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Provided by:. Today’s Agenda. Overview of Retirement Plans How Plans are Used – Private vs Public Hot Topics and Trends Employment Opportunities. Defined Contribution vs. Defined Benefit. Defined Contribution Plans. General Overview 457, 403(b) and 401(k). Governmental 457 Plans.

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Presentation Transcript
today s agenda
Today’s Agenda
  • Overview of Retirement Plans
  • How Plans are Used – Private vs Public
  • Hot Topics and Trends
  • Employment Opportunities
defined contribution plans

Defined Contribution Plans

General Overview

457, 403(b) and 401(k)

governmental 457 plans
Governmental 457 Plans
  • State and local government employers
  • Universities and school districts
  • Supplement to primary retirement benefits
  • Eligible and non-eligible plans
  • Generally available to all employees
  • Employer may also offer 403(b) and, in some cases, 401(k) plans
section 403 b plans
Section 403(b) Plans
  • Universities and school district employers
  • Churches and nonprofit 501(c)(3) organizations
  • Primary retirement plan or supplemental
  • 401(k) or 457 plan may also be offered
  • Contributions may include employee non-elective and/or employer contributions
section 401 k plans
Section 401(k) Plans
  • Predominately used in private sector
    • Government plans established before May 1986
  • Primary retirement benefit, replacing DB plans
  • Participation continues to grow
    • 7.5 million in 1984 compared to 47 million in 2005
  • What has influenced this growth?
    • Cost of defined benefit plans
    • Increased attractiveness of 401(k) plans
private sector 401 k plans
Private Sector 401(k) Plans
  • Generally considered primary benefit
  • May have small defined benefit (DB) annuity
  • Many companies freezing or eliminating DB
  • Matching contributions generally substantial
  • Portability of benefits is important
    • Workers generally change jobs more frequently than in the public sector
public sector dc plans
Public Sector DC Plans
  • Generally considered supplemental
  • DB plan benefits may be 45% or more of FAE
  • Retiree health care often provided
  • Employer matches are less common
  • Public sector employers may offer multiple supplemental plans
    • 457, 403(b), grandfathered 401(k) plan
plan governance
Plan Governance
  • Private and public sector plans must meet federal tax laws and regulations
  • Private sector plans governed by ERISA and Department of Labor (DOL) regulations
    • Public sector generally follow as best practice guide
  • Public sector plans subject to state laws and regulations
404 c requirements
404(c) Requirements
  • Applies to ERISA plans only
    • Public sector often uses as guide
  • Provides fiduciary safe harbors
  • Certain requirements must be met:
    • diversified investment choices
    • ability to move or exchange assets
    • mandatory disclosures
investment policy statements
Investment Policy Statements
  • Used by private and public sector plans
  • Generally, written document
  • Basis for decisions on investment line-up
  • Policy and process for
    • Selecting and monitoring plan’s investments
    • Adding and removing fund choices
public sector employees
Public Sector Employees
  • Tend to be more conservative investors than private sector employees
  • On average, are older than those in the private sector
  • Certain employee groups retire earlier, e.g., police and fire
automatic enrollment
Automatic Enrollment
  • More Prominent in Private Sector
  • Encouraged by 2006 Pension Protection Act
  • Effective in improving employee participation
  • Helps meet discrimination testing
  • Gaining popularity in public sector
  • Economy has impact on affordability in private sector
target date funds
Target Date Funds
  • Popularity increasing – both public and private sector
  • Increased attention from policy makers and regulators
  • Disclosures and cost an issue
  • No uniform definition of “target date”
    • “to” or “through” retirement
plan fees and charges
Plan Fees and Charges
  • Fee disclosures regulated by DOL
    • Plan sponsors/fiduciaries
    • Participants
    • Reports to the DOL (form 5500)
  • Increased legislative, regulatory and legal (class actions) scrutiny
lifetime income options
Lifetime Income Options
  • Legislators exploring ways to encourage
  • Companies developing new products to provide lifetime income distributions
  • Increased issue for employers as workforce ages
    • Lack of guaranteed lifetime income may result in employees delaying retirement date
opportunities with employers
Opportunities with Employers
  • Responsibility for DC plan varies greatly
    • Separate Retirement Division
    • Human Resources
    • Benefits and Payroll
    • Finance / Accounting
    • Treasurer / Controller’s Office
  • Information technology / Web developers
service providers
Service Providers
  • Plans may use bundled or unbundled services
    • Record-keeping and administrative services
    • Investment product providers
    • Communication and education providers
    • Investment managers
    • Consultants
employment opportunities1
Employment Opportunities
  • Account representatives and call centers
    • Requires securities licensing
  • Public relations and sales
  • Product development / project management
  • Finance, actuarial and accounting
  • Marketing: designers and writers
  • Information technology / Web developers