Understanding ERISA Fiduciary Rules 1/15 E A For broker/dealer use only. Not for use with the public. No bank guarantee Not a deposit May lose value Not FDIC/NCUA insured Not insured by any federal government agency

For broker/dealer use only. Not for use with the public. Presented by: [Name of Financial Professional, Company Name] [Name of Pacific Life Wholesaler, Pacific Life] [Name of Financial Professional] and [Company] are not affiliated with Pacific Life or its affiliated companies.

 Employee Retirement Income Security Act of 1974 (ERISA) fiduciary framework – Types of fiduciary – Fiduciary responsibilities  Department of Labor (DOL) fiduciary focus – Regulatory changes – Enforcement trends  Advisor guidelines For broker/dealer use only. Not for use with the public. Agenda Pacific Life, its affiliates, and their respective representatives do not provide tax, accounting, or legal advice. Any party that acts as a fiduciary should seek advice based on that party’s particular circumstances from an independent tax advisor or attorney. Pacific Life and its affiliates do not provide any employer-sponsored qualified plan administrative services or impartial investment advice and do not act in a fiduciary capacity for any plan. Please contact your plan administrator for any questions relating to your 401(k) plan.

 Employee Retirement Income Security Act of 1974 (ERISA) – Governs those who manage an employee benefit plan and its assets (called “fiduciaries”) – Fiduciaries have a responsibility to protect the interests of plan participants and handle plan assets properly  Department of Labor (DOL) – Guidance – Enforcement For broker/dealer use only. Not for use with the public. ERISA Fiduciary Framework

 Investment support – Investment advisors subject to fiduciary standard—Securities and Exchange Commission (SEC) – Registered representatives follow a suitability standard—Financial Industry Regulatory Authority (FINRA)  SEC considering a uniform fiduciary standard – Request for data and other information— March 1, 2013 – Soliciting descriptive and qualitative data on the benefits and costs of ▪ The current standards of conduct ▪ A uniform fiduciary standard For broker/dealer use only. Not for use with the public. Separate Investment Fiduciary Rules

ERISA Fiduciary Responsibilities 3 4 Diversify Investments Follow Plan Document 2 Act Prudently 1 Exclusive Purpose Procedural due diligence is key 5 Pay Only Reasonable Plan Expenses For broker/dealer use only. Not for use with the public.

 Liability – Personal liability for plan losses ▪ Restore plan losses (including interest) ▪ Return ill-gotten gains ▪ Pay expenses for the corrections process (e.g., appraisals, calculations) – Co-fiduciary liability ▪ Fail to take corrective actions once aware of a breach ▪ Knowingly participate  Enforcement – DOL sanctions and penalties ▪ Civil ▪ Criminal – ERISA lawsuits may be initiated by a plan fiduciary or by affected participant(s) ▪ Stock-drop cases ▪ Excessive fees For broker/dealer use only. Not for use with the public. Understanding Fiduciary Liability

Types of Fiduciaries For broker/dealer use only. Not for use with the public. Named Fiduciary 3(16) Plan Administrator 3(21) Investment Advisor 3(38) Investment Manager ERISA Retirement Plan

 Fiduciary typically named in plan document (e.g., plan sponsor)  Can be: – An individual—named personally or by position – A committee – An entity  Can appoint others to share the fiduciary role—but cannot fully transfer fiduciary responsibilities For broker/dealer use only. Not for use with the public. Named Fiduciary

 Named in plan document or appointed by named fiduciary (typically the plan sponsor)  Discretion to interpret plan document and establish plan policies  Different than a recordkeeper or third- party administrator (TPA) ERISA 3(16) Plan Administrator For broker/dealer use only. Not for use with the public. 3(16) Plan Administrator

When Is a Financial Advisor a Fiduciary? For broker/dealer use only. Not for use with the public.  Shares fiduciary responsibility with named fiduciary  Subject to ERISA fiduciary standards  Discretionary control over plan investments  Relieves named fiduciary of liability for investment decisions 3(38) Investment Manager 3(21) Investment Advisor

 Discretionary control over plan investments – Legal responsibility and liability for investment decisions – Relieves plan sponsor of fiduciary responsibility for investment decisions  Written agreement  Must be a bank, insurance company, or RIA ERISA 3(38) Investment Manager 3(38) Investment Manager For broker/dealer use only. Not for use with the public.

 Primary path to ERISA 3(21) fiduciary advisor status  Render investment advice for a fee (investment advisor)  Other ERISA 3(21) fiduciaries  Exercise discretionary authority or control over management of the plan or plan assets  Have discretionary authority or responsibility over administration of the plan For broker/dealer use only. Not for use with the public. ERISA 3(21) Fiduciary Status 3(21) Investment Advisor

Current DOL Reg (c): 5-Part Test Leading to Fiduciary Status 1. Render advice as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property 2. Perform duties on a regular basis 3. Give advise pursuant to a mutual agreement, arrangement, or understanding with the plan or a plan fiduciary, that 4. The advice will serve as a primary basis for the investment decisions with respect to plan assets, and that 5. The advice will be individualized based on the particular needs of the plan For broker/dealer use only. Not for use with the public. ERISA 3(21)—Investment Advice for a Fee

DOL Proposes to Alter 5-Part Test Purpose DOL rationale for change  Expand the definition for the circumstances under which a person will be considered a “fiduciary” when providing investment advice to plan sponsors and participants of retirement plans  Plan sponsors and participants have increased their dependence on advisors and consultants because of investment complexity  Non-fiduciaries are not subject to requirements under ERISA For broker/dealer use only. Not for use with the public.

 Status—re-proposed regulations anticipated in 2015  Eliminates “regular” and “primary” basis requirements  Impact of the proposed rule change – Expand group of financial advisors subject to ERISA’s strict standards of fiduciary responsibility – More financial advisors will be classified as fiduciaries – Current fee arrangements will be prohibited if the financial advisor changes status from non-fiduciary to fiduciary – Clarify fiduciary status relative to IRA rollovers For broker/dealer use only. Not for use with the public. More Advisors Will Likely Be Fiduciaries

 DOL re-proposed fiduciary definition regulations – May expand definition of ERISA investment fiduciary – Likely to clarify fiduciary rule regarding IRA rollovers For broker/dealer use only. Not for use with the public. Fiduciary Rules and IRA Rollovers  If not an ERISA fiduciary – You do not become fiduciary for advising on rollovers  If and ERISA fiduciary – Rollover advice may be a prohibited transaction

 Current rules – Non-fiduciary advisor—rollover advice does not result in fiduciary status – Fiduciary advisor—recommending an IRA rollover is potentially a prohibited transaction – Issue likely to be addressed in proposed fiduciary rules  FINRA Notice reminds firms of responsibilities when – Recommending an IRA rollover – Marketing IRAs For broker/dealer use only. Not for use with the public. Fiduciary Rules and Rollovers

 DOL recovered $600 million for ERISA plans (health and retirement) in fiscal year 2014 – $205 million—prohibited transactions corrected and plan assets protected – $20 million—voluntary fiduciary correction program – Closed 3,928 civil and 365 criminal investigations For broker/dealer use only. Not for use with the public. Enforcement Trends

ERISA Litigation  Increase in class action lawsuits  Excessive fees Tibble v. Edison (Supreme Court) ▪ Breach of fiduciary duty of prudence to select retail fund share class for 401(k) plan when lower-cost institutional shares were available Tussey v. ABB. Inc. (March 2014) ▪ Breach of fiduciary duty of prudence when failed to monitor recordkeeping fees ▪ Failed to follow investment policy statement Braden v. Walmart (Settled 2012) ▪ $13.5 million settlement to resolve claims that fiduciaries imprudently offered high- priced retail funds in the 401(k) plan For broker/dealer use only. Not for use with the public.

Financial Advisor Dos & Don’ts for building a suite of support services.

 Take advantage of educational opportunities – Broker/Dealer resources – Industry conferences – Free webinars – DOL website – Industry designations Don’t: Lose business because you’re unprepared Do: Invest the time to understand the fiduciary rules For broker/dealer use only. Not for use with the public.

 Monitor new developments – Locate trusted sources of information – Keep an eye on the DOL proposal to expand the definition of investment fiduciary – Follow SEC efforts to analyze regulatory standards for broker/dealers and investment advisors Do: Invest the time to understand the fiduciary rules For broker/dealer use only. Not for use with the public.

 Evaluate your current service model – Non-fiduciary role – Fiduciary support services  Review your service agreements – Fiduciary (or non-fiduciary) status – Plan sponsor’s role Don’t: Stumble into unintended legal exposure as a functional fiduciary Do: Define the scope of your fiduciary support services For broker/dealer use only. Not for use with the public.

 Additional considerations for fiduciary services – Broker/Dealer requirements ▪ Education ▪ Designations ▪ Experience – Compensation structure – Bonding requirements – Fiduciary insurance coverage Do: Define the scope of your fiduciary support services For broker/dealer use only. Not for use with the public.

Don’t: Avoid the fiduciary conversation because you are not a fiduciary Do: Build your suite of fiduciary support services  Non-fiduciary support  Outsourced fiduciary services  Helping plan sponsor fulfill fiduciary responsibilities – Fiduciary education – Investment selection and monitoring – Plan wellness metrics For broker/dealer use only. Not for use with the public.

Do: Build your suite of fiduciary support services  Plan sponsor fiduciary education  Free DOL Resources – – eLaws® ERISA Fiduciary Advisor – Publications ▪ Meeting Your Fiduciary Responsibilities ▪ Understanding Retirement Plan Fees and Expenses ▪ Selecting and Monitoring Service Providers for Your Employee Benefit Plan ▪ Reporting and Disclosure Guide for Employee Benefit Plans For broker/dealer use only. Not for use with the public.

 Investment selection and performance monitoring – fi360 tools – Due diligence breakdown – Investment comparison report – Investment profile report – Snapshot report Do: Build your suite of fiduciary support services For broker/dealer use only. Not for use with the public.

 Benchmarking – Plan objectives ▪ Plan cost – Quantitative metrics ▪ Participation rates ▪ Average account balances Do: Build your suite of fiduciary support services

 Updates – Regulatory developments – Enforcement trends – Ongoing fiduciary education  Explain how you’re helping them satisfy their responsibilities  Stress the importance of documenting their actions Don’t: Expect your client to connect the dots Do: Incorporate fiduciary topics into client meetings with plan sponsors For broker/dealer use only. Not for use with the public.

 ERISA fiduciary framework is designed to protect participant interests  Multiple fiduciary roles  DOL proposes to expand the definition of fiduciary  Fiduciary rules create an opportunity for financial advisors to deliver valuable support For broker/dealer use only. Not for use with the public. Summary

Investors should carefully consider an investment’s goals, risks, charges, strategies, and expenses. This and other information about Pacific Funds are in the prospectus that should be read carefully before investing. For broker/dealer use only. Not for use with the public.

Effective December 31, 2014, Pacific Life Funds and its family of mutual funds changed its name to Pacific Funds. In addition, individual funds were also renamed. For more information, please visit fi360 is not affiliated with Pacific Funds or Pacific Select Distributors, LLC. Mutual funds are offered by Pacific Funds. Pacific Funds are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA), and are available through licensed third-party broker/dealers. For broker/dealer use only. Not for use with the public. Pacific Funds P.O. Box 9768 Providence, RI (800) , Option 2