Challenging the Retirement Plan Status Quo 2014 Employer Retirement Symposium – Best Ideas

On January 16, 2014, AFS 401(k) was proud to bring together some of the most well-regarded companies, nonprofit organizations and trade associations in the Washington, DC area to participate in our Employer Retirement Plan Breakfast Symposium. This event hosted the intersection of retirement plan professionals and industry leaders resulting in lively presentations and discussions geared towards answering the question: “How can we challenge the retirement plan status quo?” With experts from American Century Investments and PIMCO, and of course, the AFS 401(k) team, we tackled important issues facing American workers' retirement savings. Below is a quick recap of the Best Ideas presented: Changing The Retirement Plan Status Quo – AFS 401(k) Retirement Services American workers have been facing a retirement plan crisis for quite a while now: They need both more money for retirement in order to replace their income and longer life expectancy, and they are neither saving enough nor starting to save early enough in their career. Traditionally, people think of retirement income being from three sources, referred to as the “three-legged stool”: Social Security, personal savings, and pensions. It's no surprise that in this day and age the "retirement stool" is not supported by the same three "legs" as it used to be. Employer-sponsored 401(k) plans are the future of retirement savings and both employers and workers should consider adjusting to this changing landscape. Personal savings rates have been on the decline and it can be common for a 401(k) or other similar plan to be the only means by which many people save for the future. Due to the fact that more responsibility than ever is now on employers and employees to take control of their retirement savings, AFS 401(k) recommends that companies and their Retirement Committees should integrate their overarching mission, goals & values into their overall retirement plan structure and options. We advise those in control of their employer retirement plans to hold annual strategic review meetings in order to determine how current plan provisions, education and communications programs, and invest menus align with the way you are leading your organization. Part of challenging the status quo also involves rethinking several plan provisions that have long been considered “industry standard.” These include offering loans within retirement plans as well as automatic saving escalation provisions. Furthermore, AFS believes redesigning employer contributions to stretch matching formulas encourage a much higher targeted savings rates for employees. Over the past 5 to 10 years, consumers have been getting information (about anything and everything!) in drastically different ways. Retirement plan communications are no different. Whether it’s through s, social media, or face-to- face communication, discover what works best for your employees and target them in a way that will most efficiently engage them in saving for retirement.

Using Inertia to Work for you: Re-enrollment as a Strategy for helping Participants and Sponsors – American Century Since defined contribution plans are becoming increasingly more important to the success of a retirement-ready society, Diane Gallagher outlined some ways employers can assist their employees to save more. One of those ways is through target-date funds. Gallagher outlines that inertia, the preference to keep things as they are, is one of the major reasons people have trouble saving more for retirement. Plan sponsors can help workers overcome inertia by making sound plan design choices such as prudent qualified default investment (QDIA) - selection, automatic enrollment, and auto-escalation. In a survey done by American Century, 82% of pre-retirees agree with the statement, “I wish I could talk to the younger me and tell myself to save more than I did” and more than 8 out of 10 pre-retirees acknowledged that they did not save enough for retirement during the first 10 years of their working lives. With this understanding of many pre-retirees thoughts and experiences, employers can do a multitude of things in order to change the course of their organization’s retirement plan. By employing automatic features such as auto-escalation and auto- enrollment at a higher contribution levels this can have a dramatic impact on maximizing participant savings rates. In this same study of pre-retirees, significant percentages agreed that these features have had a positive outcome on their retirement savings: 58% for automatic enrollment, 73% for automatic escalation, and 58% for Target-Date Funds as default investment options.

Interest Rates and their Implications for You: Making Sense of the Markets – PIMCO The Butterfly Effect is most basically understood as the concept that small changes can in turn have a dramatic impact elsewhere. This idea can be applied to what is happening with the Federal Reserve and the fixed income markets. The Fed’s strategy of lowering interest rates means that people and corporations borrow more from banks and that borrowed money ends up stimulating the economy. The Federal Reserve has also utilized Quantitative Easing to impact the economy: a program wherein the Fed purchases U.S. government securities to stimulate the financial markets. This increased demand for bonds, along with reduced rates, pushed down yields, which means investments in riskier assets became more attractive to investors. The uptick in these investments can improve investor’s account balance and, through the psychology of increased net worth, can also the economy. The Fed has now begun a process referred to as “tapering,” slowing the Quantitative Easing policy by reducing their amount of monthly bond purchases. Begun in 2013, the tapering effect initially created market concerns which led to a correction in bond markets. In December the Federal Reserve’s purchasing of bonds went from $85BN to $75BN and it is intended to decrease the buying of these securities by $10BN each month. PIMCO believes this will settle bond prices and relieve the worst of market pressures. It is important to keep in mind though that Fed chairman Ben Bernanke has stated that this tapering program will take quite a long time. PIMCO believes the Federal Funds rate will be well-positioned and closer to 0.25% % by December 2015, compared to 0 – 0.25%, today. Summary We believe in the power the 401(k) plan can have in changing the way people prepare for retirement. In order for the program to be successful, both employers and employees need to work on challenging the retirement plan status quo. We want employees to enjoy their life – all of it. That’s why we help make complex retirement plans simple. Contributors: AFS 401(k) Retirement Services, LLC, American Century Investments, and PIMCO

We make complex retirement plans simple Securities and Advisory services offered by Commonwealth Financial Network, ® Member FINRA/SIPC, a Registered Investment Adviser. The material provided is for general informational purposes only and does not constitute either tax or legal advice. AFS 401(k) Retirement Services 7700 Old Georgetown Rd. Suite 630 Bethesda, MD (301)