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Provided by:

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Today’s Agenda

• Overview of Retirement Plans

• How Plans are Used – Private vs Public

• Hot Topics and Trends

• Employment Opportunities

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Defined Contribution vs. Defined Benefit

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Defined Contribution Plans

General Overview

457, 403(b) and 401(k)

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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

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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

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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

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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

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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

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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

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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

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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

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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

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Hot Topics and

Trends

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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

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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

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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

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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

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Employment Opportunities

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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

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Service Providers

• Plans may use bundled or unbundled services– Record-keeping and administrative services

– Investment product providers

– Communication and education providers

– Investment managers

– Consultants

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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

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