1. Retirement Plans Basics Peter Sullivan RVP East Region
The Ritz-Carlton, Bachelor Gulch, Colorado
September 17-19, 2003

2. Retirement Plan Basics
Industry Overview
EGTRRA Changes
Adding Value To Your Client’s Plan
Plan Design issues
Operational Issues
Latest Developments
Question & Answer

3. Industry Overview More Innovation, More Options
Cookie cutter plans not effective for everyone
Trend toward flexible, hybrid plan design
Cash Balance Plans
New Comparability Plans

4. The Phenomenal Growth of 401(k)s
Industry Overview
The Phenomenal Growth of 401(k)s
401(k) Market Growth
Assets = $ Billions
Projected Annual Growth Rate 13.5%
This chart shows the growth of assets in 401(k) plans since 1986 and the estimated growth rate until 2004.
Source: Spectrem Group estimates

5. Retirement – Key to Penetrate Booming Market
Long Term Secular Trends
Retirement – Key to Penetrate Booming Market
US Private Retirement Assets
$4.0 Trillion
US Private Retirement Assets
2005E - $11.2 Trillion (10.8% CAGR)
Source Morgan Stanley Equity Research
Source Morgan Stanley Equity Research 10

6. Participants (millions)
Understanding the Participant
The 401(k) Participant Population
Participants (millions)
Projected
Annual
Growth
Rate 4.4%
Now let’s turn to the participants. Like everything else in the retirement plan industry, the number of participants has grown dramatically over the last decade. There are now approximately 30 million participants in the 401(k) market, compared to just 10 million in By 2004, the number of participants should grow to 37 million.
Source: Spectrem Group estimates

7. 30 Years of important Pension Legislation
ERISA
TEFRA
DEFRA
REA
SBJPA
GUST
EGTRRA
More to Follow?

8. What Is EGTRRA ?
Economic Growth and Tax Relief Reconciliation Act of 2001
Centerpiece of $1.35 Trillion Tax Cut
Most provisions effective 2002

9. EGTRRA Highlights: Increased Contribution Limits: (Indexed)
-Salary Deferrel($12,000)
-Total Plan Contributions ($40,000/100%Income)
-Profit Sharing Plans( 25%)
-Catch Up Contributions($2,000 )
Increased Income Limits
-$200,000 (Indexed)

10. EGTRRA Highlights -Simplify Top Heavy Testing:
- Matching Contributions help satisfy Top Heavy testing
- Safe Harbor Plans are exempt
-Simplify Rollover Requirements
- Tax Exempt 457 excluded
-Tax Credit for Start up Plans
- 50% of first $1,000 for first three years Administration expenses

11. Adding Value to your Client’s Plan
Most Plan Sponsors establish a Plan for two Reasons:
-Tax Advantages
-Employee Benefits

12. Sponsor Dynamics Deferral Rates: 8.6% in 1999 Matching 82% in 1997
Participation Rates 80% in 1999
72% in 2002

13. Sponsor Dynamics/Movement of >$1mm Plans
- 83% of Plans moved “mainly due to
dissatisfaction with old provider”’
- Only 15% moved due to new opportunities
- 78% of “dissatisfaction” the result of unresponsiveness to service requests
- 75% of employers cite “ease of administration” a major reason for replacing old provider

14. Adding Value To Your Client’s Plan
The Broker/ TRS Partnership:
Opportunities to Help:
-Plan Design Issues
- Operational Issues

15. Adding Value to Your Client’s Plan
Plan Design Opportunities:
- NCP & Safe Harbor
- Eligibility requirements:
Matching Requirements
Profit Sharing Requirements

16. Adding Value To Your Client’s Plan
Operational Opportunities:
Profit sharing allocations
Loan Administration
Hardship Administration
Spousal Consent Requirements
Employee Deductions/Timely Contributions
Plan Document Updates
Non- Discrimination Testing
Fiduciary Assistance
Employee Education

17. Adding Value To Your Client’s Plan
APT Has a 401(k)
For 6 years Profit sharing allocated incorrectly
Picked up on CPA Audit
No Advisor Involved
No Vendor help
Client tried to do it on their own
What do they do?

18. Adding Value To Your Client’s Plan
APT:
Hired an attorney
Retroactively amended Plan
Re-filed 5500
Recreate Profit sharing allocations
Filed with I.R.S. in walk in CAP
What did it cost?
Original Estimate: $280,000

19. Adding Value To Your Client’s Plan
What did it cost?
$30,000 Attorney Fees
$40,000 additional Contributions
$9,000 I.R.S. penalty
$5,000 Misc. Admin fees
Total: $84,000

20. Adding Value To Your Client’s Plan
What Happens if you have problems?
Must Amend Plan Document
Retroactive contributions+ Earnings
I.R.S. Scrutiny
Plan Disqualification

21. New Developments Enacted Legislation/Regulations Proposed Legislation
GUST Restatements

22. New Developments Enacted Regulations D.O.L. : Retirement Plan Expenses
Provides Tremendous Flexibility
Potential problems
I.R.S. has not approved

23. New Developments Proposed Legislation The Return of RSA’s & LSA’s?
Pension Preservation & Savings Expansion Act of 2003, H.R. 1776
PROPOSED not ENACTED
Making EGGTRA Permanent/accelerate Limits
Increase Retirement Plan Participation & Savings
Simplifying Retirement Plan Rules
The Return of RSA’s & LSA’s?
- Industry Opposes

24. New Developments Proposed Regulations: 401(k) Reg’s consolidation
PROPOSED not ENACTED
Awaiting Comments from the industry
Limits bottom up QNEC's

25. New Developments GUST Restatements: Individual Drafted Plans (2/02)
VS & MPP extended until (1/31/04)
All Plans must be updated
Potential Problems for Non-compliers

26. Conclusion Tremendous Opportunity: Rapidly Growing market
Favorable Pension Legislation
Need for Expert Guidance