Administering Your Firm's Retirement Plan Best Practices

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Administering Your Firm's

Retirement Plan – Best Practices

Presented by

Ginger Brennan and Rebecca Chandler

HR10

5/19/2014

3:00 PM - 4:00 PM

May 19-22, 2014, Toronto ON Canada

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2014

Ginger Brennan

National Director of Sales

–

registered representative of ING Financial Advisers, LLC

Becki Chandler

Client Relationship Manager

Administering Your Firm's Retirement Plan

Best Practices

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ABA Retirement Funds Program ALA Annual Conference

Please read the Program Disclosure Document carefully before investing. The Program

Disclosure Document contains important information about the Program and units of the

collective investment funds that serve as investment options under the Program. For email

inquiries contact: [email protected].

Securities offered through ING Financial Advisers, LLC (Member SIPC).

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Responsibilities

Introduction

Workplace

Retirement

Plan



Pre-tax income directed to

a long-term savings

vehicle on a tax-deferred

basis

Benefits



Attract and retain talented

employees



Do a good thing for your

employees



Employer tax deduction

 Selection of plan type &

features

 Selection of providers

 Fiduciary role

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Tax-deferred, long-term savings

Jane can put $13,333 in her 401(k),

because she doesn’t have to pay the

25% income tax on that money

before contributing it.

Meanwhile, John pays his tax and

puts $10,000 into his brokerage

account.

$13,333

$57,626

$43,219

$10,000

$38,236

Compound

growth at 5% per

year for 30 years

Match?

25% tax

rate

Compound

growth at 5%,

taxed, per year

for 30 years

If invested in stock,

assuming 15% tax

on capital gains

This example was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product, or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, be suitable for your portfolio or individual situation, or prove successful.

2014

2044

2014

2044

$30,175

Benefits

Meet Jane and John. Jane has a 401(k) with no employer match. John uses a regular taxable

brokerage account for his retirement savings. Both are in the 25% tax bracket. This year, Jane and

John can each afford to save $10,000 in take-home pay. For simplicity’s sake, poor Jane and John

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Attract and retain talented employees

When asked to rank the importance of 11

factors relating to job opportunities, survey

respondents placed salary, benefits (including

health insurance and 401(k) programs) and

opportunities for professional growth and

advancement at the top of the list.

1

Companies that emphasize

better benefits and use them to

attract and retain high caliber

staff add 7.3 percent in

additional profit to their

bottom line.

2

1 Generation Y. What millennial workers want:: How to attract and retain Gen Y Employees; Robert Half International and Yahoo! Hotjobs.com, 2008

2 The Human Capital Edge: 21 People Management Practices Your Company Must Implement (or Avoid) to Maximize Shareholder Value; by Bruce N. Pfau Phd, Ira T. Kay Phd, Watson Wyatt Worldwide, 2001

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Doing good for your employees

In 1985, 90% of

companies offered

traditional pensions

plans. By 2012,

that number fell to

just 11%

1

In 1998, only 10%

of companies

offered only a DC

plan. This number

is now 70%

1

Pensions have been cut

9 out of

10 lawyers are

in firms with fewer than

ten

attorneys

2 Only

17.3%

of

Companies with fewer

than

ten

employees

sponsor a retirement

plan

3 In the legal community

1 “Retirement Plan Types of Fortune 100 Companies in 2012”, Towers Watson, Insider October 2012 2 The Lawyer Statistical Report, American Bar Foundation, 2012 edition

3 Employee Benefit Research Institute estimates from the 2011 March Current Population Survey

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Employer tax deduction

Employer contributions are deductible on

the employer’s federal income tax return to

the extent that the contributions do not

exceed the limitations described in section

404 of the Internal Revenue Code.

Refer to Publication 560, Retirement Plans for

Small Business (SEP, SIMPLE, and Qualified

Plans), for more information about deduction

limitations.

You may be able to claim a tax

credit for part of the ordinary and

necessary costs of starting a

SEP, SIMPLE, or qualified plan.

The credit equals 50% of the cost to

set up and administer the plan and

educate employees about the plan, up

to a maximum of $500 per year for

each of the first 3 years of the plan.

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Selection of plan type & features

Responsibility

Pl

an

T

y

pe

s

What type of

plan is right

for your firm?

Defined

Benefit

Cash

Balance

Plan

Money

Purchase

SEP IRA

Profit

Sharing /

401(k)

SIMPLE

P

la

n

S

tr

a

te

g

ie

s

What plan

strategy

meets your

objectives?

Safe Harbor

Social Sec. Integration

Cross-tested

Maximize contributions

while reducing

limitations associated

with testing

Formula awards

higher-paid employees with a

larger percentage of

their compensation

Different employee

groups defined and

separate contributions

to each group are made

Plan

Features

What plan

features will

make your

plan unique?

Eligibility & Vesting

Investment Options &

Trading Restrictions

Match &

Match Structure

Distribution & Rollover

Options

Automatic Features &

QDIA

Self-Directed

Brokerage Service

TIP

Does your plan include an

_{advice offering?}

TIP

If your strategy is to maximize tax

deferred contributions, look into adding a

Cash Balance plan to your 401(k)

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Selection of providers

Responsibility

Recordkeeper

Third Party

Administrator

Trust Company

Investment

Advisor

Consultants

Advisory Firm

ERISA Attorney

Payroll Company

Maintains the participant records; trades the shares when contributions are deposited and when

participants reallocate their portfolios; provides the web site and call center for the participants

and plan sponsors; and generates and mails the participant statements.

Drafts the plan document; performs the compliance testing; and prepares the annual IRS Forms

5500. These tasks are sometimes part of a bundled service provided by a recordkeeper.

A Bank or Trust Company acts as Custodian; initially accepts the contributions, processes loan-

and distribution checks; and prepares tax reporting.

Provides advice and guidance on investment selection and allocation to the trustees; may also

serve as directed or discretionary trustee; and on rare occasions can take on investment

fiduciary role.

Consultant can be used in the request for proposal (“RFP”) process and retained to evaluate the

plan’s merits from time to time.

Provides advice and guidance on investment options to employees participating in the plan; may

take on professional asset management role for a fee; may take on fiduciary responsibility for

participant in-plan investments.

Can advise on plan types, plan features, and plan documents. May also help resolve plan

qualification issues or disputes.

While payroll companies offer services unrelated to retirement plans, the link between payroll

and participant contributions to qualified plans does require consideration when picking a

payroll vendor.

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Fiduciary role

Responsibility

Fiduciary Liability to Your Firm

Adoption and continued use of the Program

Selection and periodic monitoring of trustee, investment manager, and recordkeeper

Selection and monitoring of investment advice service provider to participants

Develop and maintain Plan/Program

Investment Policy1

Selection, termination, and monitoring of all fund managers, and investment options consistent

with the Plan/Program Investment Policy1

Monitoring of all investment advisor purchase/sale activity for compliance with prospectus and investment guidelines

Determining applicability and compliance of fund investment line-up for certain ERISA requirements Your Firm Your Firm Your Firm Your Firm Your Firm Your Firm Your Firm TYPICAL PLAN TRUSTEE No Outside Fiduciary Your Firm Your Firm Your Firm Your Firm Your Firm Your Firm / Investment Manager Your Firm / Investment Manager DIRECTED TRUSTEE Section 3(21) Fiduciary Your Firm Your Firm Your Firm Your Firm Investment Manager Investment Manager Investment Manager Section 3(38) Fiduciary Your Firm DISCRETIONARY TRUSTEE ABA Retirement Funds Program

FIDUCIARY ACTS AND DECISIONS RESPONSIBLE FIDUCIARY

1 Subject to acceptance by ABA Retirement Funds

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Administration and Maintenance

Eligibility and Data Changes

Responsibility

Employer determines eligibility

Employee elects to

participate in plan

Employee completes

enrollment process

Employer verifies

enrollment (optional)

Recordkeeper processes

enrollment and beneficiary

Recordkeeper establishes

account access and password

Recordkeeper sends

enrollment notice(s)

1

2

3

4

5

6

7 Follow plan document

eligibility rules

TIP

Make sure you

have enough

enrollment kits

on hand

Some law firms appreciate

the opportunity to verify

enrollments in the plan

TIP

Make sure you are

meeting your

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Administration and Maintenance

Contributions

Responsibility

Some plan types allow participants to make their own contributions to their accounts,

while other plan types only allow the employer — the firm — to contribute.

To make it easier to understand and track the

contribution limits imposed by the IRS, it may be

helpful to think of the limits in terms of layers.

For example:

TIP

For the plan types that allow employer

contributions, the formula the plan uses

to allocate employer contributions to its

participants is described in its plan

documents.

Layer 1 — the limit imposed on

the employer.

For profit sharing plans, the total

employer contributions cannot

exceed 25% of aggregate

eligible compensation of all

eligible employees (401(k)

elective salary deferral

contributions are not included in

employer contributions for this

limit).

Layer 2 — the limit imposed on

the participant (known as the

"annual additions limit").

Layer 3 — the dollar limit for

elective contributions (including

pre-tax elective contributions and

Roth 401(k) contributions).

For all contributions to all

employer plans in which the

individual participates,

contributions cannot exceed the

lesser of 100% of the

participant's eligible

compensation and a prescribed

indexed dollar amount. For 2014,

prescribed indexed dollar

amount is $52,000.

This dollar limit is indexed each

year. The limit is $17,500 for

2014. The catch-up contribution

limit for 2014 for a participant

who attains age 50 before

year-end is $5,500.

TIP

Timely Deposit Rules

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Administration and Maintenance

Investment Election Changes and Transfers

Responsibility

Typically, your participants have several options to make investment

election changes and transfers

TIP

Does your provider offer service

_{level guarantees?}

Things to keep in mind:

1 _{Make sure your participants are familiar with any trading or transfer restrictions}

within your plan’s fund lineup

2 If your plan includes a self-directed brokerage window, investment election

changes and restrictions may be different from those of funds in the plan

3 Beware of cut off times for processing of investment election changes as this is

often a source of complaint by participants

4 Find out if your current provider offers automatic investment reallocation to keep

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Administration and Maintenance

Accessing Funds

Responsibility

There are a few different ways participants typically access funds

from their plan accounts

1

2

3

4

5 TIP

When a participant leaves your firm, an account distribution is not

required. In fact, a participant with a vested account balance of more

than $5,000 can maintain the account with your firm’s plan (subject to

required minimum distributions at age 701/2).

Distribution resulting from

termination occurs when a

participant quits, retires,

or is fired.

When a participant dies, you are

responsible for checking the

participant’s records to determine

the named beneficiary and the

type of death benefit, if any,

the beneficiary should receive.

Typically for the employee

who has met the age- or

service-based criteria for

withdrawal and is still

employed.

Only specific financial

conditions qualify for

hardship withdrawals.

Assuming loans are

allowed under your plan,

a

participant may request

a loan from the vested

portion of his or her

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Qualified Domestic Relations Order (QDRO) is a legal document that acknowledges the

right of an alternate payee (e.g., spouse, former spouse, child) to receive all or a portion

of the benefits payable to a plan participant

Administration and Maintenance

QDROs

Responsibility

1. There must be a judgment, decree, or order

that is made pursuant to state domestic

relations law.

2. The order must relate to providing either child

support, alimony, or marital property rights to

a spouse, former spouse, child or other

dependent of the individual participating in

the plan.

3. The order must include the name and last

known mailing address of both the person

covered by the plan and the spouse, former

spouse, or child who is to receive the

benefits.

4. The order must include the amount or

percentage of the benefits to be paid to each

spouse, former spouse, or child, or a manner

to determine the amount or percentage.

5. The order must include the number of

payments or time period to which it

applies.

6. The order must specifically identify each

plan to which it applies.

7. The order cannot require the retirement

plan to provide any type of benefit or

payment option that is not otherwise

provided by the plan.

8. The order cannot increase benefits

based on actuarial value.

9. The order cannot require the payment of

benefits that have previously been

assigned by a prior QDRO to a different

spouse, former spouse, or child.

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Administration and Maintenance

Compliance and Communications

Responsibility

As Plan Administrator, you will need to determine the requirements that apply to your

plan based on the number of participants in your plan and your plan type

Participant communication

requirements

Plan testing requirements

Reporting requirements

1

2

3 The Department of Labor

(“DOL”) mandates that

certain communications to

plan participants be

conducted, and may

include:

1. Enrollment kit for

eligible employees

2. Summary plan

description

3. Summary of material

modifications

4. Summary annual report

5. Participant disclosure

Testing is done each year to

monitor whether the plan is

in compliance with certain

IRS and DOL requirements,

and includes:

1. Annual additions

2. Top-heavy

3. ADP and ACP

nondiscrimination

testing

4. 410(b)

Coverage

testing

Form 5500 is the annual

return for your retirement

plan that must be filed. It is

required to ensure

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Administration and Maintenance

Plan Termination

Responsibility

Although employers establish retirement plans with every intention of having a long-term

retirement vehicle, there are occasions when the decision is made to terminate it

When Must You Terminate the Plan?

Some, but not all, examples of occasions when the plan must be terminated

are as follows:

• Firm has dissolved and is no longer doing business,

• Sole proprietor has passed away and a successor employer will not be

continuing the plan, or

• Sole proprietor has retired and a successor employer will not be

continuing the plan.

TIP

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Administration and Maintenance

Forms, Tools, and Resources

Responsibility

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Program Overview

Responsibility

Recordkeeping, Client Service and Sales

A leading provider of financial products and services in the U.S. One of the largest Defined Contribution Recordkeepers with

over 49,000 plans3

ABA Retirement Funds Program

Nearly 3,700 law firms retirement plans1

More than $5 billion in assets1

50 years of service to the legal community

Investment Fiduciary, Trustee, and Custodian

Leading Global Asset Manager

$5.58 Trillion under custody1

$885 Billion under management1

Services 74% of Top 100

Corporate Plans2

Self-Directed Brokerage

Account4

Offers over 13,000 domestic, international, and global mutual funds

Ranked #1 out of 17 online brokers evaluated in the StockBrokers.com

Online Broker Review 20135

ABA Retirement Funds

(Program Sponsor; Not-for-Profit Corporation)

PROGRAM OVERSIGHT RESPONSIBILITY

Board of Directors comprised of 9 attorneys

Full-time staff: Executive Director, Associate Executive Director and Staff

1. As of December 31, 2013.

2. Based on pension assets. Source: Pensions and Investments, February 4, 2013.

3. As published by Pensions and Investments Special Report of Top DC Recordkeepers as of March 4, 2013 (based on September, 2012 data). 4. Brokerage services provided by TD Ameritrade, Inc., member FINRA/SIPC/NFA, and TD Ameritrade Clearing, Inc., member FINRA/SIPC. TD

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