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The Pentegra Advisor

SMARTPATH

TM

Helping plan sponsors achieve

successful outcomes.


What is on the mind of today’s plan sponsors? Defined contribution plans—and 401(k) plans in particular—have undergone a dramatic shift since their creation nearly 40 years ago—evolving from what was once considered a supplementary retirement benefit to become the primary source of retirement income for many people today.

Plan sponsors have a growing sense of responsibility for employees’ overall financial wellness. In fact, 83% feel responsible. 1

This represents a clear opportunity for you to

demonstrate your value. By expanding one’s focus and diving deeper into plan design and participant outcomes rather than solely focusing on plan investments, financial advisors can build stronger retirement practices and create loyal, satisfied clients. 1 Aligning Goals, Improving Outcomes 2015 Defined Contribution Survey Findings J.P. Morgan Asset Management


The dialogue around successful outcomes Today, plan sponsors are far more focused on retirement outcomes and helping participants achieve adequate levels of retirement readiness. They are concerned with the changing regulatory landscape and overall plan administrative burdens—there is a strong desire to reduce workloads, fiduciary liability and risk. They want retirement plans to deliver successful outcomes—for the sponsor as well as the participant. What does this mean? Progressive plan design. Retirement income solutions. Communication and education

that speak in terms of outcomes. Outsourced fiduciary responsibility. Simplified plan sponsor obligations. Broader retirement coverage. Today and in the future, plans that have these features will be well on track to succeed in delivering successful outcomes for everyone. The Pentegra Advisor SmartPathTM is designed to help you start the dialogue with plan sponsors—by focusing on addressing these key challenges and opportunities with solutions that differentiate your services and guide plan sponsors and participants toward more successful outcomes.

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Pentegra Retirement Services


The typical working-age American household is far toward accumulating to maintain their current living standard, and many will be to have the resources to pay for their needs in retirement. Nearly 7 in 10 (68%) of workers age 40+ admit they should have started saving earlier for retirement. Less than half (45%) have been consistent savers.2

off-track ample savings challenged

basic

1

1National Institute on Retirement Security, “Retirement Security 2015 Roadmap for Policy Makers, Americans’ Views of the Retirement Crisis� March, 2015 22015 Wells Fargo Retirement Study


Retirement Readiness It starts with progressive plan design Ensuring successful participant outcomes begins with progressive plan design that maximizes positive participant behaviors. Certain automatic plan features that better meet the needs of plan participants and plan sponsors can drive successful outcomes for participants and sponsors alike. Automatic features can include automatic enrollment, automatic escalation of salary deferrals and auto rebalancing and utilization of qualified default investment vehicles. These features help plan participants set a reasonable level of salary savings, increase their contributions over time, achieve proper investment diversification and make better use of a plan’s investment alternatives. Plan design decisions are influential and can be a key driver in helping people save successfully.

Key elements of progressive plan design

Make it easy to participate

Keep vesting schedules short

Use online enrollment

Implement auto-enrollment

Use a 6% deferral rate rather than 3%

Add an auto-escalation feature

Get creative with matching contributions

Adopt a Safe Harbor matching formula

Add a Roth 401(k) feature (with an In-Plan Roth conversion feature)

Limit plan leakage

When it comes to plan investments, less is more

Make Qualified Default Investment Alternatives (QDIAs) a “one fund� investment solution

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Pentegra Retirement Services


Pentegra Can Help Pentegra’s SmartPathTM thought leadership series shares our expertise on progressive plan design best practices that can be used as a starting point for conversations with sponsors. The Pentegra Participant SmartPathTM and Distribution PathTM offer key recommendations for accumulation as well as decumulation strategies for participants. To learn more about the Pentegra SmartPathTM series, we invite you to visit our website, www.pentegra.com, where you can review our current thinking and tap into thought leadership as showcased in our Talk to an Expert feature.

You Up at Night? 49% of Plan What’s Keeping

Sponsors cite Participants’ Participation and

Rates

Savings

2

22015 Survey of DC Viewpoints Rocaton Investment Advisors, LLC


Retirement income solutions Helping participants transition from accumulation to decumulation How do you help participants transition from the accumulation phase to the decumulation phase? The reality is that how you spend your savings is as important as how you accumulated them. Many of the same factors that shape savings decisions will also shape how you spend them. Retirement income solutions such as installment payments are a way to help participants structure retirement savings to provide regular income throughout retirement. An installment payment program lets participants make long-range plans so that they can use personal savings and other income sources without worrying about using all of their retirement income. Installment payments generally offer a great deal of flexibility in structuring payments and create an individual income stream and payment cycle. Pentegra Can Help Pentegra offers comprehensive installment payment options and flexibility. Annual/Periodic Distribution Payments An installment payment can be structured to provide benefit payments over a specified period of time based on an accumulated retirement benefit. Participants can choose to take a monthly, quarterly or annual distribution as a percentage of their savings, or as a specific flat dollar amount payable over time. Annual/Periodic Distribution Payments Based on Life Expectancy An installment payment can be structured to provide benefit payments over a specified period of time not to exceed the participant’s life expectancy using IRS life expectancy tables. Do-it-Yourself, Ad-Hoc Distribution Payments Alternatively, installment payments can be structured simply as periodic ad-hoc distributions that are made when the participant chooses.

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Pentegra Retirement Services


If You Could

Change One

Thing About Your Plan‌

21% Would Introduce/Enhance Auto Features

24% of Sponsors would include a retirement

income solution.

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42015 Survey of DC Viewpoints Rocaton / Pension Investments


Provide education focused on outcomes Your opportunity to provide value added services There is nothing more effective when it comes to influencing participant behavior than on-site education. Re-enrollment of existing plan participants helps participants take a fresh look at how they are investing their contributions since many participants are managing what is most likely their first or second largest asset under the “set it and forget it” mantra. Help participants redefine affordability Periodic re-enrollment and education meetings help participants map out a strategy and stick to that strategy to attain their long-term goals. Participants often cannot measure whether they are on track to meet their retirement planning goals without first taking the steps to determine what the goals are. What’s more, deferrals of 5% or 6% of salary and employer matching contributions don’t have a real context for participants without showing them how these contributions translate into real income at retirement. Rethink communication and education programs to help participants think in terms of affordability. Focus on financial wellness and overall budgets and make small lifestyle changes to make saving more affordable and realistic. Use your education meeting as a platform for integrating financial planning tools to help participants do this—in particular, tools that provide guidance and advice. Pentegra can help Our retirement plan education and communication tools are designed to support your efforts. Our services are flexible to complement your capabilities. We offer education and communication tools to provide you and your clients with a deeper understanding of how retirement plans can be maximized to provide successful outcomes for everyone. For more information, visit our website and view our communication tools and solutions.

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Pentegra Retirement Services


I wish my employer would: Educate me in the workplace 74% agree Require attendance at plan meetings 66% agree Encourage early savings 55% agree. 7

7Through the Rearview Mirror American Century Investments 2013


Outsource fiduciary responsibility Reduce risk, save time and money Plan sponsors find it difficult to keep up with retirement plan responsibilities—in particular, administrative responsibilities. They have to be an expert not only in their job, but also in their role as plan administrator. Most sponsors don’t consider themselves fiduciaries—which means they are not sufficiently aware of the legal responsibilities that come with their role in managing their plan. Do it for me Today, there is a great deal of talk about helping employers with fiduciary responsibility, yet the talk often falls short of what most employers actually want and need—someone to simply handle it for them. Outsourcing fiduciary responsibility, and in particular 3(16) administrative responsibilities, offers a simple solution that can minimize risk and reduce plan administrative burdens. Because the 3(16) administrator is responsible for managing the day-to-day operation of the plan, outsourcing the fiduciary responsibilities associated with this role transfers these responsibilities from the plan sponsor to the named 3(16) Administrative Fiduciary. Pentegra Can Help As one of the nation’s most experienced fiduciary service providers for more than 70 years, our retirement plan solutions are designed to deliver fiduciary and administrative relief at every level. With every retirement plan solution, we offer clients a sound approach to help manage fiduciary relief for maximum plan success, serving in all three of principal roles in a retirement plan—as a full scope ERISA 402(a) Named Fiduciary, as a 3(16) Plan Administrator, and as a Trustee, whether as a fully discretionary trustee with sole authority over plan assets or as a directed trustee under ERISA 402(a)(1).

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Pentegra Retirement Services


Most plan sponsors find it

challenging and burdensome to manage their plans. 44% of plan sponsors are not aware they are fiduciaries. 5

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5Inside the Minds of Plan Sponsors: What They Care About and Want Alliance Bernstein August 2006 6Aligning Goals, Improving Outcomes 2015 Defined Contribution Survey Findings J.P. Morgan Asset Management


Make it easier to offer a retirement plan Retirement plans play a vital role in attracting and retaining quality employees. They represent an important and essential part of an overall compensation package. Many small businesses have a strong desire to offer a 401(k) or other retirement plan but face considerable hurdles in terms of cost, expertise and dedicating the necessary time to run the plan properly. Multiple Employer Plans (MEPs) eliminate these hurdles for plan sponsors. MEPs save time, money and reduce risk, and make it easier for employers to offer a retirement plan. MEPs bring together a comprehensive array of plan services, fiduciary support and investment platforms to offer plan sponsors a seamless retirement plan solution. MEPs Make it Simple A MEP is a distinct type of retirement plan in which employers join together to pool their purchasing power within a single plan. MEPs make it easy and cost-effective for any size organization to offer a high-quality institutional level retirement plan and ease the burdens that come with sponsoring a retirement plan. With a MEP, a plan sponsor does not have to be a retirement plan expert. The MEP partners are able to offer this expertise. MEPs can be open or closed. Open MEPs permit unrelated employers to participate. Closed MEPs are for groups of employers that share a common nexus. Whether they are open or closed, MEPs offer many advantages—and these advantages are not just for small businesses. In reality, businesses of all sizes often benefit from participating in a MEP.

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Pentegra Retirement Services


“Employees want to work for employers that have

retirement

plans in place. In fact, Americans see retirement benefits as a job feature that is almost as important as salary.

Two-thirds of Americans

are willing to forgo salary increases in exchange for

guaranteed

retirement income. ” 5

5 National Institute on Retirement Security, “Retirement Security 2015 Roadmap for Policy Makers, Americans’ Views of the Retirement Crisis” March, 2015


Economies of Scale By collectively participating in a MEP, employers are able to leverage their combined purchasing power to access institutional quality features in a more cost-effective manner than single employer plans can access on their own. Cost savings can include annual audit costs, document preparation costs, government filing costs, and soft dollar costs that come from being able to offload these responsibilities. Fiduciary Relief and Professional Oversight MEPs offer the ability to outsource fiduciary responsibility and provide an elevated level of governance. By participating in a MEP, the sponsor transfers virtually all fiduciary responsibility for the management of its retirement program—the sponsor’s name comes off the legal documents as Named Fiduciary, Trustee and Plan Administrator. Streamlined Plan Administration Under a MEP, administrative responsibilities for ERISA 3(16) administrative duties can be outsourced. What’s more, a MEP uses a single plan document, which means that only a single restatement is needed for adopting employers. MEPs also streamline plan operations, as disclosures, notices and education materials are nearly identical for adopting employers. That translates into less time spent managing a retirement program. Professional Investment Management Under a MEP, investment management is outsourced to a professional investment advisor. The investment advisor selects and monitors plan investments in accordance with a written investment policy statement. The pooling of plan assets affords access to low cost, institutional-quality investment fund share classes, and the benefit of professional investment oversight. Pentegra Can Help Pentegra was founded as a multiple employer plan and trust by the Federal Home Loan Bank System in 1943. As one of the largest and most experienced MEP providers in the nation, MEPs are the foundation of our business. We’ve specialized in MEP solutions for over 70 years, having sponsored two of the largest MEPs in the United States . MEPs require specialized knowledge and experience to start and operate properly. Pentegra has that knowledge and experience. Our MEPs serve hundreds of plan sponsors and tens of thousands of participants nationwide. We offer a wealth of expertise in designing MEPs—both open and closed—along with the support to make them a success. Pentegra can work with you to design a MEP that is the right fit for your clients and allows you to showcase your services.

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Pentegra Retirement Services


A MEP is a

powerful tool

that can be used to provide

broader retirement coverage and help your clients achieve more successful retirement outcomes.


Help your clients achieve their goals with Pentegra’s Advisor SmartPathTM Contact the Pentegra Solutions Center at 855-549-6689, solutions@pentegra.com, or visit us at www.pentegra.com. Follow our thought leadership and join the conversation.


2 Enterprise Drive, Suite 408, Shelton, CT 06484-4694

800•872•3473 tel 203•925•0674 fax www.pentegra.com © 2016 Pentegra Retirement Services All Rights Reserved PAS Rev 3/16

The Pentegra Advisor SmartPath™  
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