Laura Ann Bartlett, CEBS, AIFA Vice President, Institutional Wealth Your Tribe’s Retirement Plan: The DOL’s Fiduciary and Conflict of Interest Rule Laura Ann Bartlett, CEBS, AIFA Vice President, Institutional Wealth

Important Disclosure This presentation is not intended to serve as a comprehensive review of the Definition of Investment Advice under the Fiduciary and Conflict of Interest Rule. Please consult the documents and materials published in the Federal Register by the Department of Labor relating to these matters. The opinions expressed herein reflect the judgment of the author at this date and are subject to change without notice and are not a complete analysis of any sector, industry or security. The content in this document is for informational and educational purposes only and does not constitute legal, tax or investment advice. Always consult with a qualified financial professional, accountant or lawyer for legal, tax and investment advice. Investments and insurance are not insured by the FDIC; are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. All investments are subject to risks, including possible loss of principal.   © Bank of Arizona, a division of BOKF, NA. Member FDIC. Equal Housing Lender. The Private Bank at Bank of Albuquerque provides products and services through BOKF, NA and its various affiliates and subsidiaries

Today’s agenda Who is a retirement plan fiduciary and how has the definition changed? What does it mean to be a fiduciary under the new rule? Why should you be concerned about the new rule? Practical steps you can take to minimize liability How BOK Financial can help

Who is a retirement plan fiduciary ? Any person or entity named in plan document Any person or entity who has authority and control over management of a retirement plan or its assets Any person or entity who offers investment advice with respect to plan assets, for a fee The fiduciary standard applies to plans governed by ERISA Commercial enterprise plans For other plans, operating at a fiduciary standard is a strongly advised best practice

A fiduciary must: Act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them Carry out duties prudently Follow plan documents (unless inconsistent with ERISA) Provide diversified plan investment options Monitor plan expenses

Key Best Practices for Fiduciaries: Manage Your Risks Create and properly structure an investment committee Ensure operational, legal, and regulatory compliance Review and benchmark plan investments and fees Prudently select, appoint, and monitor service providers Measure participant outcomes and investment allocations

Be aware! Fiduciary standard is the highest standard in law You are held personally responsible and liable for decisions that you make as a fiduciary Examples of fiduciary legal activity Inadequate/misleading disclosures Excessive fees Fidelity, MassMutual, Putnam, and other service providers Charged with excessive fees, self-dealing, and conflicts of interest

Know Who Fills Key Roles in Your Plan Trustee Recordkeeper Investment advisor Auditor Custodian Investment provider “Do you have written agreements with each provider and do you know what they charge?”

Key Best Practices: Limit Your Liability Document the processes used to carry out fiduciary responsibilities Form administrative/investment plan committee Hold regular meetings and retain minutes of meetings Give participants control over the investments in their accounts Ensure compliance with 404(c) and QDIA provisions, if applicable Hire a service provider to handle fiduciary functions Structure agreement so that the person or entity assumes liability for those functions selected

DOL Fiduciary & Conflict of Interest Rule Published into Federal Register on April 8, 2016 Goes into effective today! Applies to: Qualified Retirement Plans subject to ERISA IRAs Health Savings Accounts Coverdell Education Accounts Participants and beneficiaries in these plans Re-defines who is a fiduciary and what constitutes fiduciary advice Expands the situations and activities that will give rise to fiduciary advice More advisers and activities will be subject to a fiduciary standard Broad impact on investment fees, advisor compensation, and investment offerings

How does the law apply to “non-ERISA” plans? Plans subject to Title I of ERISA are covered by the new rule: 403(b) plans of public educational institutions 403(b) plans operated by private sector employers 403(b) plans operated by tax exempt employers Plans not subject to Title I of ERISA are not covered: Church plans – those that are covered by the steeple Governmental 401(k) plans Governmental 457 plans However, following a fiduciary standard is a widely agreed upon industry best practice for a plans

Who is an investment fiduciary under the new rule? Anyone who delivers “investment advice,” for a fee, including: Recommendations on acquiring, holding, disposing or exchanging securities or other investment property, including annuities/insurance Recommendations on management of securities/other property Recommendations on selection of other persons to provide investment advice Recommendations on distributions from a retirement plan or an IRA Recommendations regarding rolling assets from plan to IRA, IRA to IRA, or plan to plan and how those assets are invested after they are rolled over ERISA’s five-part test for defining investment advice has been eliminated

What other activities are now fiduciary activities? Providing recommendations, such as: Communications and conversations not previously considered advice Recommendations regarding the type of investment structure (brokerage vs. advisory) Any investment recommendation made to an individual IRA holder, plan participant, or their beneficiary All manner of recommendations related to rollovers Even a “sit tight for now” message would be advice “A communication that based on its content, context, and presentation would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a certain course of action.”

Requirements of an ERISA Investment Fiduciary Discharge the following duties solely in best interest of participants and beneficiaries: Duty of loyalty Duty of prudence Duty to diversify investments Duty to follow the plan (as long as it complies with ERISA) Self-dealing is absolutely prohibited – cannot accept a payment that creates a conflict of interest, unless there is an exemption Fees must be reasonable and “level” – compensation cannot vary based on recommendations made, unless there is an exemption

Why plan sponsors should be aware? Some advisors do not serve as fiduciaries today Broker-dealer firms operate under a suitability standard Investments must be suitable Compensation often varies based on recommendations Variable compensation may continue, but only under Best Interest Contract (BIC) exemption Additional contracts and disclosures will be required Procedural changes are likely Service providers are unlikely to provide investment fund lineups, unless they are engaged for a fee and acting as a fiduciary

Why should plan sponsors be aware? Many more communications will be considered advice Individually tailored discussions with a specific recipient Is the employee a tribal employee or a commercial enterprise employee? Suggestions to act ....or not act Providing a selective list of securities Even if no recommendation is made Discussions with participants will focus more on educating If plan sponsor and/or participant desire specific recommendations, the service provider or adviser must act in a fiduciary capacity

Why should plan sponsors be aware? Service providers are unlikely to name specific funds in asset allocation models, or give specific fund names to participants Assistance with assembling fund line-ups must be based on objective financial data and independent benchmarks Recommendations provided via participant services group or website may be more vague and less tailored to the individual: Less ability to assist with retirement decisions Less ability to assist with asset allocation decisions Provider’s proprietary funds will need to comply with the rule and related exemptions. A specific exemption exists to permit proprietary investments. Investment Education provision will apply to participant education services Less handholding will be available to your participants!

Why should plan sponsors be aware? The DOL believes that Advisers should act as Fiduciaries Institutions and advisers who already hold themselves to a fiduciary standard have significant advantages Compliance structure in place Processes and procedures exist to support fiduciary standard Have made the needed investments in people and systems Limitations will be placed on advisers and institutions that do not act in a fiduciary capacity Will only offer education and tools Other limitations may emerge in their service model Ask if your provider and your adviser are prepared to act in a fiduciary capacity!

What new services may your provider decide to offer? Managed accounts within retirement plans (and IRAs) “Robo” advice or other computer driven models Greater desire to serve terminated participants within your plan (in lieu of encouraging a rollover) Rollover tools to aid advisers in determining if the rollover is in the participant's best interest Expanded fee-based financial planning services 3(21) or 3(38) fiduciary investment advisory services

BOKF Can Assist with Consulting We offer both 3(21) and 3(38) Investment Fiduciary Services 3(21) Advisor is directed and serves as co-fiduciary Your committee makes final decision regarding investment funds Based on the investment analysis that we provide you 3(38) Advisor has full discretion to act on behalf of your committee We make and implement the final decisions on investment funds Then advise you of our decisions and the basis on which we made them We accept full fiduciary responsibility for the investments You retain the fiduciary duty to monitor a fiduciary advisor Ensure that fees are reasonable for services rendered Ensure prudence of the advisor and their process

BOKF Can Provide a Product Solution BOK Fiduciary Solution - bundled, single source, 3(38) Fiduciary Advisor and Plan Service Provider Product We serve as: Trustee and custodian Plan recordkeeper, compliance, and administration Investment provider Participant educator Full fiduciary investment advisor We provide: Guidance on plan design and best practices Simplification of plan administration Extremely competitive fees Comprehensive, diversified fund line-up

BOK Financial supports many Tribes and Pueblos with these services We can assist in making sure your plans are established properly to limit risk to your tribe We can educate you and the rest of your leaders on these new rules and how they apply to Tribes and Pueblo We operate at a fiduciary standard at all times, to ensure that our clients receive advice that is conflict-free We help educate your plan participants with fiduciary-level advice Our client service offices are located in New Mexico and Arizona

In Conclusion Impact of this new rule is both deep and broad across financial services industry DOL has expanded its regulatory reach considerably Specific changes will vary by service providers, broker-dealer firms, business models, etc. Prudent plan sponsors should be educated and prepared to ask appropriate questions of their service providers More plan sponsors will choose to hire a service provider that can serve in a fiduciary capacity Be sure that you document the prudent execution of your own duties as a fiduciary at all times

Beware the Law of Unintended Consequences! Feel free to call on us for assistance at any time!

Thank you for your interest! Questions? Laura Ann Bartlett, CEBS, AIFA lbartlett@bokf.com 602-808-5347