AllianceBernstein.com 2010 Regulatory Year in Review Preview of 2011 and Beyond Moderator: Rick Unser, AIF, QPFC, CRPS, Lockton Investment Advisors, LLC Panelists: Jessica Skinner, Compliance Attorney, Lockton Retirement Daniel Notto, Retirement Plan Counsel, AllianceBernstein AllianceBernstein.com

408(b)2 Overview  General Rule: It is a Prohibited Transaction for the plan to enter into an agreement with a service provider.  Exception under 408(b)2—if the arrangement and compensation with the service provider are “reasonable and necessary” then it is an NOT a Prohibited Transaction and is an acceptable arrangement.  Became a final interim rule in July 2010  In order for the arrangement with a service provider to be “reasonable” certain disclosures must be made to the plan sponsor and they must take this information and make a determination of “reasonableness”.  Required Disclosures: – Compensation—all compensation regardless of its classification as: direct, indirect, termination compensation, etc. must be fully disclosed in writing, prior to the arrangement being entered into. – Services—all the services the “covered service provider” is rendering must be disclosed in as much detail as necessary in order to prove these service are “reasonable” and “necessary” in light of the fee being charged. – Fiduciary Status—if the service provider is a fiduciary to the plan they must disclose that detail.

AllianceBernstein.com Plan Participant Disclosures  Uniform Disclosure Rule  Requisite Disclosures – Plan related information Timing of Disclosures: Initial, annual, and quarterly disclosures – Investment related information Timing of Disclosures: Initial, participants investment, upon participant request Applicable to plan years beginning on or after November 1, For calendar year plans = January 1, 2012.

AllianceBernstein.com Roth Conversion  Small Business Jobs Act-passed September 2010  In order for a plan sponsor to offer this to their participants, the plan must: – Have a Roth source in the plan – Allow in-service withdrawals – Allow rollovers – Elect to have this new provision apply to the plan  Accounts that are eligible for transfer to a Roth Account are restricted to: – Elective Deferral-if participant is entitled to a distribution (including in-service distribution) at age 59 ½ – Vested Employer Contributions that are not subject to the restrictions on distributions – Safe harbor employer contributions, QNECs, QMACs, and rollover contributions when participant has a distributable event. 4

AllianceBernstein.com Recommended Action Items  408(b)2 – If you do not understand or have documentation to evaluate your plan fees, request them from your service providers – Once received, if you can not determine if they are necessary and reasonable, conduct a benchmarking study  Participant Fee Disclosure – Inquire with your recordkeeper about their plan for producing notices – Ensure you have a clear understand of who will be distribute the notices  Roth Conversion – If you have Roth already, discuss amending plan to allow conversions. – If you do not have Roth, consider offering it 5

AllianceBernstein.com DOL’s Proposal to Widen the Fiduciary Net  Proposed October 21, 2010—Would revise existing 35-year old rule that defines “investment advice”  Many advisers, consultants and appraisers will become ERISA fiduciaries – Could significantly affect how the financial community delivers retirement plan services  Reasons for change – Significant changes in retirement plans and financial marketplace since ERISA was enacted in 1975 – Existing rule sometimes makes it difficult to prove an adviser’s fiduciary status  Would also apply to IRAs, MSAs, HSAs and Coverdell ESAs  The DOL also requests comments on whether recommendations to take a plan distribution should be considered fiduciary advice. 6

AllianceBernstein.com 7 Washington’s Examination of Target-Date Funds  2009 Hearings By Senate Special Committee on Aging – Prompted by Fall 2008 stock market downturn – Senator Herb Kohl (chairman) urged reviewed by the Department of Labor (DOL) and the Securities and Exchange Commission (SEC)  From the DOL – Jointly with the SEC, released on May 6 an Investor Bulletin that explains the basics of target-date funds – On November 29, proposed amendments to the QDIA regulations to require more information in participant notices – Will publish a checklist for fiduciaries to help them select and monitor target-date funds  From the SEC – Proposed target-date fund advertising rules on June 16, 2010

AllianceBernstein.com Recommended Action Items  Widening Fiduciary Definition – Some existing service provider relationship may change, as they are not willing or able to serve as a plan fiduciary – If you are unsure if any of your service providers are currently or will be a plan fiduciary, begin asking questions now  Target Date Funds – At a minimum you need to understand their fees, management philosophy, glide path, asset classes utilized, how those criteria can impact performance, and how they compare to others in the industry – If you can not answer those questions, reach out to your service provider or financial advisor 8

AllianceBernstein.com SEC Proposed Replacement of Rule 12b-1: New Rule 12b-2  Proposed on July 21, 2010  Rule 12b-1 would be eliminated  New Rule 12b-2 would be added that would allow funds to deduct a “marketing and service fee” – Marketing and service fee could be no more than 25bps – Could be used for “distribution activities” including advertising, compensation of sales personnel and payments to retirement plan recordkeepers  Asset-based distribution fees that exceed 25bps would be considered an “ongoing sales charge” – Would eventually need to be reduced to 25 bps  Impact on Class C and Class R 9

AllianceBernstein.com Far-Reaching Retirement Plan Policy Proposals  Guaranteed Retirement Accounts System – Maximum 401(k) contributions would be limited to $5,000 – Contribute 5% of employees’ earnings (2.5% employer; 2.5% employee) to individual accounts administered by Social Security Administration – Employees receive $600 tax credit annually – 3% interest, guaranteed by federal government; account balanced annuitized at retirement  National Commission on Fiscal Responsibility and Reform – Presidential commission to suggest proposals to improve America’s fiscal situation – Issued report on December 1, 2010 – “Zero” Plan – Eliminate all tax expenditures, including preferences for retirement plans – “Reduced” Plan – Cap plan contributions at $20,000 or 20% of income 10

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