ABA Retirement Funds Who s Watching Your Firm s 401(k)? A member benefit of ABA Retirement Funds Program September 11, 2013 Presented by: Michael Moniz Divisional Sales Director Registered Principal of and securities offered through ING Financial Advisers, LLC (Member SIPC) Moderated by: Denis Martin-Monty Head of Channel Management and Program Positioning www.abaretirement.com CN0715-11179-0815 1
Job Creator Supports Local Economies 63% to 69% of lawyers work for small firms with fewer than 10 employees 1 Provides Foundation for National Economy 2
Percent of survey respondents who agreed with each statement Employers of all sizes understand the value of employer-sponsored retirement plans Those who do not sponsor a plan misunderstand the advantages they offer They can! We ll show you how Employer-Sponsored Retirement Plans ESRP No Employer-Sponsored Retirement Plans ESRP 401(k) plans are valuable benefits irrespective of firm size Offering a 401(k) helps attract and retain good employees Employees value 401(k)s even without an employer match 3 401(k) plans offer more advantages than other retirement accounts Small firms don t have access to affordable 401(k) plans
Do you offer any type of retirement plan for your employees, or do you not offer such a plan? Nearly 8-in-10 small employers with 2-4 employees do not offer a retirement plan As employers get larger, the propensity to offer a retirement plan increases 2-4 Employees 77 23 5-9 Employees 65 35 10-19 Employees 69 31 20+ Employees 50 50 4
Do you offer any type of retirement plan for your employees, or do you not offer such a plan? 60% of employers either currently offer or are interested in offering a workplace retirement plan How are you saving for retirement? 33 27 39 5
The business never achieves its financial goals to allow its owners to fund a plan My business is my pension I ll do it later succumbs to inertia 6
Top reasons why your firm does not offer an employer-sponsored retirement plan? Don t have enough employees Can t afford a matching contribution Too expensive to set up Haven t had time to focus on it Can t afford the time to administer the plan Too complicated to set up We don t want to take the role of fiduciary We don t know where to start Hasn t been recommended to us Don t want to save money in a qualified plan Bad experience in the past Don t know the advantages of saving in a qualified plan 7
No out-of-pocket expenses Most important benefits when selecting a retirement plan? Ease of setting up or converting Deferred tax status Reputable brand name Wide array of fund options Low cost funds Endorsement from industry organizations Brokerage option Fiduciary solutions 8
Small law firm owners care about retirement benefits but they are not doing enough to save for their retirement needs. Seems cost may be one of the key issues with sponsoring a retirement plan or it might be the perceived administrative burden or the belief that the practice will provide for all needs at retirement. 9
Certain retirement products are affordable and made for small firms Remember the tax deferral benefits of qualified contributions Look for opportunities to leverage institutionally-priced funds 10
Some retirement products require less administration Third-party administrators ( TPA ) can help with the administration of your plan Service quality is one of the most important aspects of a sound retirement plan provider 11
Most service businesses, like law firms, are not liquid assets Timing: Nearly 8 in 10 small-business owners prior to the recession in 2007 thought they would have enough money to live comfortably when they retire. By 2010, fewer than two in three felt that way. 5 12
The value of these assets is heavily dependent on the economic environment Poor health is cited as being very important in the decision to retire for 35% of people ages 55 to 59 6 A 401(k), IRA, Keogh, or other ret. savings account The value of the sale of your business The equity you have built up in your home Individual stock or mutual fund investments Social Security A worksponsored pension plan Part-time work 13
Features SEP-IRA SIMPLE IRA 401(k) Who is it for? Self-employed individuals or small business owners, including those with employees Companies with 100 employees or fewer, that do not have any other retirement plan Companies of all sizes Key advantages Easy to set up and maintain Typically no or low initial setup or annual maintenance fee Salary reduction plan with less administration No discrimination testing Employees share responsibility for their retirement Generous contribution limits Most flexibility in plan construction Who contributes Employers only Employer is required and employee is optional Employer and employee Administration No Form 5500 filing Very limited employee notifications No Form 5500 filing Limited initial and annual employee notifications Form 5500 filing required for plan with $250K or more in assets Required employee notifications (initial and annual) Consult IRS website for more details on product limits, eligibility, and other provisions 14
Features SEP-IRA SIMPLE IRA 401(k) Contribution Limits Employer contribution limited annually to the lesser of 1. 25% of compensation or 2. Section 415 limit (lesser of 25% of compensation or $51K for 2013) Employer must contribute the same percentage of compensation for all employees including themselves Employer can either: make dollarfor-dollar matching contributions (not to exceed 3% of the employee's compensation) on behalf of eligible employees who make electivedeferral contributions), or a 2% nonelective contribution to all eligible employees, regardless of whether they make deferral contributions Employee contributes up to 100% of compensation through salary deferral, not to exceed $12K (2013) Catch-up contributions of up to $2,500 (2013) available for those age 50 or older Employee (owner or spouse) can make salary deferral contributions of up to 100% of compensation, not to exceed $17,500 (2013) Catch-up contributions of up to $5,500 (2013) available for those age 50 or older Total of all employee and employer contributions (including forfeiture) cannot exceed the lessor of 100% of compensation or $51K or $56,500 if age 50 or older Cost Typically no or low initial setup or annual maintenance fee Typically low plan and/or participant cost Typically slightly more expensive than a SEP-IRA or SIMPLE IRA, but can vary from provider to provider Consult IRS website for more details on product limits, eligibility, and other provisions 15
In 1963, the American Bar Association ( ABA ) created a not-for-profit corporation to offer a unique retirement plan Program the ABA Retirement Funds Program The ABA recognized that the legal community could benefit from a unique type of retirement plan to meet its needs 9 out of 10 lawyers are in firms with fewer than ten attorneys 11 Access Only 17.3% of Companies with fewer than ten employees sponsor a retirement plan 12 The annual median income for lawyers is $112,760 13, which compares favorably to the nationwide median household income of $51,914 14 Ability Lawyers - much like everyone else can exhibit behavioral tendencies that negatively impact retirement savings (e.g., loss aversion, familiarity bias) Willingness 16
ABA Retirement Funds (Program Sponsor; Not-for-Profit Corporation) PROGRAM OVERSIGHT RESPONSIBILITY Nine members of the Board of Directors Full-time staff: Executive Director, Associate Executive Director and Staff ABA Retirement Funds Program Nearly 3,800 Law Firms a Over $4.5 Billion in Assets a 50 years of service to the legal community Investment Fiduciary, Trustee, and Custodian Leading Global Asset Manager $4.8 Trillion under custody a $759 Billion under management a Services 42% of Top 100 Corporate Plans b 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 plans 1 Self-Directed Brokerage Account 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 2013 a As of December 31, 2012. b Based on pension assets. Source: Pensions and Investments, February 6, 2012. The ABA Retirement Funds Program, ING Financial Advisers, LLC, the Northern Trust Company and Northern Trust Investments, Inc., and TD Ameritrade, Inc., are all separate, unaffiliated companies and not responsible for one another s products and services. Brokerage services provided by TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. Used with permission. 17
Sample distribution of Program Members in the United States 18
Questions ABA RETIREMENT FUNDS PROGRAM Michael J. Moniz Divisional Sales Director P.O. Box 5142 Boston, MA 02206-5142 Tel.: 781-9764649 Email: michael.moniz@abaretirement.com www.abaretirement.com www.abaretirement.com 19
1. The Lawyer Statistical Report, American Bar Foundation, 1985, 1994, 2004, 2012 editions. 2. Micro Market Marketing Study by the ABA Retirement Funds Program, First Quarter 2012. 3. Poll Report: Small Business Owners Views on Retirement Security Main Street Alliance and American Sustainable Business Council, June 2013. 4. Small Business Owners Are Unprepared for Retirement, The American College, Bryn Mawr, February 28, 2012. 5. Nearly half of small-business owners may never retire, by Dennis Jacobe, Chief Economist, October 1, 2010. 6. The Health and Retirement Study (HRS), 20