Retirement planning is a constantly changing subject. John Friar, AIF, of HJB Financial walks employers through the new landscape of retirement planning.

1. The New Rules of Retirement Planning
Presented By:
John Friar, AIF®
Director of Corporate Retirement Plans
Hausmann-Johnson Bauch Financial

2. Today’s Agenda
 Look at Why Retirement Plans Demand So Much Attention
 Roles and Responsibilities Inside a Retirement Plan
 What Areas are Being Scrutinized
 Ultimately, What Can Plan Sponsors Do

3. What’s So Important About
Retirement Plans

4. America’s Top Financial Concerns
18 to 29 30 to 49 50 to 64 65+
Not having enough money for retirement 50% 70% 68% 37%
Not having enough money for kid’s college 46% 55% 23% 8%
Not being able to pay medical costs of
serious illness or accident
52% 54% 58% 43%
Not being able to pay off debt 47% 45% 42% 20%
Not able to maintain standard of living you
enjoy
52% 44% 52% 41%
Not able to pay normal monthly bills 35% 37% 46% 33%
Not able to pay for normal health care costs 40% 33% 38% 29%
Not able to pay rent, mortgage or other
housing costs
40% 30% 31% 30%
Not able to make minimum payment on
credit cards
14% 17% 18% 15%
Gallup, Economy and Personal Finance Survey, April 2014

5. Snapshot of 401(k) Plan Activity
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Average Account Balance
$72,383
Median Account Balance
$18,433
as of
12/31/13
Only 20% of participants had account balances >$100,000
Only 10% of participants had account balances > $200,000
Source: Employee Benefit Research Institute

6. Retirement Income Concerns

7. Retirement Income Concerns
Participants lack knowledge of life expectancy
and sustainable withdrawal rates
RealityBelief
20 yrs. 30 yrs.
7-10%
annual draw
down
4% annual
draw down

8. Defining What Your Role Is

9. Definitions
Investment Fiduciary – Someone who
is managing the assets of another
person and stands in a special
relationship of trust, confidence,
and/or legal responsibility.

10. Investment Fiduciaries - Stewards
Stewards – Manage the
investment decision making
process (trustees,
investment committee
members, plan sponsors)

11. The Investment Steward Cont…
More than 5 million men and women
serve as:
• Members of investment committees of
retirement plans, foundations, and
endowments
• Trustees of private trusts
Stewards manage more than 80% of the
nation’s liquid investable wealth, yet
few have received formal training for
their role.

12. Investment Fiduciaries - Advisors
Advisors – Provide comprehensive and
continuous investment advice (wealth
managers, financial advisors, trust
officers, financial consultants,
investment consultants, financial
planners)

13. Investment Fiduciaries – Advisors Cont…
• 3-21 Fiduciary
• 3-38 Fiduciary

14. Investment Fiduciaries – Advisors Cont…
Most Stewards share their fiduciary
responsibilities with Investment Advisors.
Even so, Investment Advisors:
• Often have a limited understanding of the
fiduciary code of conduct, and
• Have no uniform advanced education
requirements.
Therefore, effective due diligence in
selecting Investment Advisors is
critical.

15. Investment Fiduciaries – Investment Managers
Managers – Make
investment decisions,
and select the individual
securities to implement a
specific investment

16. Investment Fiduciaries – Investment Managers Cont…
Investment Managers make investment decisions. They
select the individual securities to implement a specific
investment mandate (such as large cap growth).
The Steward and Advisor have a fiduciary duty to demonstrate
that Investment Managers have been prudently selected and
monitored.

17. Responsibility vs. Liability
Fiduciary responsibilities can be
shared but not abdicated.
Liability exposures exist where there are
unfulfilled responsibilities.
Fiduciaries can reduce liability by
identifying and filling gaps in their
practices.

18. We Haven’t Had to Worry About This Before!

19. President’s budget proposal
Mandatory autoIRA for employer with more than 10 EEs
w/ 3 yr. $500 tax credit
Limit the total accrual of tax-favored retirement benefits
(basically the 415(b) limit)
Require plans to allow EEs with 3 yrs of 500 hrs. to defer
into 401(k) plan
Exempt accounts of $100,000 or less from RMD rules
Encourage state retirement savings initiatives

20. DOL 2013 Enforcement Results

21. DOL Guidance Definition of “Fiduciary”
•The proposal significantly expands the definition of fiduciary
investment advice
•Level-fee advisors generally not affected, except with
respect to rollovers
•Recommending an IRA rollover becomes a fiduciary act
requiring level fees; BIC exemption
•Educating participants not considered a fiduciary act

22. ERISA Litigation - fee litigation
Tibble v. Edison International (9th Cir. 2013, Supreme
Ct. May 18, 2015)
 SC considered whether a fiduciary’s allegedly
imprudent retention of an investment is an ‘action’ or
‘omission’ that triggers the running of the 6-year
limitations period
 SC ruled that basically each review of (or failure to
review) the plan’s investment options starts a new
six-year clock running for a potential claim of a
fiduciary breach with respect to those investments

23. ERISA Litigation
Tibble v. Edison International (cont.)
Key takeaways:
•A fiduciary’s duty to monitor investments is separate from the
duty to prudently select the investment
•“Trustee must ‘systematically consider all the investments of
the trust at regular intervals’ to ensure they are appropriate”
•A “fiduciary is required to conduct a regular review of its
investment with the nature and timing of the review contingent
on the circumstances”
•A fiduciary has a “duty to monitor investments and remove
imprudent ones”

24. A Word About IRA Rollovers
Great opportunity to discuss rollovers from qualified plans
to IRAs
Regulatory scrutiny on advice concerning these
transactions
DOL definition “Conflict of Interest Rule – Investment
Advice”
FINRA regulatory Notice 13-45
Remember: leaving assets in the plan should always be
discussed

25. TDF Glide Paths – “to or through”
“To” retirement - for participants who expect to
withdraw most of their money at the target date.
•They typically maintain their allocations once they reach
the target date.
“Through” retirement - for participants who plan to
gradually withdraw from their accounts after the
target date.
•They continue adjusting the allocation for 20 to 30 years
after the target date.

26. TDF Glide Paths – “to or through”
Example of equity range in two funds
2010 Fund 2050 Fund
Low
Equity
20%
Other
Low
Equity
38%
Other
High
Equity
70%
Other
High
Equity
95%
Other

27. What To Do?

28. 1. Know standards, laws, and trust provisions
2. Diversify assets to specific risk/return profile of client
3. Prepare investment policy statement
4. Use “prudent experts” and document due diligence
5. Control and account for investment expenses
6. Monitor the activities of “prudent experts”
7. Avoid conflicts of interest and prohibited transactions
8. Work with an advisor who is committed to the 401(k)
industry
8 Fiduciary Precepts

29. “The greatest enemy of a good
plan is the dream of a perfect
plan.”
Carl von Clausewitz – Prussian General

30. Thank you!
For More Information Contact:
John Friar, AIF®
Financial Consultant/ Director of Corporate Retirement Plans
Jfriar@hjbfinancial.com
Direct: 608-252-9634

31. Webinar CE Credit
SHRM Activity ID:
15-3P543
1 hour
HRCI Program ID:
252085
1.0 HR (General)
recertification hour
*The use of this seal is not an endorsement by the HR
Certification Institute of the quality of the activity. It means that
this activity has met the HR Certification Institute’s criteria to be
pre-approved for recertification credit.