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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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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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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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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