1 Retirement Plans Overview and Regulatory Update for 2012 Presented by: Mary Scott, CFP ®, CRPS ® Vice President, Retirement Plan Specialist

2 Today’s Agenda Overview of Employer Sponsored Plans –Defined contribution and defined benefit plans Fee Disclosure Rules for 2012 –Service provider fee disclosures –Participant level fee disclosures

3 MANDATORYVOLUNTARY Social Security Unemployment Tax Health, Medical & Retirement Plans TAX FAVORED SEP/SAR-SEPSIMPLE-IRAQUALIFIEDNONQUALIFIED457 Deferred Compensation Top Hat (SERP) Excess Benefit DEFINED CONTRIBUTION Profit Sharing Age Weighted/Cross Tested P/S 401(k)/SIMPLE 401(k) Money Purchase Pension ESOP DEFINED BENEFIT Pension 403(b)457(b) Employer Benefit Plans

4 Retirement Plan Options SEP-IRA SIMPLE-IRA Profit Sharing 401(k) Profit Sharing Defined Benefit 403(b)

5 SEP-IRA Flexible, employer-only contributions are made to individual IRAs on behalf of employees Limited fiduciary liability as employees direct their own IRA investments Simple to establish and maintain with minimal administration costs

6 SEP-IRA Limits Maximum contribution for a participant is 25% of comp ($250k max) up to $50k Employer can deduct a max of 25% of eligible payroll Deadline for plan set up and contributions is tax filing due date, plus extensions

7 SIMPLE-IRA For business owners who want employees to share responsibility for their retirement Funding to SIMPLE IRAs, where employees direct investments, minimizes employer fiduciary issues Plan administration costs are minimal

8 SIMPLE-IRA Limits Employee deferral limit for 2012 is $11,500 with a $2,500 catch up for participants over age 50 Mandatory employer contribution –3% match or –2% non-elective contribution

9 Profit Sharing Employer funded plan Flexible employer contributions Vesting schedule available Generally contributions are prorated based on each participants share of total compensation May allow for loans

10 Profit Sharing Limits Maximum contribution for participant is 100% of compensation up to $50k (2012) Employer can deduct a max of 25% of eligible payroll Plan must be established by end of taxable year Contributions must be made by tax filing deadline

11 Age-Weighted Profit Sharing Profit Sharing plan designed to provide greater benefits for older employees Plan bases contributions on benefits at retirement age, not on allocations in the current year Sophistication of plan design requires a higher level plan document, testing, and more costly administration

12 New Comparability Profit Sharing Profit Sharing plan designed to vary the benefits by different employee groups Plan measures benefits at retirement, not on contribution in current year - similar to Age Weighted plan Plan appeals to businesses interested in favoring specific employees

13 Employees Age Compensation Standard Integrated Age-Weighted New Comp Doctor, B*44$250,000.00$50, Doctor, A*53$250,000.00$50, Group A$500,000.00$100, Asst, C23$26,000.00$5,200.00$4,370.67$1,138.74$1, Asst, B26$26,000.00$5,200.00$4,370.67$1,414.66$1, Asst, A46$30,000.00$6,000.00$5,043.08$6,933.75$1, Nurse, B29$40,000.00$8,000.00$6,724.11$2,703.73$2, Nurse, A40$60,000.00$12,000.00$10,086.17$8,985.61$3, Receptionist, A24$24,000.00$4,800.00$4,034.47$1,129.98$1, Group B$206,000.00$41,200.00$34,629.18$22,306.47$10, Total$706,000.00$141,200.00$134,629.18$122,306.47$110, Group A %70.82% 74.28%81.76%90.66% Group B %29.18% 25.72%18.24%9.34%

14 401(k) Profit Sharing May be primarily employee funded Employee deferrals on pre-tax, tax-deferred basis May include discretionary employer contributions and/or matching contributions May allow for loans Vesting schedule available for employer contributions

15 401(k) P/S Limits Employee contributions up to $17,000 with a $5,500 catch up for participants age 50+ Employer contribution cannot exceed 25% of eligible payroll Maximum benefit an employee can receive in the plan $50k or 100% of comp

16 Safe Harbor 401(k) P/S Suitable for businesses where owners/ highly compensated employees are limited in their contributions Plan eliminates the need for some nondiscrimination tests Mandatory employer contribution must be made to plan No vesting schedule on the S/H contribution

17 Safe Harbor 401(k) Contributions Non-elective contribution of 3%, or a Matching contribution –Basic match formula matches 100% of the first 3% of deferrals, then 50% between 3%-5% of deferrals Enhanced match available

18 NameIncomeDeferral$EE% $Safe Harbor 3% %Safe Harbor 3% CatchupNCPS $NCPS %Total$Total%415 Limit Doctor, B$250,000$17, %$7, %$0.00$25, %$50, %$50,000 Doctor, A$250,000$17, %$7, %$5,500$25, %$55, %$50,000 Group A$500,000$34,000$15,000$5,500$51,000$105,500 Asst, C$26,000$1, %$ %$0.00$ %$2, %$26,000 Asst, B$26,000$ %$ %$0.00$ %$1, %$26,000 Asst, A$30,000$1, %$ %$0.00$ %$2, %$30,000 Nurse, B$40,000$ %$1, %$0.00$ %$1, %$40,000 Nurse, A$60,000$3, %$1, %$0.00$ %$5, %$50,000 Receptionist, A $24,000$ %$ %$0.00$ %$1, %$24,000 Group B$206,000$5,800$6,180$0.00$2,884$14,864 Total$706,000$39,800$21,180$5,500$53,884$120,364 Group A %70.82%85.43%70.82%100.00%94.65%87.65% Group B %29.18%14.57%29.18%0.00%5.35%12.35% Safe Harbor 401(k) / New Comp Profit Sharing

19 Defined Benefit Pension Plan Provides a determinable annual benefit at retirement Plan contribution formulas are based on a specific retirement benefit –Max benefit to fund for in 2012 is $200,000 Contribution is actuarially determined and is usually made quarterly No loans or in-service withdrawals allowed

20 403(b) Plans Non-profit 501(c)(3) organizations and public schools, college or university ERISA and non-ERISA plans Limits same as 401(k)s Document required for all types (2009) Information sharing arrangements required with providers allowed under the plan

21 DOL’s Fee Disclosure Initiatives Part 1: Schedule C of the form 5500 (2009) Part 2: Covered service provider disclosure under ERISA 408(b)(2) (July 1, 2012) Part 3: Plan fiduciary disclosure to participants who direct their own investments DOL 404a-5 (August 30, 2012)

22 Purpose of the new rules Help plan fiduciaries to determine if contracts are “reasonable” Provide transparency with regards to plan fees Inform participants of the fees they pay inside of the plan

23 Covered Plans All ERISA governed plans, including: *401(k) *Money purchase pension *403(b) *Target benefit *Profit sharing *Defined benefit *ESOP *Cash balance Plans NOT covered by 408(b)(2) –SEP-IRAs and SIMPLE-IRAs –Governmental plans; non-electing church plans –Certain orphaned 403(b) plans

24 Covered Service Providers Broker-Dealers Registered Investment Advisers (RIAs) Recordkeepers Third Party Administrators (TPAs) Banks and trust companies Only if expected to receive $1000 over life of contract

25 Plan Sponsor Obligations Determine “covered” service providers Make sure each has disclosed by July 1, 2012 –All required information been disclosed? –Non-compliant service providers must be reported to the DOL and terminated (90 days) Determine whether each service arrangement is “reasonable”

26 Participant Fee Disclosure 404a-5 Applies to plans with participant directed investments Initial disclosure by August 30, 2012; subsequent quarterly by November 14, 2012 Many relying on TPAs to send the disclosure, get confirmation to make sure that they are sent

27 Participant Fee Disclosure Contents Disclosure must contain: –Plan related information –Information regarding plan administrative and individual expenses –Investment information about designated investment alternatives Performance data, benchmarks, fees, website, etc. Comparative chart format

28 Preparing Your Participants Communicate, communicate, communicate! The fees are not new, nothing has changed but the disclosure Don’t let fee disclosure overshadow the many benefits of the plan –Tax savings –Matching contributions –Higher contribution limits

29 Questions? Contact: Mary Scott at or