Standard Retirement Services, Inc. 1100 SW Sixth AvenuePortland OR 97204

www.standard.com

The Standard is the marketing name for StanCorp Financial Group, Inc., and its subsidiaries. StanCorp Equities, Inc., member FINRA, wholesales a group annuity contract issued by Standard Insurance Company and a mutual fund trust platform for retirement plans. Third-party administrative services are provided by Standard Retirement Services, Inc. Investment advisory services are provided by StanCorp Investment Advisers, Inc., a registered investment advisor. StanCorp Equities, Inc., Standard Insurance Company, Standard Retirement Services, Inc., and StanCorp Investment Advisers, Inc., are subsidiaries of StanCorp Financial Group, Inc., and all are Oregon corporations.

DOL Final Fiduciary Regulations Initial Analysis/FAQs

RP-18129 (4/16)

DOL Final Fiduciary Regulation Initial Analysis/FAQs The long-awaited Fiduciary Investment Advice regulations were announced on April 6, 2016. They include more than 600 pages of complicated, inter-related rules that will govern whether an individual is giving investment advice and considered to be an investment advice fiduciary. They also add requirements for new contractual commitments and/or disclosures. They differ in several ways from the proposed version — for example, level-fee arrangements in qualified plans now appear to be subject to the Best Interest Contract Provisions. The industry is still digesting the regulations, and many questions have been raised in various forums. The DOL has pledged to work with the industry to put out responsive, timely guidance (most likely in the form of Q&As) to assist in compliance. The Standard’s legal department is closely monitoring and participating with the industry in coming to a clear understanding of these very detailed regulations. In the next 18 months we will take any necessary steps to ensure that we are complying with the regulations and do what we can to assist advisors and clients.

Initial Analysis/FAQs

When are the regulations effective? The “effective date” of the new regulations is June 7, 2016. However, responding to industry concerns regarding complexity of implementation, the “applicability date” is April 10, 2017. Additionally, certain sections of the Best Interest Contract Exemption (the BICE) are further delayed until Jan. 1, 2018.

How will this affect plan sponsors? • What to expect: The regulations apply to advisors and require investment

advisors to commit to acting in the best interests of their client. Many investment advisors have always acknowledged fiduciary status, and most advisors (whether they have officially acknowledged fiduciary status or not) have always acted in the best interests of their plan clients. What plan sponsors can expect to see in the next 18 months or so will be additional disclosures from their advisor (including StanCorp Investment Advisers, if The Standard is providing 3(21) and 3(38) services). It is also possible some advisors may wish to change the structure of their compensation and may contact plan sponsors to discuss that.

Regulatory Insights

Retirement Plans

This information is for general information purposes only. Advisors should consult with their broker-dealer, compliance or legal counsel for guidance specific to their own situation.

• Why plan sponsors should care: Plan sponsors will want to review the disclosures they receive carefully to make sure the advisors engaged to work on their plans commit to act in the best interests of the plan and its participants. While these regulations are not directed at plan sponsors, the downstream effect is that it will become an expectation that plan sponsors carefully vet their plan advisors with these requirements in mind.

How will this affect advisors? The regulations make anyone who provides investment advice (defined below) a fiduciary and therefore required to act in the best interest of the advice recipient. Many advisors already act as fiduciaries. However, the DOL has added a number of required disclosures, and in some instances, required contractual commitments, which advisors will need to analyze and apply to their business. The ultimate outcome of this is a more formal and documented commitment to acting in the best interests of plans and plan participants, and greater scrutiny of compensation practices for possible conflicts of interest. What constitutes investment advice under the new regulation?The concept hinges on several elements — a recommendation, the status of a person making it, who the recommendation is made to and what the recommendation is about:

• An advice recommendation under the regulations is a communication that (1) based on its content, would reasonably be viewed by the recipient of the communication as a suggestion that they engage in or refrain from taking a particular course of action, and (2) is regarding the buying, holding, managing or selling of securities or other investment property by a plan or IRA, OR the hiring of a specific investment advisor or manager

• The person or entity making the recommendation (1) has acknowledged his or her fiduciary status, (2) gives advice under an arrangement, agreement or understanding that the advice is based on the investor’s particular needs, or (3) gives advice directed to a specific investor about whether the investor should make an investment or management decision.

• The person or entity or any of their affiliates making the recommendation receives direct or indirect compensation in connection with the recommendation.

• The individual or entity receiving the advice is a plan, plan fiduciary, plan participant, IRA or IRA owner. Why does this new definition matter? Individuals providing investment advice for a fee are plan fiduciaries under ERISA (3)(21)(ii), and obligated to act in the best interest of the plan and plan participants. There is a perception that some persons giving investment advice were not acting as fiduciaries, or were being paid in a fashion that could create a conflict of interest. The regulations were designed to address that perception by requiring persons giving investment advice to adhere to a “best interest” standard of care. What else is required? Individuals giving investment advice to plans, plan participants and to IRAs are now required to put their commitment to acting in the best interests of the plan or participant in writing. Depending on a number of factors, this could be required to take the form of either an actual contract, or could be provided to plan sponsors as disclosures. There are other administrative requirements as well, such as certain disclosures on websites and notification to the DOL. What about investment education? There was concern based on the proposed version of the regulations that they would severely curtail a service providers’ ability to provide vital investment education to plan participants and IRA owners. The final regulations were broadened for qualified plan-related educational conversations and materials — for example, asset allocation models may now be much more easily explained. However, similar refinements were NOT made for IRA-directed advice. It remains to be seen if this will have a chilling effect on service providers’ ability to give quality advice in the individual IRA and rollover market. Who enforces this new standard? The DOL can write the rules but has no enforcement authority over IRAs. IRA enforcement is delegated to the IRS, which is generally not focused on these types of issues. The DOL attempted to address this by utilizing the ‘best interest contract’ requirement — such a contract must not include provisions limiting the liability of the investment advisor and may not bar investor participation in class action suits. As a practical matter, DOL intends that it will be enforced by plaintiff litigation.