The document provides information about retirement plan governance and fiduciary responsibilities. It discusses the importance of establishing clear roles, processes, and oversight for retirement plans to help ensure compliance and protect fiduciaries from liability. It emphasizes having the right people involved, clearly identifying duties, documenting formal procedures, and routinely monitoring activities. Well-documented governance helps fiduciaries fulfill their responsibilities and prepares plans for potential IRS or DOL audits.

1. Retirement Plans: Managing Your
Fiduciary Responsibility

2. About Pensionmark
Pensionmark Retirement Group provides retirement plan consulting services to
employers throughout the nation, with a focus on delivering reliable
retirement plan solutions and helping employees retire with dignity.
Firm Statistics
• Established in 1988 and currently serving
approximately 650 corporate clients with over
$5 billion in retirement plan assets
• Over 71 team members across 21 offices
throughout the United States
• Recognized as one of the top retirement plan
consulting firms in the nation1
1. PLANSPONSOR Magazine 2007-2012. Nominated by industry professionals and
selected based on a quantitative evaluation of service levels and feedback from
employer clients.

3. About AppFolio SecureDocs
AppFolio SecureDocs is a virtual data room for sharing
and storing sensitive documents both internally and
with outside parties.
AppFolio, Inc. Company Basics
• Founded by the team that created and launched
GoToMyPC and GoToMeeting
• Backed by leading technology companies and investors
• Web-based business software for financial and legal
professionals

4. About Devyn Duex
Devyn Duex, MBA, AIF®, CRPS®
Vice President, Client Relations
LPL Registered Administrative Associate
• Mrs. Duex received her Master’s in Business Administration-
Marketing (MBA/MKT) from the University of Phoenix and received
her Bachelor of Arts degree in Theatre Arts, Magna Cum Laude, from
Point Park University in Pittsburgh, PA.
• She has been recognized as one of the nation's most influential
retirement plan advisors by 401kWire (2009, 2010). (Based on reader
votes, input from distributors and statistics about advisor practice
gathered directly from nominees.)
• Mrs. Duex was recently recognized as one of the Top Women in
Business in 2012 for the Tri-Counties by Pacific Coast Business Times.
• Mrs. Duex also earned the AIF® (Accredited Investment Fiduciary™)
professional designation awarded by the Center for Fiduciary Studies
which is associated with the University of Pittsburgh and the
CHARTERED RETIREMENT PLANS SPECIALISTSM (CRPS®) certification
from the College of Financial Planning.

5. Key Topics
After today’s session you will have a better understanding
of the following:
• Plan Governance—What is it and why you should care.
• 401(k), IRS and Department of Labor (DOL) Audit Planning
• Fee Disclosure is here, now what? Understanding and determining
reasonableness.
• Are your participants ‘Retirement Ready’?

6. What is Plan Governance?
It is more than just fiduciary responsibility:
Plan governance encompasses all of the
duties, responsibilities, and actions connected with the
establishment and administration of the Plan and the
management of Plan assets.

7. What Questions Should You Ask?
• Are the right people involved?
• Are duties clearly identified and communicated?
• Are there formal processes and procedures in place
and documented?
• Are activities being routinely monitored?

8. What Questions Should You Ask?
• Are the right people involved?

9. Who’s Involved?
The following people may be involved:
• Individuals authorized to act on behalf of the employer as
Plan Sponsor
• Fiduciaries
• Employees of the Plan Sponsor who carry out ministerial
duties
• Service Providers
• Financial Professionals

10. One Role At a Time
The individual can act in only one capacity at
any time and must understand which role he
or she is in when fulfilling assigned duties.

11. Settlor Functions
Employer functions which are non-fiduciary in nature
including:
•Establishing and amending the retirement plan
•Determining fiduciary structure
•Determining who will appoint the named fiduciary
•Putting risk strategies in place

12. Who is a Fiduciary?
A Fiduciary is any individual who:
Uses discretion in administering and managing a Plan or controlling the Plan’s
assets makes that person a fiduciary to the extent of that discretion or control.
A Plan must have at least one fiduciary (a person or entity) named in the
written Plan as the Named Fiduciary (for some Plans, it may be an
administrative committee or a company’s board of directors).
Must act in the best interest of Plan participants and beneficiaries, held to ERISA
standard of care:
• Follow the prudent person rule
• Follow the diversification rule
• Follow the exclusive benefit rule
• Act in accordance with the plan documents
• Provide information to plan participants.

13. Ministerial Duties
These functions are non-discretionary in nature and
are necessary to carry out the day-to-day operation of
the Plan:
• Enrolling employees in the retirement Plan as
a part new employee orientation
• Processing employee deferrals through payroll
• Conducting employee meetings emphasizing
the importance of planning for retirement

14. Accidental Fiduciary
Following a process is one thing; making a decision or
interpreting how a process should be done is another
• An employee or other individual who exercises discretionary
authority over the Plan and becomes a fiduciary, even if not
appointed.

15. Service Providers &
Financial Professionals
Important to establish, understand, and monitor your
process around organizations providing services to the
Plan.

16. What Questions Should You Ask?
• Are the right people involved?
• Are duties clearly identified and communicated?

17. Roles & Responsibilities
• Communication of roles and responsibilities—and an
understanding of those roles and responsibilities by
the individuals assigned—are keys to successful Plan
governance
• Document, Document, Document!

18. What Questions Should You Ask?
• Are the right people involved?
• Are duties clearly identified and communicated?
• Are there formal processes and procedures in place
and documented?

19. Processes and Procedures
Critical in helping both fiduciaries and non-fiduciaries
carry out their responsibilities, assisting in keeping
your plan in compliance, and will result in greater
efficiency and preparedness in the event of an IRS or
DOL plan audit.

20. Manage Your Risk by Using a
Disciplined Process
Clear and deliberate methodology is key
How you arrived at a decision can be more important than the
decision itself.
Common processes to address:
• Selecting and monitoring investments
• Administering loan program
• Qualification process of DROs
• Determining claims for benefits
• Required disclosures to participants
• Determining Eligibility
• Plan compliance testing
• Contribution timing
• Participant withdrawal transactions and distributions

21. Document…
…Document, Document.

22. What Questions Should You Ask?
• Are the right people involved?
• Are duties clearly identified and communicated?
• Are there formal processes and procedures in place and
documented?
• Are activities being routinely monitored?

23. It doesn’t end at the set-up…
Routinely monitor both fiduciary and non-fiduciary
activities, and make changes as needed.

24. ERISA Compliance is Important
ERISA compliance is important. Failure can result in
serious penalties.
• Bear personal liability for breaches
• Subject to fines of 5% to 100% of the amount of losses
incurred, as well as excise taxes, and civil or criminal sanctions
• The plan may be disqualified

25. Poll 1
Have you already established Plan governance
regarding your Retirement benefit(s)?
• YES
• NO
• A Process is in place, but not officially documented

26. Audit Planning
• 401k Required Independent Audit
• IRS Audit
• DOL Investigation

27. 401(k) Required Audit
• Over 100 participants as of the first day of the
Plan Year
• Participant definition: Any individual eligible to make
elective contributions under a Plan, Nonvested
individuals who are earning or retaining credited
service, and current and former employees and
beneficiaries eligible for or receiving benefits
• 80/120 Participant Rule; small Plan filer exception
• Independent Qualified Public Accountant

28. Poll 2
Is your Plan currently under random selection for an
audit/investigation by the IRS or DOL?
• YES, currently in process
• YES, a letter was received but the process has not yet
started
• YES, a previous Plan year, not currently.
• No, never been through this process

29. IRS Audit & DOL Investigation
• The Employee Benefits Security Administration (EBSA) audited
more than 3,100 plans
•73% of them were required to restore losses
•The amount of plan restorations, fines, and penalties for the year totaled
nearly $1.05 billion
•Average fine per plan was approximately $450,000
• The DOL recently added nearly 1,000 employees, most of them
assigned to enforce compliance among plan sponsors
• One hundred new DOL enforcers are in place with an
estimated first-year budget of $153 million
Source: FA News (Financial Advisor) February 21, 2012 ‘Plan Sponsors Getting Big Fines From DOL’ by Jim McConville

30. DOL Investigation
Responsibility to review Plans for Fiduciary breaches
Reminder; Basic Fiduciary Duties
• Acting solely in the interests of the participants and their beneficiaries
• Being prudent
• Paying only reasonable and necessary expenses of the plan
• Following the terms of the plan

31. DOL Investigation
Steps to help address common problems
1. Understand your plan and your responsibilities
2. Carefully select service providers
3. Make timely contributions
4. Avoid prohibited transactions

32. IRS Audit
How 5500’s are Selected for Examination:
Project Cases
•Large or Unusual Assets or Entries on Form 5500
•Inconsistencies in Answers
•Inaccurate Answers
•Referrals from IRS Divisions, PBGC, DOL, Interested Parties

33. IRS Audit
How 5500’s are Selected for Examination:
Project Cases
•Large or Unusual Assets or Entries on Form 5500
•Inconsistencies in Answers
•Inaccurate Answers
•Referrals from IRS Divisions, PBGC, DOL, Interested Parties

34. IRS Audit

35. IRS Audit

36. Common Examination Errors
All Plans:
• Non-Amenders
• Definition of “Compensation”
–Plan vs. operational definition not consistent
• Excluding eligible employees / Including ineligible employees
• Plan loans
–Sponsor: failure to withhold loan payments

37. Common Examination Errors
401(k) Plans:
• Employer matching contributions not made
– Failure to properly count Hours of Service
– Incorrect plan entry date
• ADP and ACP testing failures
– Not completed
– Not passed
• Excess elective deferrals
–Limit increased from $16,500 to $17,000 for 2012

38. Common Examination Errors
403(b) Plans:
• Excess elective deferrals
– Improper use of the 15 year-of-service catch-up rules
• Universal availability
– Exclusions
• Part-time employees
• Other arbitrary classifications
• Reclassifying independent contractors

39. Common Examination Errors
403(b) Plans:
• The 2009 tax year now under review
• Focusing on
– Were Notice 2009-3 requirements satisfied?
– Revenue Procedure 2007-71 requirements
– Exempt Organizations - controlled groups?
– Universal availability “Bright-Line” test

40. IRS Audit

41. How Do You Improve Compliance?
This is where proper Plan
Governance pays off…it is critical
to have disciplined process &
internal controls!

42. Fee Disclosure, Now What?
15, 17, 18

43. Fee Disclosure in Summary
• ERISA 404(a)(5) and 408(b)(2), along with
enhancements to the 5500-Schedule C are part of a
three-pronged DOL disclosure strategy
• DOL’s intent is to improve on the disclosure of fees
and any conflicts of interest
• Designed to assist Plan Sponsor in maintaining
reasonableness of fees and allow employees to make
better decisions

44. Poll 3
Has your Plan gone through a fee analysis to
determine reasonableness of fees?
• YES
• NO
• NO, but we plan to analyze this, this year

45. Fee Disclosure- 408(b)(2)
Value Proposition
• The Department believes that plan fiduciaries need this information, when
selecting and monitoring service providers, to satisfy their fiduciary
obligations under ERISA section 404(a)(1) to act prudently and solely in the
interest of the plan’s participants and beneficiaries and for the exclusive
purpose of providing benefits and defraying reasonable expenses of
administering the plan.
Number of times “Reasonableness” or
“Reasonable” is mentioned in the regulation:
49

46. Why the main issue is NOT
disclosure, it is Reasonableness
Taking it one step further:
• The table above shows the impact on projected retirement account balance of a 20% change in 6 retirement variables.
• The chart clearly shows that “provable” differences in these statistics are important to participants.
• For example, if a service provider can demonstrate that their communications and education program actually results
in deferral rates that are 1.20% higher than average, that will be worth $38,148 to just that one participant
• By contrast a 20% reduction in fees (15 bps) is worth only $5,398 to that one participant
In fact, nearly every major lawsuit regarding fees mentioned the impact higher fees have on retirement balances. By
logic, a Plan Sponsor going for lower fees but choosing a provider that will result in lower retirement balances could also
have liability. This is why the DOL clearly emphasizes “reasonable fees” versus “low fees”

47. How Can You Determine Fee
Reasonableness
• Should reflect those services that help Plan Sponsors fulfill their
Fiduciary Duty as well as provide information on Best Practices
Plan Sponsor
• Should measure those Participant Success Measures that have a
proven impact on increasing Retirement Readiness
Participants
• Should measure those services that have a meaningful impact on
the Cost of Servicing the plan
Service Providers

48. Are Your Participants Retirement
Ready? Shifting Focus
Investments
Plan Fees Retirement
Readiness
Plan Trends

49. Plan Success Cycle

50. Poll 4
If your organization works with a retirement Plan
Advisor, does your Advisor provide fiduciary
services to the Plan?
• YES
• NO
• I am not sure
• Currently do not work with an Advisor

51. Contact Us
Pensionmark Retirement Group QUESTIONS?
24 E. Cota Street, Suite 200
Santa Barbara, CA 93101
Phone: (888) 201-5488
info@Pensionmark.com
www.pensionmark.com
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FINRA/SIPC. Financial Representatives of Pensionmark
provide investment advice through Independent
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52. Thank You
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