401(K) PLAN FIDUCIARY BEST PRACTICES & INDUSTRY TRENDS March 1, 2016 Steven L. Toomey, CIMA Principal BKD Wealth Advisors, LLC stoomey@bkd.com 1
TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & email address All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar ABOUT BKD BENEFIT PLAN CONSULTING We provide the following services to more than 750 retirement plan sponsors Plan design Plan implementation Investment consulting Serve as co-fiduciary Employee education Compliance testing Serve most plan types Division of BKD Wealth Advisors, LLC (BKDWA) 2
ISSUES FACING RETIREMENT PLAN SPONSORS Increased regulatory scrutiny & fiduciary responsibility Retirement readiness Understanding & managing plan investments & fees INCREASED REGULATORY SCRUTINY & FIDUCIARIES DOL is increasingly focused on plan sponsors fulfilling their fiduciary responsibilities Increased number of plan audits Hired 900 auditors Estimates generating $9 in fines/$1 invested in staffing Smaller 401(k) plans Recovered almost $700 million in FY2015 3
INCREASED REGULATORY SCRUTINY & FIDUCIARIES Basic Primary Tenets of Fiduciary Responsibility under ERISA D U T Y of Loyalty to Diversify to Incur Only Reasonable Expenses to Provide Monitoring & Oversight to Avoid Prohibited Transactions INCREASED REGULATORY SCRUTINY & FIDUCIARIES DOL is focusing on the following Sole interest of plan participants & their beneficiaries Plan governance Documentation Reasonable expenses Undergoing a DOL Audit (case study) 4
INCREASED REGULATORY SCRUTINY & FIDUCIARIES Three ways to become a fiduciary ERISA Appointed by named fiduciary Decision-making authority or discretionary control HOW TO LIMIT LIABILITY FOR PLAN FIDUCIARIES* Know standards, law, trust provisions & your plan document Diversify assets to specific risk/return profile of client Prepare written investment policy statement Use prudent experts, i.e, investment manager, & document due diligence Work with investment consultants who serve in a co-fiduciary manner Control & account for all expenses Monitor activities of prudent experts Avoid conflicts of interest & prohibited transactions *As developed by Fiduciary360 & Foundation for Fiduciary Studies 5
ON THE FIDUCIARY HORIZON Retirement income Distributions & rollovers from 401(k) plans Target date funds Use & allocation of revenue sharing PlanAdvisorTools.com, 401(k) Predictions for 2014, Fred Reish, Partner, Drinker Biddle & Reath LLP RETIREMENT READINESS Is my plan properly designed? Education vs. enrollment meetings How to measure retirement readiness 6
RETIREMENT READINESS Importan t for plan sponsors DOL focus Average annual U.S. savings rate is estimated at 4-5% Approximately 26% of adults have no savings More than 25% of adults 50-64 are not saving anything for retirement Median contribution amount for those participating in a 401k plan is 7% RETIREMENT READINESS Plan design trends Automatic enrollment Automatic escalation Automatic re-enrollment Use company match to encourage greater savings Roth feature Target-date funds as QDIAs 7
RETIREMENT READINESS Must provide more robust education Segregate education sessions Annual retirement income assessment (gap analysis) Two-thirds of participants believe they can withdraw more than 6% annually Offer & educate Software aggregation tools RETIREMENT PLAN INVESTMENT & FEE TRENDS Open architecture mutual fund platforms Qualified default investments Investment policy statements for all plans Investment menu simplification Passive vs. active investment strategies Independent fee benchmarking at least every three years 8
RETIREMENT PLAN INVESTMENT & FEE TRENDS Of the plans that automatically enroll participants, 69% default into Target Date Funds TO retirement vs. THROUGH retirement Target Date Funds Source: Morningstar Direct, BKD Wealth Advisors SUCCESSFUL RETIREMENT PLAN Plan sponsor s fiduciary responsibilities Simplifies Formal processes & procedures & goal setting Knowledgeable, professional advisors 100% fee transparency High employee participation rates Helps prepare participants for retirement & provides means to measure this 9
OFFICE LOCATIONS Chicago, IL 1901 S. Meyers Road, Suite 630 Oakbrook Terrace, IL 60181 630.282.9500 Dallas, TX 14241 Dallas Parkway, Suite 1100 Dallas, TX 75254 972.702.8262 Indianapolis, IN 201 N. Illinois Street, Suite 700 Indianapolis, IN 46204 317.383.4000 Little Rock, AR 400 W. Capitol Ave., Suite 2500 Little Rock, AR 72201 501.375.5200 Kansas City, MO 1201 Walnut St., Suite 1700 Kansas City, MO 64106 816.842.1935 Springfield, MO 910 E. St. Louis St., Suite 200 Springfield, MO 65806 417.866.5822 St. Louis, MO 211 N. Broadway, Suite 600 St. Louis, MO 63102 314.231.5544 Wichita, KS 1551 N. Waterfront Parkway, Suite 300 Wichita, KS 67206 316.265.2811 10
CONTINUING PROFESSIONAL EDUCATION (CPE) CREDITS BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org. The information in BKD webinars is presented by BKD professionals, but applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting on any matters covered in these webinars. CPE CREDIT CPE credit may be awarded upon verification of participant attendance For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at training@bkd.com 11
FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact: Steve L. Toomey, CIMA // Principal stoomey@bkd.com // 816.701.0255 12