Be sure to sign the

1
Be sure to sign the Sign-In/Sign-Out sheet
outside of the room when applying for Continuing
Education Credits for the following
certifications. (Check the appropriate
certification)
Important Reminder!!!

• CFA
• CFP
• CPE

2
So Youre A New Trustee
Moderator Linda Barber, Nationwide Retirement
Solutions Panel Cathie Eitelberg, The Segal
Company Georgette Gestely, City of New York
(NY) Regina Hilbert, Suffolk County (NY)
3
So Youre A New Trustee
Cathie G. Eitelberg Senior Vice President
National Director, Public Sector Market The
Segal Company
4
Outline of Topics

• Fiduciary Duty and Trustee Responsibilities
• Policies
• Role of the Board and Committees
• Role of the Advisors

5
Fiduciary Duty and Trustee Responsibilities
6
Fiduciary Responsibility

• Rule 1
• All Rules ApplyOn Day ONE

7
Fiduciary DutyA Definition

• Fiduciary Defined
• A person is a fiduciary with respect to an
  employee benefit plan to the extent he/she
  exercises discretionary authority with respect to
  plan and assets
• Exercise of discretion is the key
• Can include more than just the trustees
• Extends to investment management and benefit
  administration

Are You a Fiduciary?
8
Take The Test
Are You A Fiduciary Are You A Fiduciary Are You A Fiduciary
Yes No
? ? Did you participate in the decision to offer the plan, the type of plan that is offered, or in the selection of the investment options?
? ? Do you participate in a committee or Board to implement the plan, to administer its provisions or to select and monitor its investment options?
? ? Do you have any responsibility to choose or evaluate service providers?
? ? Do you establish policies and procedures relating to plan administration or do you have authority to make exceptions to these rules?
? ? Do you have authority to bind the employer through contracts, or to delegate certain functions for the plan?
If youve checked yes to any of the above, you
are likely a fiduciary.
Source Nationwide Retirement Solutions Fiduciary
Fundamentals for Government Sector Defined
Contribution Plans, p. 5
9
Fiduciary Responsibility

• The Board of Trustees has fiduciary
  responsibility and the individual Trustees are
  fiduciaries.
• The legal standards applied to fiduciaries
  (duties of prudence and loyalty) are the highest
  standards under the law and are often difficult
  to understand.
• Meeting the fiduciary standards requires more
  than mere common sense or a good faith attempt.

10
Fiduciary Responsibility

• The fiduciary standards are the same for all
  trustees regardless of how they became a trustee.
  
• The fiduciary standard is not applied on a
  sliding scale, therefore, all members of the
  Board of Trustees are instantly held to this very
  high standard as soon as they become trustees.

11
Duty of Prudence

• Simply by virtue of being a trustee, a person
  has the fiduciary responsibility to follow the
  duty of prudence in all trustee activities.
• The duty of prudence
• A determination of whether the board of trustees
  has exercised prudence in an investment decision
  must be made by considering the investment of all
  of the assets of the trust over which the board
  has management and control, rather than by
  considering the prudence of a single
  investment.. This description is in line with
  modern portfolio theory and reflects current
  best practices.

12
Duty of Prudence

• In making investments for the retirement system,
  a fiduciary is to manage with the care, skill,
  prudence, and diligence, under the circumstances
  then prevailing, that a prudent man acting in a
  like capacity and familiar with such matters
  would use in the conduct of an enterprise of a
  like character and with like aims. This level of
  care is known as the prudent expert rule.
• The fundamental principle for professional money
  management, stated by Judge Samuel Putnum in
  1830, supports this rule, Those responsible to
  invest money for others should act with prudence,
  discretion, intelligence, and regard for the
  safety of capital as well as income.

13
Prudent Expert Standard

• The prudent expert standard recognizes that the
  assets held in pension fund trusts are for a
  unique purpose with a long time horizon.
  Additionally, the asset pool is often far larger
  than the assets held by individuals.
• Furthermore, the standard takes into account that
  the management of these large asset pools
  requires a more sophisticated approach than
  people use in the management of their own
  affairs.
• When Congress passed ERISA applying the common
  law of trusts to pension funds, it did not adopt
  the prudent man standard but rather adopted a
  standard of those familiar with such matters.
  This standard and the court decisions that have
  subsequently interpreted ERISA are the sources of
  the prudent expert standard.

14
Prudent Expert Standard

• Technically, ERISA does not apply to public
  retirement systems. ERISA only protects those in
  the private sector however, there is no good
  policy reason to provide less protection to
  public employees by using lower standards.
• Fiduciaries for public retirement systems who do
  not live up to the prudent expert standard are
  not following current best practices in the
  public retirement arena and are depriving their
  members of the protections afforded to employees
  in the private sector.

15
Duty of Loyalty

• The duty of loyalty
• The duty of loyalty is another basic fiduciary
  duty imposed upon trustees. Essentially, it
  requires that the trustees act solely for the
  benefit of the members and beneficiaries of a
  trust in investment matters and all other
  decisions. It is a long standing principle in the
  common law of trusts.
• The decisions of the trustees must be for the
  exclusive benefit of the active and retired
  members, their survivors, and beneficiaries.

16
Duty of Loyalty

• This duty is not well understood, especially by
  those outside the retirement system who are
  accustomed to balancing multiple interests when
  making policy decisions. What is required is that
  decisions are made in the best interest of the
  plan, not an individual participant or group of
  participants.

17
Policies
18
Policies

• Intent

Guidance
Protection

• Implement charter and statute
• Provide governance framework
• Communicate to stakeholders
• Establish historic record

• Provide direction to fiduciaries, both Board and
  Staff
• Set expectations for Board and Individual Trustee
  conduct

• Set out due diligence process
• Establish monitoring and reporting process

19
Policy Basics

• Conflict of Interest
• If it seems wrong, it probably is
• Pay for play avoidance
• Self-dealing
• Rules of Engagement
• Management of the fund
• Board interaction
• Risk Management and Avoidance
• Process over Passion
• Monitoring and Enforcement
• RulesRule
• Keeping scoreCounts

20
Core Policies

• Ethics
• Code of Conduct
• Gifts and consideration
• Education
• Describe educational objectives and how funding
  will be allocated
• Require a written evaluation of any educational
  session attended
• Include travel reimbursement rules

• Communications
• Identify rules under which the Board of Trustees
  will operate
• Guidelines for Trustee to Trustee Communication
• Specifics on Information Dissemination
• Guidelines for Trustee communication with
  participants
• Guidelines for Trustee communication with
  external parties

21
Core Policies

• Investments
• Asset Allocation
• Benchmarks
• Pay-for-play avoidance
• Governance
• Define Board of Trustee and Staff Roles
• Implementation of Statutes

22
Core Policies Deferred Compensation Section 457
Plans

• Trustee Responsibilities
• Duty of Prudence and Loyalty
• Investment Policies
• Selection of Options
• Spousal Rights
• Division/Distribution of Assets
• Service Providers
• Revenue Sharing

23
Role of the Board and Committees
24
Role of the Board of Trustees, Committees and
Staff

• Board of Trustees Role
• Strategic Governance
• Business Direction/Continuity Process
• Accountability Assessment
• Due Diligence Activities
• Committees Role
• Examination of Issues and Options
• Recommendation to full Board of Trustees
• Audit of Processes and People
• Staff
• Implementation of administrative, reporting and
  monitoring activities
• Operations, documentation and research

25
Key Committees

• Investment
• Recommend to the Board of Trustees a written
  investment policy
• Monitor and report to the Board of Trustees
  compliance with the written policy and manager
  performance
• Recommend internal and external managers to the
  Board of Trustees
• Audit
• Review the adequacy and effectiveness of internal
  controls
• Monitor accounting policies and reporting
  practices
• Approve the scope of audits
• Ensure a process is in place to report any
  conduct or transaction that may violate the
  ethics policy or statute
• May include an outside party or official

26
Role of the Advisors
27
Role of Advisors

• Type of Advisors
• Investment Manager
• Investment Consultant
• Pension Actuary
• Fiduciary Counsel
• Custodian Bank
• Auditors

• Selection Process
• Selection is done in the best interest of the
  participants
• Follows a clearly defined process
• Assures competitive cost for value
• Adhere to appropriate due diligence processes
• Identify selection decision responsibility
• Reporting Structure
• Clarify reporting schedule
• Reporting structures can vary depending on the
  service providers focus

28
What Should You Ask Advisors?

• Investment Advisors

Money Managers

• Reimbursement limitations (e.g., travel costs)
• State fiduciary duties and ethics standards
• Insurance requirements (including for errors and
  fraud)
• Open records law application
• Audit process and information required to be
  provided by contractor
• Securities litigation/class actions
• Clarification of fiduciary status

• Do you receive any payments from money managers
  you recommend?
• Do you have policies/procedures to address
  conflicts of interest?
• What steps do you take to ensure the plan
  receives best execution for securities trades?
• How do you monitor the amount of any brokerage
  commissions paid to ensure plan does not over-pay
  consulting fees?
• Will you acknowledge in writing your fiduciary
  obligations as an investment adviser?
• Pending Litigation?

29
Fiduciary Governance Checklist

• Avoid conflicts of interest and perception of
  conflict
• Contracting
• Investment
• Ethical
• Develop decision processes
• Follow the process
• Record the process
• Make fact-supported decisions

30
Fiduciary Governance Checklist

• Monitor and verify results
• Performance reviews
• Compliance reviews
• Asset Liability Assessments
• Ask questions Get Answers

31
Appendix
32
AppendixResource Materials

• DOLs EBSA Publications
• Understanding Retirement Plan Fees and Expenses
  (May 2004)
• DOLs Employee Benefits Security
  Administration(EBSA)
• Website includes Facts Sheets(http//www.dol.gov/
  ebsa/newsroom)
• Selecting and Monitoring Pension Consultants
  (May 2005)

33
AppendixResource Materials

• SEC Publications
• SEC Staff Report (May 2005)(http//sec.gov/news/s
  tudies/pensionexamstudy.pdf)
• Summary of Findings
• IRS
• IRS service provider audit initiative(published
  June 13, 2006)
• Top audit issues

34
Resources for Retirement Plan Fiduciaries

• Questions?
• Cathie EitelbergSenior Vice PresidentNational
  Director Public Sector MarketThe Segal CompanyT
  202.833.6437ceitelberg_at_segalco.com

35
So Youre A New Trustee

• Georgette Gestely
• Executive Director
• City of New York Pre-Tax Benefits Programs

36
Four Step Process of Building a Defined
Contribution Program
37
GovernanceRules and Regulations

• Federal Regulations 457 and 401(k) IRS Code
  Sections
• State Regulations
• Procurement Rules and Regulations
• Rules of competitive bidding
• Allowable investments
• Mandatory contract terms and maximum durations
• Plan Document filed with IRS by State for
  Determination Letter
• States purpose of the plan
• Details the general rules governing the plan and
  its administration
• Details general responsibilities of plan sponsor

38
I. Governance

• What do Defined Contribution plans procure?
• In a very real sense, plan sponsors are the
  ultimate contractors. Charged to design programs
  that serve multiple (and sometimes contradictory)
  purposes, they generally must do so by cobbling
  together what can be a vast array of services
  from a potpourri of different providers. That
  they frequently seek the counsel of
  expertsconsultants, attorneys, and/or
  advisersto do so, in no way diminishes the
  challenge of pulling that all together.
• PLANSPONSOR.COM 5/9/08

39
The 1st Big Contracting Decision is Recordkeeping

• Bundled vs. Unbundled
• Pro
• Bundled plans, where the investments and
• recordkeeping are with a single vendor through a
• single contract, are EASIER, one stop shopping
  for
• plan sponsors.
• Con
• Bundled recordkeeping means less control over the
• program. Bundled programs do not allow plan
• sponsors to hire best in class vendors for every
  aspect
• of the program including the lowest costs.

40
Bundled vs. Unbundled

• Pro
• Bundled providers often offer FREE recordkeeping
  as
• long as all, or most, of the assets remain with
  them.
• Con
• There is no such thing as a free lunch, so free
  translates
• into invisible to the plan sponsor. Bundled
  recordkeeping
• fees are reflected as asset-based fees
  incorporated into
• the investment management fees. That makes it
• impossible to see how much either recordkeeping
  or
• investment management actually costs
  participants.
• Since the recordkeeping fees are added to the
  investment
• management fees, they directly reduce the
  investment
• returns of participants.

41
Bundled vs. Unbundled

• More Cons
• Since the fee is charged on the investments, the
  larger
• the participants balance the more he is paying
  for
• recordkeeping, without an increase in services
  provided.
• When the markets go down, the asset-based fees
  paid
• to the bundled provider go down with them. This
  might
• translate into reduced services being provided by
  the
• bundled recordkeeper to participants.

42
Bundled vs. Unbundled

• Pro
• Often times, a family of investment funds is
  offered to
• participants by the bundled provider, which SAVES
  TIME
• for the plan sponsor who would otherwise need to
• issue individual investment management RFPs
• review proposals
• conduct oral presentations
• draft contracts with individual investment
  managers
• hire investment advisors to help with all of
  these
• Con
• The investments within a family of funds, by
  definition,
• cannot ALL offer participants best in class
  investments
• with respect to performance and fees.

43
Bundled vs. Unbundled

• More Cons
• The investments within a family of funds have not
  been selected through a competitive bidding
  process, so the plan sponsor has not exercised
  due diligence in their selection. Most likely the
  investment funds are also not being reviewed
  regularly against their benchmarks and peers.
• Pro
• Through open architecture, a bundled recordkeeper
  can offer outside investment funds in addition to
  its own family of funds.
• Con
• In this case, the relationship of the outside
  investment manager will be with the bundled
  recordkeeper rather than with the deferred
  compensation plan sponsor. That will translate
  into a charge to the participant in the form of a
  recordkeeping overlay.

44
Bundled vs. Unbundled

• Pro
• Bundled recordkeeping allows for efficiencies of
  scale that
• lower costs.
• Con
• If costs cannot be broken out and compared to the
  universe,
• how can anyone tell whether or not they are lower
  and the plan
• participant is indeed benefiting from these
  economies?

45
Bundled vs. Unbundled

• Pro
• Bundled recordkeepers often offer their own
  off-the-shelf, proprietary target date portfolios
  which gives plan sponsors an easy way to
  incorporate these into their plans.
• Con
• Target date strategies can be off-the-shelf or
  custom built,using an unbundled plan sponsors
  own investment funds.
• The more hands-on you are in building your target
  date portfolios, the more you will be in control
  of both their cost and the monitoring of their
  performance.
• As is the case with a family of investment funds,
  off-the-shelf target date portfolios offer the
  plan sponsor little opportunity to look under
  the hood.

46
The 2nd Contracting Decision is the Investment
Program

• Using the best investment vehicles for your plan
• Mutual funds, which once made sense in deferred
• compensation plans when assets were low and it
  was important
• for participants to find their investments in
  the newspaper, no
• longer make sense.
• Rather than expensive, retail mutual funds, plan
  providers can offer participants any number of
  lower cost, institutionally priced vehicles.
• Yet a recent Callen survey found that over 50 of
  large plans use nothing but mutual funds as their
  investment vehicles.

47
Using the Best Investment Vehicles for your Plan

• What if the mutual fund manager offers you a
• rebate? Isnt that the same as having lower cost
• institutional funds?
• No. Lower cost funds affect the participant
  accounts directly the higher the fee, the lower
  the return. Rebates, on the other hand, are paid
  to plan sponsors, while participants continue to
  pay the higher fee on their investments.
• Rebates are typically used to offset plan
  expenses. Since the rebates of a single
  investment fund are being used for servicing all
  plan participants regardless of their investment
  options, the validity of their use is
  questionable.

48
Using the Best Investment Vehicles for your Plan

• Use the power of your aggregate DB and DC dollars
  to negotiate the most favorable terms through
  investment vehicle types
• Retail Mutual Funds
• Institutional Mutual Funds
• Super Institutional Mutual Funds
• Co-Mingled Funds
• Collective Trusts
• Separate Accounts 4
• Separate accounts need a master custodian to hold
  the assets,trade the shares and calculate the
  NAVs on a daily basis. That information is
  transferred to the recordkeeper.

49
Using the Best Investment Vehicles for your Plan

• Why Separate Accounts?
• Minimizes expenses
• Allows control over investment managers and
  investment policy
• Maximizes returns
• Keeps it simple for the participant. They only
  need to determine if they want to be in this
  asset class. The evaluation of the manager and
  underlying holdings is done by the Board, staff,
  and investment consultants.
• Underlying fund managers can be changed without
  any disruption to the participants (funds keep
  the same values and there is no blackout period)
• Prevents trading abuses not open to outside
  investors
• Allows for securities lending

50
Using the Best Investment Vehicles for your Plan

• How do NYC Plan fees compare to those of the
  universe?
• The Citys average participant pays .26 on 100
  the median cost of an average institutional fund
  is .54 on 100 the median cost of a retail fund
  in an IRA is .83 on 100.

Fund (all separate account) DCP Expense Ratio
Stable Income Fund 0.17
Bond Fund 0.26
Equity Index Fund 0.04
Socially Responsible Fund 0.46
Mid-Cap Equity Fund 0.57
International Equity Fund 0.38
Small-Cap Equity Fund 0.42
Pre-Arranged Portfolios 0.26
The change from mutual funds to separate accounts
has resulted in a cost savings of approximately
3 million annually for NYC Plan participants
51
Using the Best Investment Vehicles for your Plan

• What is Securities Lending?
• When a plan sponsor is invested in separate
  accounts, it is the owner of those securities
  (rather than the investment company).
• Since the plan sponsor owns the securities,
  it can lend them through a lending agent (its
  custodian or other institution).
• A securities lending policy details what can
  be lent and how the loaned securities are
  compensated and collateralized.
• If you think that your plans securities
  those held by investment companies in
  institutional mutual funds or commingled
  investment trusts are not being lent, think
  again!
• Your securities are being lent by the trust
  or fund who owns the securities, though not
  necessarily for your optimal benefit.
• Through separate accounts, your plan can
  control that function and get your full share of
  revenue.

52
Using the Best Investment Vehicles for your Plan

• Securities lending offers plan sponsors another
  important
• revenue source to either offset administrative
  expenses or
• offer additional plan services. If you do not
  use separate
• accounts, but commingled trust funds, for
  example, you
• might talk to your provider about sharing the
  securities
• lending revenue on the plans assets with your
  plan.

53
III.The Investment Policy

• Lists responsibilities of
• Board
• Investment Advisor
• Investment Manager
• Documents investment decision process
• Details criteria and benchmarks by which
  investments are maintained overtime
• Defines investment options, establishes the
  policies, expectations and guidelines for each
  option

54
III.The Investment Program

• The Big Questions for both the plan sponsor and
• the participant are hard to answer.
• Plan sponsor questions
• What is the right number of investment options a
• plan should offer?
• Are four too few, are 87 too many?
• Is more more?
• Is less more?
• Does it more or less matter?

55
III.The Investment Program

• And then, within an asset class (small cap, for
• example), should employees be offered
• A single, small cap option lets call it
  growth?
• A small cap value, small cap growth and a small
  cap index option? (This issue is still being
  discussed today.)
• Or several choices of each style of investing?
• Or a single, blended, style-neutral small cap
  option?
• Plan sponsors are all over the map on this, even
• though study after study shows that if plan
  sponsors
• are confused, participants will find confusing
• investment choices even more confusing.

56
IV. Participant Financial Literacy

• Plan participant questions
• Where should I investment my money?
• More often than not, their decisions have not
  been not
• the best
• failing to diversify, participants have invested
  instead in one or two investment options only
• or, to play it safe, they have invested in them
  all the 1/n ratio, as Ben Artzi called it,
  choosing every possible option with a box next to
  it to check
• Participants have failed to rebalance their
  portfolios
• Participants move their money at the worst time
  in the market, often buying high, selling low,
  locking in their losses.

57
IV. Participant Financial Literacy

• Why have investment communications been
  unsuccessful?
• It has been an uphill battle to teach employees
  the fundamentals of investing for the long term,
  diversifying their portfolios, remembering to
  rebalance their portfolios.the list goes on.
• Printed Matter glossy, 8th grade level materials
  have not worked
• people hate to read stuff they MUST read
• people hate to read stuff they dont understand
• and more and more, as images overtake the written
  work, people just plain hate to read.
• Our hearts have gone out to all the busy and
  overwhelmed would-be investors.

58
IV. Participant Financial Literacy

• How About Electronic Communications?
• How has electronic advice fared?
• We have tried making everything interactive
  allowing participants to play with what-if
  scenarios so that they could make better
  investment decisions with their ultimate
  retirement goals in mind.
• Findings Few participants used electronic advice
  and even fewer used it and then followed the
  advice.
• The Pension Protection Act (PPA) has brought big
  changes. It allows automatic enrollment of
  employees and also allows specific QDIAs
  (Qualified Default Investments) for the automatic
  contributions. Target Date Portfolios are the
  most popular of the QDIAs.

59
IV. Target Date Portfolios
The Response to Where Should I Invest My Money?
New York Citys Target Date Portfolios

• Portfolios continue to roll down past the point
  of severance of employment. The equity risk
  continues to reduce past the Required Minimum
  Distribution age of 70½, and throughout
  retirement.
• Participants can make a single decision and then
  have a professionally managed portfolio going
  foward
• The graphic allows participants to see the payout
  stage while they are still accumulating assets.

60
IV. Financial Literacy - Beyond Investment
Education

• Holistic Financial Planning can
• fight financial illiteracy
• Today we understand that communications is not
  about investments within the DC plan alone. It
  must deal with both the distribution of those
  assets and how they will fit into the larger
  picture of a participants finances.

61
So Youre A New Trustee

• Regina L Hilbert
• Deferred Compensation Administrator
• Suffolk County (NY) Public Employees Deferred
  Compensation Plan

62
Whats been covered so far?

• Fiduciary Duty and Trustee Responsibilities
  Policies and the Role of the Board, Committees
  and Advisors
• Governance, Recordkeeping, Investments and
  Financial Literacy

63
Whats the common thread?

• You are responsible from Day One!
• Your initial vote on any motion counts exactly
  the same as a Trustee with 15 years on the Board.
  
• Theres a lot you need to knowthis workshop is
  designed to cover the basics.
• You must keep up with Plan changes!

64
Guide for New Trustees from Administrators Point
of View

• Familiarize yourself with your Plan Document, the
  By-Laws, the Operations Manual, etc.
• Ask questions of fellow Board members.
• Ask to see minutes going back at least a year to
  bring you up to speed.
• If no formal training is offered, ask for it from
  your in-house staff or your provider.
• Recognize the guiding principles in all decision
  making.

65
Guiding Principles

• All decisions made by Trustees must be for the
  exclusive benefit of all the Plan Participants
  and their Beneficiaries and Alternate Payees.
• Do not act solely for the benefit of whatever
  group you may be representing. As a trustee,
  you must consider all -- not just your
  membership.

66
Practical Guide to 4 Areas

• Governance
• Recordkeeping
• Investments
• Financial Literacy and Resources

67
Governance on the Federal Level

• 457 regulations, 415 regulations, loan rules
• 457 not subject to ERISA requirements, but used
  as a best practices model.
• Although the Plan gets its name from the section
  of the Internal Revenue Code, its also subject
  to State law and local resolutions.

68
Governance on the State Level

• May be regulated on the State level
• Allowable investments, including what
  participants may be permitted to buy through a
  Brokerage Window
• Independent Audit (Financial Statement)
• Length of your term of contract with your
  Provider(s)
• Annuity restrictions
• Auto-enrollment
• Loans

69
Plan Governance on the Local Level

• Appointing authority and Board term
• Indemnification (employee or non-employee)
• Fiduciary Liability Insurance
• Conflict of InterestFinancial Disclosure
• Attendance Requirement (may be based on your
  States Public Officers Law)

70
Plan Governance on the Local Level (cont)

• By-Laws
• Guidelines re Conflict Resolution (tie vote)
• Super majority for some motions
• Trustees roles and responsibilities
• Committee roles
• Operating Manual
• How Plan is run
• How changes are implemented
• Both documents assist you in being consistent in
  your actions!

71
Plan Governance on the Local Level (cont)

• Municipalitys Code of Ethics
• Dont gossip
• Dont share any info you may come across
  regarding a Participants account balance,
  outstanding loan balance, pending divorce or
  circumstances that led the Participant to submit
  an Unforeseeable Emergency Withdrawal
  application, etc.

72
Plan Details

• New Trustees must understand the levels of
  governance to appreciate the complexity of the
  Plan.
• New Trustees will come to understand whats
  allowable now may change (usually for the better)
  and that it is important to keep up to date with
  defined contribution/retirement saving
  legislation.

73
Challenge for New Trustee is to understand their
Plans specifics

• Suffolk County NY is a Local Plan.
• Stand-alone Plan in the sense that its
  record-keeper or keepers (in NY referred to as
  Administrative Service Agencies) are selected by
  the Board investments options are selected by
  the Board, BUT
• Plan operates with a State-prepared Plan Document
  (template) which is referred to as a NYS Model
  Plan.

74
Being a NYS Model Plan Plan

• Advantages
• IRS approval is already in place
• Current Plan Document (Model Plan) is in
  compliance with the provisions of Pension
  Protection Act
• Disadvantages
• Cannot offer Plan Features, unless allowed by the
  State-sanctioned Plan Document
• Limited flexibility, for example, with time
  frames

75
Record-keeping

• The pros and cons of Bundled versus Unbundled
  have been covered in detail by prior speaker.
• Many local (smaller) plans opt for the bundled
  approach because it is easier and saves time.
• Many Plan Sponsors do not have the staff (or the
  expertise) to put together an unbundled program
  or to custom build target date funds.

76
Multiple Providers (Bundled Plan)

• Some Plans have more than one record-keeper
• Advantages
• Perception of choice
• Financial security
• Disadvantages
• More complex to administer, different procedures
  in place
• More Complex RFP Process
• Coordination issues contribution limits, loans,
  etc.

77
Investments

• Clipped from slide of prior speaker
• Rebates, on the other hand, are paid to plan
  sponsors, while participants continue to pay the
  higher fee on their investments.
• Rebates are typically used to offset plan
  expenses. Since the rebates of a single
  investment fund are being used for servicing all
  plan participants regardless of their investment
  options, the validity of their use is
  questionable.

78
Rebates

• May also be referred to as administrative
  allowance funds or revenue sharing.
• Tempting when reviewing incoming RFPs
• You may be able to offer a different share class
  of the same fund so that the Participant pays a
  lower expense ratio.
• Recognize the trade-off!

79
Rebates (cont)

• This topic has been covered at NAGDCA meetings
  for the last few years with no consensus that
  there is a single best way to handle this.
• If your Plan has made the decision to accept
  rebates, what are the acceptable uses for this
  revenue?
• Plan expenses, such as annual audit and
  trustee education
• Return to the Participants

80
Investment Policy

• Its an individual Boards decision re whether to
  adopt a written investment policy.
• It is a Board responsibility to evaluate before
  selecting a fund to be added to (or deleted from)
  your line-up . The on-going monitoring for
  performance, utilization, etc. is also a Board
  responsibility. A written investment policy may
  outline the policy and process when the above
  decisions are reached.

81
Share Class

• Identify what share class (for example, Retail
  Share class) is offered by each Fund in your
  Plan.
• Understand there may be enough assets in a Fund
  to make it eligible for an Institutional Share
  class.
• Establish within your Investment Policy
  guidelines that a review should be made each time
  a Fund offered in a Plan becomes eligible to be
  offered as an Institutional Share class.

82
Financial Literacy and Resources

• You need to understand more than just financial
  terms.
• Newly appointed trustees are often confident that
  they are familiar with the market and know how
  to invest in stocks, bonds and mutual funds.
• The financial literacy required of a Trustee is
  knowledge of how the Plan should operate to be in
  compliance.

83
Financial Literacy and Resources

• Trustees need to understand the impact (good or
  bad) of loan provisions, investment advice,
  auto-enrollment, auto-rebalance,
  easy-to-understand written material, on-site
  workshops, etc. on the Participants ability to
  establish and meet their retirement goals.

84
Financial Literacy and Resources

• Definitions of financial terms are easily
  accessible on-line. There are many great
  publications including Money, Kiplingers, etc.
• IMO The best source of information about public
  sector plans is www.nagdca.org. The site not only
  provides specific info through NAGDCA Notes and
  Issue Briefs, but is the way to keep up with
  pending legislation.

85
Financial Literacy and Resources

• Many publications, although not specifically
  limited to public sector plans, are good sources
  of information on defined contribution plans,
  including
• Plan Sponsor and website www.plansponsor.com
• BenefitsLink website www.benefitslink.com
• Pensions Investments
• Employee Benefit News

86
Financial Literacy and Resources

• Government resources
• www.irs.gov Tab for the Retirement Plans
  Community
• www.dol.gov (for the private sector plans, but
  interesting reading)
• Industry/Provider resources
• Newsletters, web casts re the market and
  legislative updates

87
Financial Literacy and Resources

• International Foundation for Retirement Education
  (InFRE) www.infre.org
• International Foundation of Employee Benefits
  Plans (IFEBP) www.ifebp.org
• 457 Answer Book Aspen Publishers

88
Thank you for your time. We will now take
questions from the audience.