The new Department of Labor fee disclosure rules for retirement plans go into effect July 2012. These rules were designed to make it easier for plan sponsors and participants to compare plan costs and fees, as well as to help determine whether these fees represent good value for the services being provided to your credit union. Did you know you have legal obligation to review your current plan fees? Watch this free webinar to learn how and where to start, the different types of service arrangements for retirement plans and the explanations of plan fees and expenses. For more information: www.nafcu.org/pentegra

1. Our difference is your advantage
OUR DIFFERENCE IS YOUR ADVANTAGE
401(k) FEE 101
Evaluating Plan Fees And
Estimating Value
Presented By: Sonya V. Robinson, MPM®
May 23, 2012

2. OUR DIFFERENCE IS YOUR ADVANTAGE
ABOUT PENTEGRA
Pentegra Retirement Services delivers a full complement of tailored
retirement plan services to credit unions nationwide.
Pentegra has a strong heritage working with the financial
community. Pentegra was founded by the Federal Home Loan
Bank System in 1943 to offer a retirement program for their
employees. And while we have never lost our focus, we have
grown along with many of our clients to serve more than 700
financial institutions nationwide.

3. OUR DIFFERENCE IS YOUR ADVANTAGE
AGENDA
 Historical Background
 Methods & Types of Compensation
 Paradigm Shifts
 Disclosure Timing
 Your Next Steps
 Question and Answers

4. OUR DIFFERENCE IS YOUR ADVANTAGE
HISTORICAL BACKGROUND
 ERISA has established the rules that apply to Plan fiduciaries.
 Since its passage in 1974, Section 408 has always provided a
requirement that a plan pay only “reasonable” fees required for
administration.
 If “unreasonable”…a prohibited transaction occurs and creates
a breach of fiduciary duty.

5. OUR DIFFERENCE IS YOUR ADVANTAGE
HISTORICAL BACKGROUND
 Over time, the methods by which to compensate vendors for
plan administration services have become many, flexible and
…overly complex.
 This has created a double-edged sword:
– it’s been easy to compensate providers for services rendered
– it makes it difficult for plan fiduciaries to isolate the true cost
of retirement plan administration
 Transparency is the fundamental issue.
– For Plan Sponsors
– For Participants

6. OUR DIFFERENCE IS YOUR ADVANTAGE
SERVICE PROVIDER FEE DISCLOSURE
 Section 408(b)(2) of ERISA is intended to provide transparency of
all costs and fees related to the administration of retirement
plans
 Any Covered Service Provider “CSP” who obtains compensation
(direct or indirect) in excess of $1,000, is required to provide a
disclosure notice
 Failure to comply, results in a “Prohibited Transaction” and
subjects the Provider to a 15% excise tax

7. OUR DIFFERENCE IS YOUR ADVANTAGE
WHO MUST PROVIDE FEE DISCLOSURE
INFORMATION?
Your
Retirement
Plan
Trustee
Custodian
Record
keeper
ERISA
Named
Fiduciary
Investment
Advisor
Third Party
Administrator
Accountant

8. OUR DIFFERENCE IS YOUR ADVANTAGE
YOU SHOULD EXPECT TO SEE…..
 Clearly defined roles & responsibilities
 Who ‘is’ & ‘is not’ a fiduciary
 Compensation/Fee Schedules
– Prospective Estimates
– Bundled/Unbundled Arrangements

9. OUR DIFFERENCE IS YOUR ADVANTAGE
POLLING QUESTION #1
 What types of fees are you paying today for your retirement
plan?
– Direct Compensation
– Indirect Compensation
– Paid to/among related parties
– Termination of Services
– All of the above

10. OUR DIFFERENCE IS YOUR ADVANTAGE
TYPES OF COMPENSATION
•Cost to
transfer
records &
assets
•Transaction
Based or
•Against the
Plan’s
investments
•Revenue
Sharing
Arrangements
•Account
Maintenance
Fees
Direct Indirect
Service
Termination
Paid
Among
Related
Parties
Your
Retirement
Plan
Trustee
Custodian
Record
keeper
ERISA
Named
Fiduciary
Investment
Advisor
Third Party
Administrator
Accountant

11. OUR DIFFERENCE IS YOUR ADVANTAGE
METHODS OF PAYMENT
Invoice
Direct Debit
Blended Arrangements
Net Asset Value
Revenue Sharing

12. OUR DIFFERENCE IS YOUR ADVANTAGE
POLLING QUESTION #2
 Do you know that you are required by law to evaluate fees for
services received?
– Absolutely
– To some extent
– To a minor extent
– Absolutely not

13. OUR DIFFERENCE IS YOUR ADVANTAGE
PARADIGM SHIFT
 Not taking action; is not an option
 Choose your approach:
– Review & Document
– Bid & Select
 Proactively evaluate the goods and services you receive for the
fees you pay
 Develop a comprehensive process to demonstrate that you’ve
evaluated the costs for your plan and deemed those costs to
be “reasonable”

14. OUR DIFFERENCE IS YOUR ADVANTAGE
CONSIDERATIONS
 Assess fee reasonableness (in relation to plan size and services
offered)
 Define success (Low cost? Increased participation? Retirement
readiness? Ease of administration?)
 Review services offered and/or provided
 Understand the responsibilities to your participants

15. OUR DIFFERENCE IS YOUR ADVANTAGE
UTILIZE YOUR RESOURCES
 Request assistance understand the breadth & depth of
information provided in your disclosure
 Utilize your Relationship Manager, Consultant and/or Advisor to
assist you in performing your fiduciary duties.
 Talk to your provider(s) about enhanced services, plan options,
etc.
 Discuss reasonable costs in tandem with value added services

16. OUR DIFFERENCE IS YOUR ADVANTAGE
BEST PRACTICES
 Document a formal process to regularly evaluate the plan:
– Services, costs and level of “success”.
– Failure to embark on a formal and diligent process, may result in
litigation from plan participants.
 Collaborate with your providers to create a program that works
for your employees.
– Sharpen your Pencil…if you’re happy with your provider…but not the
fees? Have meaningful discussions
 Request new/updated Service Agreements
 Communicate, Communicate, Communicate

17. OUR DIFFERENCE IS YOUR ADVANTAGE
TIMING OF DISCLOSURES
 July 1, 2012
 In advance of entering into new
or renewed contracts
 Errors or Omissions within 30 days
of notification
 Changes to goods or services
provided, no later than 60 days
after the provider is “aware” of
the change
 Within 90 days after requesting
required information
– If not received, you must
notify DOL & terminate
contract
Your
Retirement
Plan
Trustee
Custodian
Record
keeper
ERISA
Named
Fiduciary
Investment
Advisor
Third Party
Administrator
Accountant

18. OUR DIFFERENCE IS YOUR ADVANTAGE
WHAT TO DO NEXT?
 Assign Responsibility
– Prepare list of covered service providers for your Retirement
plan
– Document review process (frequency, methodology, etc.)
– Develop management communication & reporting plan
– Promote awareness

19. OUR DIFFERENCE IS YOUR ADVANTAGE
CONTACT INFORMATION
Sonya V. Robinson, MPM ®
Phone: 914-821-9439
Email: srobinson@pentegra.com
www.nafcu.org/pentegra