

Core ConceptCore Concept

>LitigationFacts & ProcedureFacts & Procedure

2B-20

George v. Kraft Food Global (cont’d)

Related case: Plaintiffs alleged failure to remove actively managed funds from DC plan after having done so in DB & failure to monitor.

Court dismissed failure to monitor allegation—fiduciaries presented evidence of process

Court denied motion to dismiss because jury could conclude that retention of (or failure to make a decision to remove) actively managed funds constituted fiduciary breach.

One of first rulings (though only on motion, so not dispositive) to give teeth to index argument

>LitigationCore ConceptCore Concept

2B-21

Plaintiffs alleged inadequate selection and range of investment options and excessive fees on retail mutual funds.

73 options available, including 67 retail mutual funds.

Third Circuit affirmed lower decision that plaintiffs failed to state plausible claim of breach. Looked at characteristics of the mix and range of options.

Court examined the variety of risk and fee profiles of all options

Renfro v. Unisys Corp

Reiterates the importance of prudent process in determining overall investment menu (not just individual investment options).

Speaks to importance of fee consideration in constructing investment menu

Core ConceptCore Concept

>LitigationFacts & FindingsFacts & Findings

2B-22

Regulatory—408(b)(2)

“Reasonable contract regulations” ERISA section 406—Prohibited Transactions

– Furnishing of services by party in interest

– Service providers are parties in interest

ERISA section 408—Exemptions from PT– ERISA section 408(b)(2)

Services necessary for establishment/operation of plan

Contract must be “reasonable”

Compensation must be “reasonable”

Previous standard: Allowed for termination on reasonably short notice without penalty to plan

Effective date was July 1, 2012

2B-23

Regulatory—404a-5

Participant disclosures Covered Plans

– Individual account plan

Purpose– Allocate investment responsibilities to participants & beneficiaries

Plan administrator’s responsibilities:– On regular & periodic basis, provide participants (all eligibles) &

beneficiaries (with a right to direct) with information regarding their rights and responsibilities with respect to investments.

– Sufficient information to make informed decisions on both.

Disclosure categories– Plan related

– Investment related

2B-24

Regulatory—404a-5

Effective dates postponed: – Initial disclosure—August 30, 2012– First annual disclosure—not later than 60 days after

effective date of 408(b)(2) disclosures (July 1, 2012), August 30, 2012

– First quarterly disclosure—45 days after end of quarter in which 404(a)(5) initial disclosure . . . no later than November 14, 2012

2B-25

Making Sense of Retirement Plan Fees

2B-26

Billed FeesInvestment Management

FeesAsset Based Fees Revenue Sharing

Disclosure

Web-based ToolsAutomated Voice Response System

Loan/Withdrawal ProcessingOnline Enrollment

Enrollment Materials & MeetingsIndividual Advice Solutions

Participant StatementsBi-lingual SupportInvestment Philosophy

Quantitative AnalysisQualitative Analysis

ScorecardSM Fund Ranking

Plan Document, SPDDiscrimination Testing

5500 Filings ERISA Resources

Accounting Employer/Employee Reports Processing Payroll Deposits Quality Assurance Standards

Recordkeeping Technology Services

Compliance

Investment Management

Communications

Cost

ParticipantPlan Sponsor

The Services You Are Procuring

2B-27

Administrative Fees

Investment Fees Plan Consulting Fees

All costs associated with managing the 

investments

Advisory fees paid to a registered investment 

advisor or commission paid to a broker

Services to operate the plan: Recordkeeping, Trustee,

Compliance, Communications

Components of Plan Costs

Always paid for by plan participant

Paid for by plan sponsor

and/or participant

Paid for by plan sponsor

and/or participant

2B-28

How Will They Be Paid For?

How much does it cost?

Who’s going to pay?

– Plan sponsor

– Plan

– Participants

How are they going to pay?

– Direct-billing

– Asset-based fees

– Per participant charge

2B-29

Revenue Sharing Defined

The following are characteristics/sources of revenue sharing:– Any investment fee or expense in excess of what is needed to

manage the assets in the plan

– Revenue that is paid (shared) with one or more of the following: Broker, consultant, advisor

Investment company (whose fund is an option in the 401(k) plan)

Outside third party administrator or recordkeeper

– The net dollars kept by the plan provider after payment of revenue to other sources

– Administrative/recordkeeping fees and expenses which are imbedded in total investment fees

2B-30

Shareholder Servicing: Revenue shared by the mutual fund company with the service provider.

Investment Management Fee

12-b1 Fees

Shareholder Servicing Fees

Sub-TA (Agency Transfer Fees)

Asset / Wrap Fee: Additional fees layered on top of total investment fees.

12-b1: Distribution expenses paid by mutual funds from fund assets. Includes commissions to brokers, marketing expenses and other administrative services.

Investment Management: Fees for managing investment assets. Charged as a percentage of the assets invested and deducted from the investment return.

Sub-TA: Brokerage firms and mutual funds often contract recordkeeping and other services related to participant shares to a third party called a sub-transfer agent.

The Pieces of Revenue Sharing

2B-31

Share Classes Defined

Many mutual funds offer the identical money manager with several different investment management expense options varying the revenue sharing shared with third parties

Each investment management expense option is a different share class

2B-32

How Much Revenue Sharing Do You Want?

ShareClass

4th QTRReturn 

1‐YearReturn 

3‐Year Annl Ret

5‐Year Annl Ret 

10‐Year Annl Ret 

Expense Ratio 

RevenueSharing

R1  10.05 11.42 ‐3.46 1.74 1.99 1.44 1.05

R2  10.05 11.49 ‐3.44 1.76 2.04 1.41 1.00

R3  10.15 11.95 ‐3.01 2.22 2.47 0.97 0.65

R4  10.26 12.29 ‐2.72 2.51 2.78 0.68 0.35

R5  10.32 12.63 ‐2.44 2.82 3.04 0.39 0.05

R6  10.32 12.67 ‐2.42 2.87 3.08 0.34 0.00

American Funds—Growth Fund of America

2B-33

Administrative Fees

Investment Fees Plan Consulting Fees

All costs associated with managing the 

investments

Advisory fees paid to a registered investment 

advisor or commission paid to a broker

Services to operate the plan: Recordkeeping, Trustee,

Compliance, Communications

How Services Are Paid For—Model 1

2B-34

Administrative Fees

Investment Fees Plan Consulting Fees

All costs associated with managing the 

investments

Advisory fees paid to a registered investment 

advisor or commission paid to a broker

Services to operate the plan: Recordkeeping, Trustee,

Compliance, Communications

How Services Are Paid For—Model 2

2B-35

Administrative Fees

Investment Fees Plan Consulting Fees

All costs associated with managing the 

investments

Advisory fees paid to a registered investment 

advisor or commission paid to a broker

Services to operate the plan: Recordkeeping, Trustee,

Compliance, Communications

How Services Are Paid For—Model 3

2B-36

General Cost Observations

The vast majority of total plan costs are paid for by participants through revenue sharing

Plan pricing will vary significantly based on:

– Plan assets

– Participants

– Average account balance

– Service requirements

2B-37

The RFP Process: The Leverage You are Looking for to

Renegotiate Fees, Services and Investment Opportunities

2B-38

RFP Process Fiduciary Objectives

Fiduciaries have the obligation to select and monitor service providers to ensure decisions are made for the exclusive benefit of participants with the skill and prudence of an expert

– Comprehensive process

– Measurable process

– Documented process

2B-39

Financial Strength/

ExperienceProduct

Excellence

Demographic Match

Delivery System Compatibility

Cornerstones of the Process

Cornerstonesfor screening

potential providers

2B-40

Vendor Grave Yard FIRM NAME ACTION SUCCESSOR PROVIDER YEAR Prudential (Small Market) Outsourced Recordkeeping to Bisys 2000 Strong (Small Market) Outsourced Recordkeeping to Universal Pensions 2000 T. Rowe Price (Small Market) Outsourced Recordkeeping to Trustar 2000 US Bank Outsourced Recordkeeping to Bisys 2000 Wachovia Sold to First Union 2001 Wachovia Outsourced Recordkeeping to INVESCO 2001 John Hancock Financial Services Sold to Universal Pensions 2001 AON Sold to INVESCO 2001 Morgan Stanley Dean Witter Outsourced Recordkeeping to ADP 2001 Universal Pensions Sold to Bisys 2001 PaineWebber Outsourced Recordkeeping to MFS 2001 Metropolitan Life Insurance (MetLife) Outsourced Large Plans Hewitt Associates 2001 Nippon Life Insurance Company of America Exited the Business 2002 American Skandia Exited the Business 2002 Key Sold to The Principal Group 2002 Trustar Retirement Services Exited the Business 2002 State Street Research & Management Exited the Business 2002 Guardian Life Exited the Business 2002 Emplanet Exited the Business 2002 Bank of New York Exiting the Business PFPC 2002 National City Outsourced Hewitt Associates 2002 Provident Mutual Life Sold to Nationwide Financial 2002 AMG Purchased Lincoln Financial 2002 Mercantile Bank Outsourcing Bisys 2002 American Century 401(k) Division Sold to JP Morgan 2003 GE Asset Management Outsourced Recordkeeping to Bisys 2003 CIGNA Sold Recordkeeping and assets to Prudential 2003 Northern Trust Division Sold to Hewitt 2003 Pan American Life Closed most sales offices 2003 Prudential Securities Sold to Wachovia 2003 Scudder Outsourced Recordkeeping to ADP 2003 Mpower Sold to Morningstar 2003 Manulife Sold to John Hancock 2003 Federated Insurance Groups Sold to Great-West 2003 Bank of New York Bundled program sold to Wachovia 2003 Bank One Sold to JP Morgan 2004 Strong Funds Sold to Wells Fargo 2004 Harris Bank Sold to Wells Fargo 2004 American Express Outsourced $5-50 M Recordkeeping to Great-West 2004 CNA Trust Sold to Union Bank of TruSource 2004 Metavante Retirement Business Sold to EMJAY 2004 ABN AMRO Sold to Principal 2004 Gold K Merging Retirement Plan Company 2005 Mellon HRIS Sold to ASC 2005 Invesmart Sold to StanCorp Financial Group 2006 Ameriprise Sold Recordkeeping and assets to Wachovia 2006 Metropolitan Life Insurance (MetLife) Sold to Great-West 2006 Ceridian Sold Recordkeeping and assets to The Newport Group 2006 The 401(k) Company Sold to Charles Schwab 2006 Putnam Investments Sold to Power Financial Corp. (Great-West) 2007 Union Bank of California Sold Recordkeeping and assets to Prudential 2007 SunLife Sold to The Hartford 2007 First Mercantile Bank Sold to MassMutual 2008 CitiStreet Sold to ING 2008

2B-41

Types of Recordkeepers

Asset Manager

• Proprietary Funds only

• Proprietary and Defined Outside Mutual Fund offering

• Proprietary and Open Architecture

• Proprietary and Outside Separate Accounts

Open Architecture

• Unlimited Outside Mutual Fund access

Asset Gatherer

• Sub-advised Funds only

• Sub-advised and Defined Outside Mutual Fund offering

• Sub-advised and Open Architecture

• Defined Outside Mutual Fund offering

• Defined Outside Separate Account offering

2B-42

The Balancing Act

InvestmentOpportunities

2B-43

Billed FeesInvestment Management

FeesAsset Based Fees Revenue Sharing

Disclosure

Web-based ToolsAutomated Voice Response System

Loan/Withdrawal ProcessingOnline Enrollment

Enrollment Materials & MeetingsIndividual Advice Solutions

Participant StatementsBi-lingual SupportInvestment Philosophy

Quantitative AnalysisQualitative Analysis

ScorecardSM Fund Ranking

Plan Document, SPDDiscrimination Testing

5500 Filings ERISA Resources

Accounting Employer/Employee Reports Processing Payroll Deposits Quality Assurance Standards

Recordkeeping Technology Services

Compliance

Investment Management

Communications

Cost

ParticipantPlan Sponsor

The Services You Are Procuring

2B-44

The RFP Process

Week Step Responsibility Meeting Length1 Information Gathering Client/

AdvisorN/A

2 Discussion of Vendors to send RFP Client/Advisor 30 minutes (Conference Call)

2 RFP Questionnaire sent to Qualified Vendors Advisors N/A

5 RFP’s received and initial analysis done to identify Finalists

Advisors N/A

7 Discussion of initial analysis and Semi-Finalist Vendors selected

Client/Advisor 1 Hour(Face to Face or Conference Call)

8 Final analysis done on Semi-Finalist Vendors Advisor N/A

9 Presentation of RFP Analysis & Finalist Vendors selected

Client/Advisor 2 Hours

10 Finalist Presentations by Vendors Client/Advisor/Finalist Vendors

2 Hours each

12 Final Decision Client/Advisor N/A

13 Implementation meeting with winning vendor and begin Conversion process

Client/Advisor/New Vendor

2 Hours

2B-45

Case Study

2B-46

Background

Assets: $90,000,000

Active participants: 1,883

Education requirements: 16 days/year

Years with current services provider: 16

2B-47

Desired Outcomes

Benchmarking for due diligence purposes

Not sure if the fee structure was competitive

Education on all of the new services available in the marketplace

Potential improvement of the investment lineup

2B-48

Twelve Bidding Vendors

Six open architecture bidders

Three asset gatherer bidders

Three asset manager bidders

2B-49

Preliminary Analysis

Narrowing the field to 7

2B-50

Preliminary Analysis—(Cont’d)

2B-51

B3 Provider Analysis

55 Pages of quantitative and qualitative analysis on the fees, investment opportunities, and services of the 7 semi-finalists ext

2B-52

Cost Analysis of Incumbent

Imperative to create an apples to apples comparison vs. competing vendors

Sample cost analysis with revenue sharing

Asset Class Assets Assets % Fund Expense Ratio Cost ($) Revenue

SharingRevenue

Sharing ($)Large Blend $1,316,776 6.24% LC S&P 500 Index (PGI) 0.73% $9,612 0.58% $7,637Large Blend $567,756 2.69% LargeCap Blend II (TRP) 1.32% $7,494 0.78% $4,428Large Growth $931,956 4.42% AF Growth Fd of Amer 0.93% $8,667 0.60% $5,592Large Growth $340,519 1.61% LargeCap Gr I (TRP) 1.30% $4,427 0.80% $2,724Large Value $688,327 3.26% Amer Cent Eq Inc A 1.22% $8,398 0.55% $3,786Mid Blend $220,286 1.04% MC S&P 400 Idx (PGI) 0.74% $1,630 0.58% $1,278Mid Growth $853,474 4.04% Janus Adviser MCG 1.16% $9,900 0.50% $4,267Mid Value $164,888 0.78% MCV I (Goldman/LA) 1.57% $2,589 0.86% $1,418Small Blend $469,322 2.22% SC S&P 600 Idx (PGI) 0.73% $3,426 0.58% $2,722Small Growth $138,249 0.66% Lord Abbett Dev Grth 1.13% $1,562 0.40% $553Small Value $414,337 1.96% Amer Cent SCV 1.74% $7,209 0.55% $2,279Int'l Stock $1,732,876 8.21% AF EuroPacific Growth 1.07% $18,542 0.60% $10,397Fixed Income $2,150,895 10.19% PIMCO Total Return 1.15% $24,735 0.70% $15,056Cash $8,265,182 39.17% Fixed Income Option 0.65% $53,724 0.65% $53,724Asset Allocation $86,380 0.41% LifeTime Strat Inc 1.25% $1,080 0.73% $631Asset Allocation $447,323 2.12% LifeTime 2010 1.34% $5,994 0.76% $3,400Asset Allocation $702,639 3.33% LifeTime 2020 1.39% $9,767 0.77% $5,410Asset Allocation $1,093,840 5.18% LifeTime 2030 1.42% $15,533 0.78% $8,532Asset Allocation $373,937 1.77% LifeTime 2040 1.44% $5,385 0.79% $2,954Asset Allocation $141,546 0.67% LifeTime 2050 1.46% $2,067 0.79% $1,118Total Assets $21,100,508 100.00%

Weighted Expense Ratio (EE paid) 0.96% $201,740 0.65% $137,906 Asset Charge (EE or ER paid) 0.10% $21,101 Billed Fees (ER paid) 0.05% $10,000

TOTALS 1.10% $232,841 0.65% $137,906

Information presented here is intended for client use only.

Existing Plan Assets / Allocation Vendor 1

2B-53

Per Participant Total Cost

2B-54

Per Participant Recordkeeping Cost

2B-55

Current Investment Opportunities

Imperative to have a robust way (more than just returns) of comparing investment opportunities

Illustration of the ScorecardSM System

2B-56

Investment Comparison

2B-57

Services Comparison

Side-by-side comparison of the services providers reviewing 20 section and over 350 data points

2B-58

Service Comparison (Cont’d)

2B-59

Choosing Finalists

Have we received enough concessions from the incumbent?

Should we interview the incumbent?

What 2-3 service providers have the right balance of services, investment opportunities, and costs for our company?

Interviewed three vendors

2B-60

Finalist Meetings

Prepared agenda

1½ to 2 hours each

Focus on user experiences– Plan sponsor experience

People

Commitment

Data exchange

– Participant experience Hard copy materials

Participant education campaign

1-800 experience

Website

2B-61

Final Decision

References

Specific/detailed follow-up questions

Commitments in writing

Documentation of decision

2B-62

Your New Provider

Before you sign on the dotted line:

– Develop a timeline for transition

– Agree on roles and responsibilities

– Finalize the investment line-up/or fees

– Agree on performance standards and put them in writing

2B-63

Outcomes

Cost:– Reduced fees by over $179,000/year

– Resulted in a 30% overall savings

Investment opportunities– Enhanced our overall investment score from a 7.7 to a 9.2

– Enhanced the investment choices including adding additional asset classes and asset allocation funds

2B-64

Outcomes (Cont’d)

Service:– Enhance participant experience

Multilingual capabilities

Enhanced website

Customized collateral

– Enhance employer experience Online reporting functions

Ongoing advisory resources

Enhanced payroll bridge

2B-65

Conclusions/Action Steps

Establish and follow a prudent process for understanding, monitoring and documenting fees, services, and investment opportunities

– General benchmarking of fees: Annually

– Specific benchmarking of fees & investment opportunities to the marketplace: Every 2-3 years

– Full RFP vendor analysis: Any time you are unhappy/uncertain with the services being delivered, the fee structure, or the investment lineup, or at least every 4-5 years

2B-66

Conclusions/Action Steps

Include meaningful and comprehensive fund analysis as part of your fee benchmarking/RFP analysis

Accept only full and transparent fee disclosures from all service providers

And remember—all complex challenges have easy to understand, wrong solutions! No one said being a fiduciary is easy, but creating a “best practices” retirement plan will reap employees rewards for many years to come.

2B-67

Questions & Answers

Thank You!

2B-68