The Ohio Employee Ownership Center April 20, 2007 Basic Relationship Between the Company and the TPA Florence V. Zabarsky Zabarsky & Associates, LLC (440)

 A good relationship between the Company and the TPA is crucial to the effective and smooth operation of an ESOP, or any Retirement Plan  The TPA should be knowledgeable, but also personable and able to provide efficient service  The Company, or Plan Sponsor should be available to work with the TPA as needed to respond to any issues that arise

 Service Agreement contents  Annual Data Request  Partnership between the TPA, Client and Trust Company  Preliminary Report  Communication of testing results and issues  Other TPA Functions Basic Relationship Between the Company and the TPA

Service Agreement Contents Service Agreement Contents  A service agreement should be in place for each Client/TPA relationship  It should include a Schedule of Services, along with responsible party  Avoid functions that no one realizes they are responsible for

Service Agreement Contents Service Agreement Contents Routine TPA Duties:  Eligibility determination  Participant recordkeeping  Calculation/allocation of employer contribution  Calculation/allocation of forfeitures  Distribution processing  Compliance testing

Service Agreement Contents Duties Rarely Handled By TPA:  Making any decisions related to the Plan  To avoid being considered a fiduciary, the TPA cannot make any decisions in regard to the Plan. This would include method of handling any process that a Plan would have a choice in  Could include areas of the Plan Documents, testing, etc.  TPAs normally do not issue Plan disbursements

Annual Data Request  Employee (Census) Information  Company Information  ESOP Information

Annual Data Request Employee (Census) Information   SSN, Name   Dates   Birth   Hire   Termination   Rehire history   Hours   Compensation

Annual Data Request Employee (Census) Information  Any “other” contributions – 401(k), match, employer to another plan  Officers  Shareholders  Family Members  Pending QDROs

Company Information  Type of Company – C Corp, S Corp, etc.  Any mergers, acquisitions, etc.

Annual Data Request ESOP Information  Plan Assets – including Checking/Trust accounts, any mutual funds, any other investments  Detail of ESOP loan payments made  Amendments to Plan Document or Loan Document  Plan Year-end Stock Valuation  Fidelity bond information

Working with Client and Trust Company During the year-end allocation process it is important to have a representative available at both the client and the Trust Company, for any issues or questions that arise

Preliminary Report  Contents  Discussion in regard to

Communicating testing results and issues  Options and timing  Section 404 – Deductibility  Section 410b - Coverage  Section 415 – Annual Additions  Section 416 – Top Heavy

Final Report and Participant Statements

Other TPA Functions  Notification to Client of distributions  R.M.D.s  Diversification  Participants Eligible for Notification  Calculation of available amount  Annual Plan Sponsor Meeting  Employee Meetings

Sample Timeline  December 1  TPA sends a year-end data request to the Company  This should include an employee census request, as well as detail of all items needed  February 15  Company should remit all requested items to the TPA  March 15  TPA Delivers preliminary report to the client  March 31  Appraiser completes year-end stock valuation  March 31  Company reviews/gives approval of preliminary report  April  TPA delivers completed final report, participant statements, final testing and Form 5500 (if unaudited Plan) to client