MAKING A GOOD 401(k) PLAN EVEN BETTER

TOPICS COVERED  Increasing Participation  Understanding Your Plan  Roth 401(k)  Safe Harbor  Investment Policy Statement  Managing Fiduciary Responsibility

INCREASING PARTICIPATION  Annual Employee Education Meetings (or more frequent)  Mandatory attendance for new hires  Periodic distribution of literature to promote plan and relevant retirement planning or investment topics  Decrease eligibility waiting period to join plan Can keep the waiting period for employer contributions longer - known as “Dual Eligibility”  Offer more frequent entry dates

INCREASING PARTICIPATION  Incorporate a match formula that requires / entices employees to defer to receive an employer contribution  Design a match formula that requires greater deferrals to maximize match Instead of matching 100% of 3% = a maximum match of 3%... Offer a match of 50% of 6% = a maximum match of 3%

INCREASING PARTICIPATION  Auto Enrollment  If no affirmative deferral election is made by employee (including 0%), they are automatically enrolled in the plan for a set deferral % (typically 3 – 6%)  Have option to also auto-increase beginning deferral % each year by 1% up to a maximum of 10%  Employee has 90 days to reverse initial deferrals out of plan without penalty  Stopping or modifying future deferrals determined by provisions of the plan

UNDERSTANDING YOUR PLAN Need to understand and evaluate provisions  Eligibility Waiting Period  Is there also a minimum # of hours required or simply length of service?  Dual Eligibility  Entry Date  Exclusions by classification  Plan’s Definition of Compensation  Deferrals  Changes to deferrals

UNDERSTANDING YOUR PLAN Need to understand and evaluate provisions (continued)  Match  Annual Employer Contributions  Vesting  Withdrawals  Using and Allocating Forfeitures  Updating participant records

ROTH 401(k)  A new, optional, account source within an existing 401(k) retirement plan  Combines some features of Traditional 401(k) and Roth IRA  Gives the OPTION to set aside money for retirement on an after-tax basis  Earnings grow on a tax-deferred basis and qualified withdrawals made tax free (at age 59 ½ and held the account for 5 years)  NO INCOME LIMITS – all participants are eligible  Can also allow pre-tax sources to be ‘converted’ to Roth 401(k) source

SAFE HARBOR PLAN DESIGN  Allows employers to avoid Compliance Testing on 401(k) deferrals  Highly Compensated Employees can defer up to plan or IRS maximum each year  Requires an employer contribution to plan (limits and restrictions apply)  Certain Match or Profit Sharing formulas qualify  Generally requires accelerated vesting (immediate or 2 year)  Can be made in addition to other “non-safe harbor” plan contributions

INVESTMENT POLICY STATEMENT  Intended to assist Plan Fiduciaries to make investment related decisions in a prudent manner  Outlines underlying philosophies and process for selection, monitoring and evaluation of investments offered to participants  Should be reviewed and applied at least annually  Third party administrator or plan provider does not necessarily provide or maintain this even if they have provided investment menu  If investments challenged by participants, a sound Investment Policy Statement and process can provide protection

THE ROLE OF A PLAN FIDUCIARY  Many activities associated with plan operations make the person performing them a fiduciary  Fiduciary status based on functions, not job title  Act on behalf of participants, subject to standards of conduct, and liability  Act solely in interest of participants  Carry out duties prudently  Follow plan documents  Diversify investments  Pay reasonable plan expenses

MANAGING FIDUCIARY RESPONSIBILITY  Maintain an updated, IRS approved document  Be aware of responsibilities as Fiduciary  Fiduciaries and Plan Committee meet at least annually  Maintain due diligence file  Investment employees’ deferrals in a timely manner  Review investments at least annually including performance and fees (document this review)  Offer employee education at least annually

SUMMARY  A few simple improvements and changes can allow for significant benefits  Periodically monitor and review what is currently offered  Document reviews  Be aware of and consider new alternatives and improvements