1. Presentation Title © 2011 Fox Rothschild Qualified Plans for Tax- Exempt Employers New York Society of Association Executives Finance & Management Institute January 18, 2012 Presented by Harvey M. Katz, Esq. 212-878-7976 hkatz@foxrothschild.com

2. Presentation Title © 2011 Fox Rothschild Plan Options – Best Design?  457(b) Plan  401(a) Defined Benefit Plan  403(b) Plan (Non ERISA)  403(b) Plan (ERISA Covered)  401(k) Plan

3. Presentation Title © 2011 Fox Rothschild 457(b) Plans – HCEs Only!  Discriminatory by design  Limited to “select group of management or highly compensated”  Annual contributions limited to separate $17,000 (indexed)  Catch-up contributions - $17,000 within 3 years of retirement age  No loans  Must be unfunded  No rollovers to other types of plans

4. Presentation Title © 2011 Fox Rothschild Common Attributes - 403(b) / 401(k) / 401(a)  Tax-qualified – Earnings accumulate tax free, taxed to participants only upon distribution  Eligibility requirements – All common law employees  Vesting Requirements – Similar, generally, 100% after 2 years or 20% per year starting in 2 nd or 3 rd year.  Waiting periods – Generally, age 21 and 1 year of service  Loans permitted

5. Presentation Title © 2011 Fox Rothschild Common Attributes - 403(b) / 401(k) / 401(a)  Compensation limits – Generally $250,000 annually  Early distribution tax, if paid for other than death, disability, separation from service after age 55  Minimum distribution requirements at 70 ½  Funded plan – Held in trust or annuities  Portability – Generally permitted, via rollover or direct transfer  Non-discrimination rules - Similar coverage, participation and non-discrimination rules.

6. Presentation Title © 2011 Fox Rothschild 401(a) Defined Benefit – A Dinosaur?  Actuarially determined contributions  Annual minimum funding requirements  PBGC filing required  Potential for unfunded liabilities with balance sheet impact  Cannot be terminated without permission of PBGC if underfunded  Most private sector DB plans have been terminated

7. Presentation Title © 2011 Fox Rothschild Care and Feeding of Underfunded DB Plans  Cannot be terminated without cash infusion  Freeze DB plans as an alternative - Hard vs. Soft Freeze  Watch assets with “back-end” fees  Purchase annuities  Watch Interest rates  Distress termination if employer is in financial difficulty

8. Presentation Title © 2011 Fox Rothschild 403(b) Plans –Two Flavors  ERISA stands for Employee Retirement Income Security Act of 1974  If minimal employer involvement in plan, then no ERISA coverage  Traditionally withholding and paying over contributions to a 403(b) provider is insufficient to trigger ERISA coverage  Performance of required coverage testing and writing a plan document will not trigger ERISA coverage

9. Presentation Title © 2011 Fox Rothschild Non-ERISA 403(b) - Alternative for Smaller Employers  Non-ERISA 403(b) plans are relatively easy to establish and maintain  No fiduciary responsibilities under Federal law  Fewer reporting and disclosure obligations - - No annual 5500 filing - No Summary Plan Description required - No fee disclosure  No significant coverage testing, only Universal Availability Rule

10. Presentation Title © 2011 Fox Rothschild Why an ERISA 403(b)? It’s All About Control  Employer matching or discretionary contributions  Exercise of discretion - plan-to-plan transfers - processing distributions - hardship determination - qualified domestic relations orders - participant loans  Control of Investment Choices

11. Presentation Title © 2011 Fox Rothschild 401(k) vs. ERISA 403(b) – Service and Fees are Key Factors  401(k) Plans are far more prevalent - More available providers - More competitive fees - More compliance-oriented providers  Availability of a catch-up contribution in 403(b) is not an important factor  Fiduciary obligation to examine fees

12. Presentation Title © 2011 Fox Rothschild Universal Availability vs. ADP  ADP - Actual Deferral Percentage - Contributions of highly compensated limited based upon level of rank and file contributions  Universal Availability – Virtually all employees must be covered  Employers with need to exclude groups of employees should opt for 401(k)  Employers who need to maximize highly- compensated deferrals should opt for 403(b)

13. Presentation Title © 2011 Fox Rothschild Contact Information Harvey M. Katz, Esq. 100 Park Avenue New York, NY 10017 212.878.7976 hkatz@foxrothschild.com Questions are welcomed!