An Overview of the Current Defined Contribution Marketplace

1. What’s Changed with 401(k)s?
More Than You Think
Jacob C. Adamczyk
Overview of Current
Defined Contribution Marketplace

2. TODAY’S AGENDA
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• Fiduciary Blind Spots & Best Practices
• Investment Management
• Optimizing Plan Design
• Financial Wellness & Employee Engagement
• Understanding Fees, Services & Structure

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FIDUCIARY BLIND SPOTS & BEST PRACTICES
Blind Spots
• Committee composition & responsibilities
• Process over outcomes
• Meeting minutes
• 3(21) Advisor / 3(38) Manager
• Investment Policy Statement (IPS)
• Vendor RFI / RFP
• Participant education vs. advice
• Fiduciary liability insurance
• Fidelity bond coverage
Best Practices
• Understanding your fiduciary duties
• Documentation
• Fee analysis / benchmarking
• Vendor management
• Proprietary investments
• Recent litigation
• Fidelity, Franklin Templeton, GE,
Nordstrom, Northrop Grumman, Putnam,
Voya, Xerox

4. 4
FIDUCIARY BLIND SPOTSFIDUCIARY BLIND SPOTS & BEST PRACTICES
Broker
3(21) Fiduciary
Co-Fiduciary
3(38) Fiduciary
Full-Scope Fiduciary

5. 5
FIDUCIARY BLIND SPOTS & BEST PRACTICES
3(21)
Co-Fiduciary
• Moderate level of protection
• Investment Advisor
• Retain control of investment
lineup
• Retain liability for investment
decisions
3(38)
Full-Scope Fiduciary
• Highest level of protection
• Investment Manager
• No liability for investment
decisions
• Lack of control
• Higher fees
Type of Advisor Pros Cons

6. 6
FIDUCIARY BLIND SPOTS & BEST PRACTICES
• DOL Fiduciary Rule
– First introduced in 2009 by DOL; approved April 6, 2016
– Final rule addresses conflicts of interest for advisors re: 401(k) Plans and IRAs
• Compliance Deadlines
– June 9, 2017: Educational requirements and investment advice provisions
– January 1, 2018: Major participant disclosures, new contracts and agreements
• What It Means for Advisors
– Must follow fiduciary standard of care; suitability standard no longer applies
– Only offer advice that reflects “best interests” of plan participants/beneficiaries
• What It Means for Sponsors
– Understand type of advisor you are working with; engage fiduciary advisor
– Focus on fees: how and where they are being paid

7. INVESTMENT MANAGEMENT
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Proprietary
vs.
Non-
Proprietary
Expense Ratios
&
Share Classes
Asset Class
Diversification
QDIA
Active
vs.
Passive
Absolute &
Relative
Performance
Platform
Flexibility
Plan
Demographics
Fund Menu
Considerations

8. INVESTMENT MANAGEMENT
Share Class Availability
– Must evaluate “net net” expense ratio of each investment
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9. INVESTMENT MANAGEMENT
QDIA Designation (Qualified Default Investment Alternative)
– Safe harbor protection afforded to plan sponsors, if conditions met
– Three approved types of QDIAs (TDFs, Managed Accounts, Lifestyle Funds)
– Documentation of QDIA decision and rationale is critical
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10. OPTIMIZING PLAN DESIGN
• Automatic Enrollment
• Automatic Escalation
• Default Fund(s)
• Ease of Accessing Money
• Loans & Financial Hardships
• Available Sources
• Distribution Ages
• Eligibility & Entry Periods
• Match vs. Profit Share
• Trustee
• Vesting Schedules
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11. OPTIMIZING PLAN DESIGN
Peer Group
Benchmarking
• Categories
• Plan size (5)
• Industry (50)
• Geography (5)
• Employee count (10)
• Plan type (11)
• Plan Features
• Advisor type
• Advisor services
• Auto enroll/escalation
• Eligibility/Entry
• Employer contribution
• Fee/Expense payment
• Investments
• Plan administration
• Plan structure
• Providers/Vendors
• Vesting
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12. OPTIMIZING PLAN DESIGN
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Health Care Organizations (For Profit)
Overall Micro
(<$5M)
Small
($5-$50M)
Mid
($50-$200M)
Large
($200-$1B)
Mega
(>$1B)
Immediate 19.5% 11.7% 16.7% 29.6% 66.7% 83.3%
3 Months 20.7% 13.6% 26% 33.3% 11.1% 16.7%
4-6 Months 10.8% 12.6% 8.3% 14.8% 11.1% 0%
7-11 Months 0.4% 0% 1% 0% 0% 0%
1 Year 45.2% 58.3% 43.8% 22.2% 11.1% 0%
> 1 Year 3.3% 3.9% 4.2% 0% 0% 0%
Eligibility

13. OPTIMIZING PLAN DESIGN
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Roth Contributions
Law Firms
Overall Micro
(<$5M)
Small
($5-$50M)
Mid
($50-$200M)
Large
($200-$1B)
Mega
(>$1B)
Yes 74.3% 56.7% 64.4% 90.3% 92.5% 100%
No 26.6% 43.3% 35.6% 9.7% 4.8% 0%

14. OPTIMIZING PLAN DESIGN
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Safe Harbor
Building / Construction / Contracting
Overall Micro
(<$5M)
Small
($5-$50M)
Mid
($50-$200M)
Large
($200-$1B)
Mega
(>$1B)
Yes 50.8% 62.8% 39.1% 31.6% 66.7% 66.7%
No 49.2% 37.2% 60.9% 68.4% 33.3% 33.3%

15. FINANCIAL WELLNESS & EMPLOYEE ENGAGEMENT
1 in 4
who feel
“financially in
control” still worry
about finances5
50%
not confident
they have $1,000
in emergency
savings4
1/3
earning $100K+
have credit card
debt; 22% struggle
with payments3
7 of 10
say “financial”
most common form
of stress1
21%
with outstanding
loans from workplace
savings plan2
S T R E S SD I S T R E S S
C O N T R O L
1“Are Teens Adopting Adults’ Stress Habits?”, American Psychological Association, 2014.
2 PWC Employees Financial Wellness Survey, April 2015.
3 Jack Van Derhei, Sarah Holden, Luis Alonso, Steven Bass, and Ann Marie Pino,”401(k) Plan Asset Allocation, Account Balances, and Loan/Activity in 2013.”, EBRI Issue Brief, no. 408, December 2014.
4 State Street Global Advisors, Biannual DC Investor Survey, March 2015.
5 Fidelity, Financial Wellness Study, July 2015.
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16. FINANCIAL WELLNESS & EMPLOYEE ENGAGEMENT
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• Stretch Match
• Benefits Harmonization
• Rewards Programs
• Wellness Dollars
• Individual Financial Advice

17. Broker
3(38) Fiduciary
Full Scope Fiduciary
 Various Paycheck Deductions
 Setting up a Budget
 Expense Categorization
 Cash Management
 Emergency Savings
 Retirement
 Saving for Large Purchases Investments
 Savings Optimization
 Income Plan
 Pension
 Social Security
 Medicare
 Will/Estate Plan
 Life and Disability Insurance
 Long-Term Care Insurance
 Safeguarding Documents
 In-Network vs. Out-of-Network
 Name Brand vs. Generic Rx
 Health Care Savings Accounts
 Preventative Care Opportunities
 Student Loans
 Credit Cards
 Mortgage
 Car Loans
 Workplace Loans
 Credit Score
 Debt Prioritization
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FINANCIAL WELLNESS & EMPLOYEE ENGAGEMENT

18. UNDERSTANDING FEES, SERVICES & STRUCTURE
Fee Analysis
• Plan Structure
• Bundled vs. Unbundled
• Advisor vs. Direct
• Fee Structure
• Total Cost
• Fee Levelization
• Pro Rata vs. Per Capita
• Company Pay vs. Plan Pay
• Revenue Sharing
• Fee Credits
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19. UNDERSTANDING FEES, SERVICES & STRUCTURE
Plan Services
• Advisor
• Fiduciary Governance
• Participant Education
• Plan Administration
• Vendor Management
• Investment Management
• Recordkeeper
• Annual Notice deliveries
• Beneficiary recordkeeping
• Directed Trustee
• Eligibility tracking
• Loan/FHW/QDRO administration
• Mandatory distributions
• Participant technologies
• Payroll integration
• Plan sponsor technologies
• Reporting capabilities
• Rollover support
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20. KEY TAKEAWAYS
• Fiduciary Governance
– Investment Policy Statement
– Prudent process, documentation and training
• Investment Management
– 3(21) or 3(38) Fiduciary
– Share class analysis, 404(c) compliance, QDIA
• Plan Design
– Industry benchmarking to ensure marketplace competitiveness
– Risk management & liability protection
• Vendor Management
– Fee & service benchmarking
– Ongoing vendor due diligence
• Employee Engagement
– Get creative!
– Maximize company dollars
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21. www.aurumwealth.com @AurumWealthAkron | Cleveland | Tampa
CONTACT INFORMATION
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T H A N K YO U F O R YO U R AT T E N D A N C E
Jacob C. Adamczyk, AIF®
Director, Retirement Plan Services
440-605-7279
jadamczyk@aurumwealth.com