Plan Design 101  April 27, 2010 Presentation by: Steve Scott Managing Partner Retirement Solution Group, LLC
Agenda <ul><li>Who Is RSG? </li></ul><ul><li>Case Studies </li></ul><ul><li>Benchmarking </li></ul><ul><li>Next Steps </li...
Who Is RSG?
Retirement Solution Group, LLC <ul><li>This is our  CORE  business. </li></ul><ul><li>Retirement Plan consulting firm </li...
Definition of a “Fiduciary” <ul><li>You are a fiduciary of an employee benefit plan if you meet any one of the following t...
Roles & Responsibilities of Plan Fiduciary  Retirement Solution Group Through an efficient delivery model, we offer a vari...
Case Studies
Case Study:  Optimizing Profit Sharing Allocations <ul><li>Situation:  Local dentist sponsored a profit sharing plan with ...
Case Study:  Designed Based “Safe Harbor” <ul><li>Situation:  Owner and other highly compensated officers at a  restaurant...
Case Study:  Defined Benefit Plan <ul><li>Situation:  Private school, was looking for a way to reward loyalty and service ...
Case Study:  Defined Benefit Overlay <ul><li>Situation:  Sole attorney in his mid-40’s with no staff was putting away $46,...
Case Study:  Designed Based “Carve-Out” <ul><li>Situation:  Radiologist group had Money Purchase Plan, which they maximize...
The Defined Benefit Game
Defined Benefit Asset Allocation (source Cerulli) Retirement Solution Group <ul><li>Equities have seen a consistent rise o...
PBGC Pension Insurance Data Book 2007 <ul><li>Definition of Funding Ratio = the ratio of a pension plan’s assets to its li...
The Hypothetical “Lost Decade&quot; <ul><li>Impact of 8.5% vs. 6.5% assumed rate of return : </li></ul><ul><li>Actuarial l...
Summary <ul><li>Who Is RSG? </li></ul><ul><ul><li>Core Competency </li></ul></ul><ul><li>Case Studies </li></ul><ul><ul><l...
So What? <ul><li>Is Your, or your clients’, Plan Customized:  </li></ul><ul><li>Funding Levels fro Key Employees/Owners </...
How do you, and your clients, fair? <ul><li>Run a free Plan analysis to look at Plan maximization and fiduciary oversight....
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Plan Design 101

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  • NOTE ABOUT SPEAKER NOTES: Content in the speaker notes section are not meant to be used as scripts and SHOULD NOT be distributed to clients. Instead, they’re supposed to provide general concepts expressed by the material, explanations of specific services and capabilities, and suggestions for expressing these ideas effectively. You may replace content in these speaker’s notes with your own language that reflects the concepts being expressed.
  • The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.
  • Plan Design 101

    1. 1. Plan Design 101 April 27, 2010 Presentation by: Steve Scott Managing Partner Retirement Solution Group, LLC
    2. 2. Agenda <ul><li>Who Is RSG? </li></ul><ul><li>Case Studies </li></ul><ul><li>Benchmarking </li></ul><ul><li>Next Steps </li></ul>
    3. 3. Who Is RSG?
    4. 4. Retirement Solution Group, LLC <ul><li>This is our CORE business. </li></ul><ul><li>Retirement Plan consulting firm </li></ul><ul><li>Administers over 300 plans </li></ul><ul><li>Co-Fiduciary on more than $150,000,000 </li></ul><ul><li>Participant Services for more than 8000 participants </li></ul><ul><li>2 federally enrolled actuaries on staff </li></ul><ul><li>2 on-Staff enrollment & education support available (Spanish speaking available) </li></ul><ul><li>We are fully independent </li></ul><ul><li>Regional offices in Chicago, New England and Florida (business in 22 states) </li></ul><ul><li>Members of NIPA, ASPA and CFDD </li></ul><ul><li>99% (+) of firm revenue comes from qualified retirement plan related business </li></ul>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.
    5. 5. Definition of a “Fiduciary” <ul><li>You are a fiduciary of an employee benefit plan if you meet any one of the following tests: </li></ul><ul><li>You exercise discretionary authority or control over plan assets or plan management - “Functional Fiduciary” </li></ul><ul><li>You are specifically identified in the written documents of a plan as a “Named Fiduciary” </li></ul><ul><li>You have discretionary responsibility in the administration of the plan. </li></ul><ul><li>You manage the plan or its assets or render investment advice for a fee. </li></ul>
    6. 6. Roles & Responsibilities of Plan Fiduciary 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. Client Independent Pension Consulting Services <ul><li>Investment </li></ul><ul><li>Co-Fiduciary </li></ul><ul><li>Benchmarking </li></ul><ul><li>Conflicts of Interest </li></ul><ul><li>Investment Policy Statement (IPS) </li></ul><ul><li>Adherence to IPS </li></ul><ul><li>Education </li></ul><ul><li>Cost </li></ul><ul><li>Breakdown </li></ul><ul><li>Prudent Man Standard </li></ul><ul><li>Investment Related Expenses </li></ul><ul><li>Support Related Expense </li></ul><ul><li>PERA Opportunities </li></ul>Investments, Recordkeeping, and Participant Services <ul><li>Technical </li></ul><ul><li>Proper valuation work </li></ul><ul><li>Tax and relevant government filings </li></ul><ul><li>Plan Document and SPD compliance </li></ul><ul><li>Methodologies </li></ul><ul><li>Best Practices </li></ul>
    7. 7. Case Studies
    8. 8. Case Study: Optimizing Profit Sharing Allocations <ul><li>Situation: Local dentist sponsored a profit sharing plan with a standard pro-rata allocation (% of pay) set-up by his accountant in the late 80’s . </li></ul><ul><li>Complication: Maximizing the dentist contributions at the IRS individual aggregate limit ($49,000 in 2010) would required a 20% of pay contribution to all eligible employees. </li></ul><ul><li>Result: RSG redesigned the Plan using a “cross-tested” profit sharing contribution reducing the required contribution to the staff to 5% of pay. Client saved $58,000 (25% of total contribution) in year 1. </li></ul>Retirement Solution Group
    9. 9. Case Study: Designed Based “Safe Harbor” <ul><li>Situation: Owner and other highly compensated officers at a restaurant investment and operating group was unable to participate in the company’s 401(k) plan without substantial refunds due to non-discrimination requirements. </li></ul><ul><li>Complication: The nature of the restaurant business and the demographics of its staff made it difficult to generate and increase participation in a meaningful way. </li></ul><ul><li>Result: By implementing a Safe Harbor match, the plan automatically passed discrimination testing and allowed the owners and officers to increase participation to the full IRS limit ($16,500 in 2009, plus $5,500 catch-up for participants over 50) and receive a 4% company match. </li></ul>Retirement Solution Group
    10. 10. Case Study: Defined Benefit Plan <ul><li>Situation: Private school, was looking for a way to reward loyalty and service through a retirement plan program. </li></ul><ul><li>Complication: IRS limits the ability to reward service in defined contribution plans through eligibility provisions (maximum of one year and two entry dates) and a maximum allowable vesting schedule (six year graded or three year cliff vesting). </li></ul><ul><li>Result: RSG implemented a defined benefit plan with a benefit formula structured to pay and years of service – 1% of pay times years of service up to 25 (maximum benefit is 25% of pay with 25 years of service). </li></ul>Retirement Solution Group
    11. 11. Case Study: Defined Benefit Overlay <ul><li>Situation: Sole attorney in his mid-40’s with no staff was putting away $46,000/year into a profit sharing plan and was looking for increased deductions. </li></ul><ul><li>Complication: The attorney was already maximized at the IRS individual aggregate limit for his Defined Contribution Plan (2008 limit). </li></ul><ul><li>Result: RSG implemented a Defined Benefit Plan in addition to the Defined Contribution plan. Year 1 contributions/deductions were $108,000 under the Pension Protection Act of 2006 – over a 100% increase. </li></ul>Retirement Solution Group
    12. 12. Case Study: Designed Based “Carve-Out” <ul><li>Situation: Radiologist group had Money Purchase Plan, which they maximized to the DC limit, and had to give a flat allocation to all staff. </li></ul><ul><li>Complication: Radiologists make a lot of money, and they needed a bigger deduction. Plus, they wanted to give a fair, but not flat staff contribution. </li></ul><ul><li>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. </li></ul>Retirement Solution Group
    13. 13. The Defined Benefit Game
    14. 14. Defined Benefit Asset Allocation (source Cerulli) Retirement Solution Group <ul><li>Equities have seen a consistent rise over the past 10 years </li></ul><ul><li>Trends have shown an increase in international vs. U.S. (domestic) equities </li></ul><ul><li>Hedge funds and other alternative assets identified in “other” category hit historic high </li></ul>Cerulli Quantitative Update – Retirement Markets 2008 – Ch. 2, 92
    15. 15. PBGC Pension Insurance Data Book 2007 <ul><li>Definition of Funding Ratio = the ratio of a pension plan’s assets to its liabilities </li></ul><ul><li>In 2005, plans with funding ratios of 60-69% represented the highest number of plans covered by the PBGC (29.3% of all plans). This group however was not the most severely underfunded category. Those plans whose funding ratio was 50-59% were the most severely underfunded. </li></ul><ul><li>Deficit Reduction Contribution (DRC) – applies only if funded ratio is below a certain level. The DRC requires a shorter funding period. This will likely impact the plan in 2010 or 2011 where the funding ratio will probably fall under 80% and the phasing in of investment losses of 2008 </li></ul><ul><li>RSG works with Plan Sponsors and Advisors on underfunded plans options and tries to take a consultative approach to plan management, so administration , actuarial, and investments all work together to try and achieve the business objective. </li></ul>
    16. 16. The Hypothetical “Lost Decade&quot; <ul><li>Impact of 8.5% vs. 6.5% assumed rate of return : </li></ul><ul><li>Actuarial loss if market return is 0% ……………….$5,580,084,786.13 (Using 8.5 assumption) </li></ul><ul><li>Actuarial loss if market return is 0%...........................$3,925,990,705.52 (Using 6.5 assumption) </li></ul><ul><li>Annual Impact using aggregate funding……………$416,000,000.00 </li></ul><ul><li>Annual Impact using PPA…………………………..$716,000,000.00 </li></ul><ul><li>Aggregate Funding Extends the Period over which the loss is recovered </li></ul>
    17. 17. Summary <ul><li>Who Is RSG? </li></ul><ul><ul><li>Core Competency </li></ul></ul><ul><li>Case Studies </li></ul><ul><ul><li>H&R Block vs. CPA Solution </li></ul></ul><ul><li>Defined Benefit Game </li></ul><ul><ul><li>Need a Specialist You Have Access to </li></ul></ul>
    18. 18. So What? <ul><li>Is Your, or your clients’, Plan Customized: </li></ul><ul><li>Funding Levels fro Key Employees/Owners </li></ul><ul><li>Demographic/Census Issues </li></ul><ul><li>Repeatable Profits & Cash Flow </li></ul><ul><li>Understand Flexibility & Restrictions </li></ul><ul><li>Consulting Services: </li></ul><ul><li>Create Strategy that Matches Business Objectives </li></ul><ul><li>Monitoring Regulatory Changes to Ensure Compliance (EGTRRA rewrites and PPA funding) </li></ul><ul><li>Advise on Options </li></ul>There are a lot of sellers of retirement plan products and services. There are very FEW qualified pension consultants. Retirement Solution Group
    19. 19. How do you, and your clients, fair? <ul><li>Run a free Plan analysis to look at Plan maximization and fiduciary oversight. </li></ul><ul><li>RSG is always available, 866-352-7731 </li></ul><ul><li>Steve Scott, Managing Partner x 21 </li></ul><ul><li>Scott Emering, Partner x11 </li></ul><ul><li>Ed Emering, Partner/FSA </li></ul><ul><li>Cynthia Baldwin, FSA </li></ul><ul><li>Julie Yanez, Administrator </li></ul><ul><li>Joey Rodriguez, Administrator </li></ul><ul><li>Christie Cheng, Education & Relationship Manager </li></ul><ul><li>Elvia Sanchez, Education & Relationship Manager (Spanish speaking) </li></ul><ul><li>Katy Janovsky, Office Management </li></ul><ul><li>Ric Gazarian, Consultant </li></ul>Retirement Solution Group
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