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Mid-Year 2010,State of the Qualified Retirement Plan Space
“Much Ado About Nothing”
July 27, 2010
Presentation by:
Steve ScottManaging PartnerRetirement Solution Group, LLC
“Securities offered through Ausdal Financial Partners, Inc, member FINRA, SIPC. Advisory services provided by Ausdal Financial Partners. Retirement Solutions Group and Ausdal Financial Partners, Inc are separately owned and operated companies.”
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Agenda
Who Is RSG?
State of the Industry
Case Studies
Next Steps
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Who Is RSG?
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Retirement Solution Group, LLC
This is our CORE business.
Retirement Plan consulting firm Administers over 300 plans Co-Fiduciary on more than $150,000,000 Participant Services for more than 8000 participants 2 federally enrolled actuaries on staff 2 on-Staff enrollment & education support available (Spanish speaking available) We are fully independent Regional offices in Chicago, New England and Florida (business in 22 states) Members of NIPA, ASPA and CFDD 99% (+) of firm revenue comes from qualified retirement plan related business
Retirement Solution Group
All decisions are made in the best interest of participants per ERISA. We adhere to the DOL guidelines on participant reporting and ensure that full disclosure be present throughout.
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Definition of a “Fiduciary”
You are a fiduciary of an employee benefit plan if you meet any one of the following tests:
You exercise discretionary authority or control over plan assets or plan management - “Functional Fiduciary”
You are specifically identified in the written documents of a plan as a “Named Fiduciary”
You have discretionary responsibility in the administration of the plan.
You manage the plan or its assets or render investment advice for a fee.
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Roles & Responsibilities of Plan Fiduciary
Client
Independent Pension Consulting Services
Investment Co-Fiduciary Benchmarking Conflicts of Interest Investment Policy Statement (IPS) Adherence to IPS Education
Cost Breakdown Prudent Man Standard Investment Related Expenses Support Related Expense PERA Opportunities
Investments, Recordkeeping, and Participant Services
Technical Proper valuation work Tax and relevant government
filings Plan Document and SPD
compliance Methodologies Best Practices
Retirement Solution Group
Through an efficient delivery model, we offer a variety of solutions to your retirement plan. The roles and responsibilities must be clear and explicit. Accountability is key.
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State of the Industry
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State of the Industry: Markets
Equities: Remain volatile, but improperly categorized by many as “down” DJIA, +1.47% YTD & 18.14% 1-year S&P 500, -0.04% YTD & 15.25% 1-year S&P Midcap 400, +5.87% YTD & 25.42% 1-year Russell 2000, +4.72% YTD & 20.75% 1-year EAFE USD, –6.42% YTD & 7.7% 1-year EM USD, –0.81% YTD & 19.38% 1-year
Fixed Income: Still attractive from a risk standpoint, but yields are no where near the levels of last year during early stages of economic recovery
Morningstar Core Bond, +5.75% YTD & 9.07% 1-year US T-Bill Auction, +0.06% YTD & 0.12% 1-year
Source: Morningstar.com (all returns as of 7/23/10)
Retirement Solution Group
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State of the Industry: Legislative
From Washington: More oversight Financial Regulations Bill Increased Fee-Disclosure Increased Conflicts Disclosure More auditors EFAST 5500 Filings Question of Fiduciary Seems Next
FINRA: Still attractive from a risk standpoint, but yields are no where near the levels of last year during early stages of economic recovery
More Proactive Investment Complaint Center Participant Advice
Retirement Solution Group
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State of the Industry: Plan Design
DC Plans : Meaningful, yet low cost, changes seems to be trend 59% offer auto-enrollment in 2009
Additional 12% of remainder stated “Very Likely” for change in 2010 29% offer ROTH feature
Additional 12% of remainder stated “Very Likely” for change in 2010 46% “Very Likely” to review operational changes and/or vendors in 2010
DB Plans: Taking the next step 9% will close Plan to new entrants 64% plan on doing funding projections 34% plan on reviewing funding strategies 80% rank “managing risk” as high priority
Source: Hewitt 2010 Retirement Survey
Retirement Solution Group
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Case Studies
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Case Study: Participant Market Timing
Situation: 62 year old participant goes aggressive during recovery of 2009 and Q1 2010. In the late June sees the markets drop below 10,000 in DJIA. Believes second dip is coming, goes to cash.
Complication: Market does immediately drop an additional 300 in DJIA on first two days of July. But then rallies past 10,000 on July 7th.
Result: Sitting in cash at a present value estimated loss of 4.5% based on DJIA.
VIX at historic highs.
Retirement Solution Group
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Case Study: Education Matters
Situation: Manufacturing company has many hourly and bi-lingual workers. Due to economic conditions, suspends Safe Harbor in 2009.
Complication: The HCEs were used to participating at a max-out rate, and the original Plan of suspending Safe Harbor caused some panic and a large decrease in deferral rates.
Result: RSG worked with HR and management on creating an educational campaign called “The Bridge.” Greatly reduced the impact of the suspensions, and thus HCE refunds. 2010 we enacted “Maybe Safe Harbor” which is scheduled to be enacted in December 2010.
Retirement Solution Group
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Case Study: Designed Based “Carve-Out”
Situation: Doctors group had Money Purchase Plan, which they maximized to the DC limit, and had to give a flat allocation to all staff.
Complication: Doctors had significant HCEs and payroll, and they needed a bigger deduction. Plus, they wanted to give a fair, but not flat staff contribution.
Result: By implementing a “Carve-Out” plan design solution we offer the senior doctors an additional $165,000 deduction via Cash Balance Plan. The 401(k)/Profit Sharing Plan is both cross tested for group allocation and for coverage testing, and lowered their average staff contribution from 10% to 7.5%. No staff or non-owners are regular participants in the Cash Balance Plan. In addition, the Cash Balance Plan is individually allocated so that each doctor can decide appropriate allocation level. Note 40% coverage.Retirement Solution Group
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Next Steps
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Summary
Who Is RSG? Core Competency
Markets Rudderless Ship
Case Studies H&R Block vs. CPA Solution
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So What?
Is Your Plan Customized for Participants:
Investment Review
Offense or Defense
The Plan
Beneficiaries
Is Your Plan Customized for Plan Sponsors:
Tax Maximization
Design
Fiduciary Oversight
There are a lot of retirement plan voices, mostly sales people. There are very FEW qualified pension consultants.
Retirement Solution Group“Investments involve risks and potential loss of principal and are not FDIC insured investments.”
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How do you, and your clients, fair?
Run a free Plan analysis to look at Plan maximization and fiduciary oversight.
RSG is always available, 866-352-7731
1. Steve Scott, Managing Partner x 21
2. Scott Emering, Partner x11
3. Ed Emering, Partner/FSA
4. Cynthia Baldwin, FSA
5. Julie Yanez, Administrator
6. Bob Kibble, Administrator
7. Christie Cheng, Education & Relationship Manager
8. Elvia Sanchez, Education & Relationship Manager (Spanish speaking)
9. Katy Janovsky, Office Management
10. Ric Gazarian, Consultant
Retirement Solution Group