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ABC Company Logo. The ABC Company 401(k) / Profit Sharing Plan The ultimate solution for your retirement program Presented by First National Bank and BPAS. Discussion outline. Introduction Firm qualifications and capabilities Review of current situation and ABC Company’s key goals - PowerPoint PPT PresentationTRANSCRIPT
The ABC Company 401(k) / Profit Sharing Plan The ultimate solution for your retirement program
Presented by First National Bank and BPAS
ABC Company Logo
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Discussion outline
IntroductionFirm qualifications and capabilitiesReview of current situation and ABC Company’s key goalsOur proposal
– Highlights– Service team– Investments – Education– New website highlights
How the FNB / BPAS solution is uniqueTransition stepsFee summary
Firm qualifications and capabilities
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About First National Bank
Headquartered in ________ (locally invested and focused)Nationally chartered trust company (examined by OCC)Over 60 years in the trust, fiduciary and wealth management businessMore than $1 billion in assets under managementTeam approach provides maximum service and coverageRetirement plans: a major area of focusSenior investment management service provides direct assistance to
participants (what many other programs lack)A strategic partner to maximize efficiencies in cost and service (a key
benefit for our retirement plan clients)
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Who is BPAS as our administrative partner?
Full-service retirement provider, servicing entire spectrum DC, DB, and nonqualified plans
Five offices, two time zones Administering 1,900 DC plans
– 283,000 employees tracked – 188,000 participants with a balance– $4.4 billion in DC plan assets
“In-sourcing”. BPAS acts as recordkeeper, agent-to-trustee and NSCC member, all in one firm – this is extremely unique within the industry.
Wholly owned subsidiary of a NYSE-traded company (NYSE: CBU), which has 1,800 employees in total.
Profitable. Reliable. Committed to the retirement plan business.
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The corporate structure of BPAS
- Regional Bank
DC Plan Administration
Institutional Trust Company(Member NSCC)
National Actuarial Practice(formerly PWC)
Community Bank, N.A.
Community Bank System, Inc. (NYSE: CBU)
Section 125Practice
BPA HB&T Harbridge FlexCorp
Benefit Plans Administrative Services, Inc.(BPAS)
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Various “household name” clients of BPAS (across U.S. and P.R.)
ADM Corporation Bausch & Lomb Black & Decker Boston College Braun Corporation Burger King Corporation Chili’s Restaurants Church's Chicken CNA Insurance Coca Cola ConAgra DaimlerChrysler Financial
Services Direct T.V. Empire State Carpenters
Union First Security Mortgage
Between our business in the 50 U.S. states plus Puerto Rico, our client base includes divisions or subsidiaries of the above companies and orABC Company, Inc.nizations.
General Electric Corporation
Golub Corp. (Price Chopper supermarkets)
Heineken, Inc. Helen Keller National
Center International Food
Network Kelly Services KFC / Taco Bell / Pizza Hut
of P.R. Kinney Drugs USA Levitt Homes Lexmark Corporation Marriott Corporation McDonald's Corporation Nestle Corporation
Oracle Pacific Life Insurance Pall Corp. Pay and Save, Inc. SAP Sephora St. Jude Medical Center Stony Brook University Suzuki Syracuse University The Doug Flutie
Foundation Twentieth Century Fox Unilever Verizon Waste Management
Review of current situationand ABC Company’s key goals
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Current situation: Two separate plans
401(k) plan – $8.3 million in assets and 337 participants (277 active plus 60 terminated)
– Daily valued, participant directed
– Serviced by FNB and BPAS
Profit Sharing Plan – $12 million in assets, approximately 920 participants (645 active participants plus 277 terminated participants)
– Quarterly valued, trustee directed (approximately 80 / 20 allocation of stocks to bonds and cash at present)
– Serviced by local TPA and independent advisor
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ABC Company frustration points
The number of current contacts – leads to inefficient service– Custodian and Directed Trustee (401k)– Directed Trustee (Profit Sharing)– Investment Advisor– Record keeper for Profit Sharing Plan– Plan attorney – Auditors
Profit Sharing Plan risk profile not appropriate for allWorkload – at times too muchExcessive fiduciary liabilityCost of two separate plans
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Goals of the new retirement plan
Move Profit Sharing Plan to participant direction, eliminating significant fiduciary liability
Reduce costStreamline processes - efficient service, superior service!Engage and motivate participants to invest for their future Improve the results of annual compliance tests so HCEs can contribute
moreEnhance plan (safe harbor, moving to match, combination, etc)Maintain the integrity of fund monitoring / review process, with
institutional, best-in-class funds
Our proposal
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Our Proposal
Combine Profit Sharing Plan with 401k PlanMove entire plan to participant direction, daily valuationConsolidate to single BPAS plan documentConsider changes to employer contribution (safe harbor, match,
combination) Implement automatic rollover programRequired minimum distribution process will cover entire plan (initiated
by BPAS) Simplify audit with unique BPAS approach (certified audit package)Continue with online enrollment (consider automatic enrollment?)
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Benefits of combining into a single program
Single website and one point of entry for participants– BPAS call center services entire
plan One set of forms Combined statements and reports Work with one Plan Consultant to
oversee entire program A single process for contributions,
loans, hardships, distributions and other activity
Eliminate several contact points from the mix
Consolidated plan sponsor website for managing entire program
Restate plan onto a single prototype document - eliminates legal cost
No timing differences on valuation dates or distributions
Eliminate ‘fairness issues’ on Profit Sharing Plan distributions
One set of compliance tests, combined Form 5500, BPAS handles all participant notices
Reduce audit costs dramatically
In summary, we will dramatically streamline the plan and your service experience!
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Service team
Simplify to two main points of contactFirst National Bank – Mary Jones
– Peter Miller
– Alice Greenwald
BPAS - Amy Shaub– Census Team
– Customer Service Rep Team
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Assisting participants through the BPAS Call Center
CSR
CSRCSR
CSR
CSR
CSR
CSRCSR
• All calls recorded and archived• ‘Next available routing’ across multiple offices• If queue exists, approximate hold time is provided• Option to hang up, receive immediate callback when next CSR becomes available• Translator line covers approximately 100 additional languages• Current team hours: 8:00 AM – 6:30 PM EST• Email and voicemail available 24 / 365
CSR Team Manager instant management reports real-time reporting of:
incoming call volume number of calls on hold average hold time call abandonment rate individual CSR performance
can add additional CSRs to queue at any time based on volume
ideal system for managing, training individual CSRs
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Our open architecture platform – a decided advantage
Over 210 fund families currently traded across our platform (1,900+ funds currently traded) – mutual funds and daily valued collective funds (e.g., American, Vanguard, PIMCO, Black Rock, Fidelity, Dodge & Cox, Federated, etc)
No variable annuities or separate accounts; all funds are transparent, ‘known quantity’ investments (no load, same day / late day trading)
Any revenue sharing is offset against theplatform charge for each fund
This eliminates any conflicts of interest in the fund review, fund monitoring and participant education process (a key focus of new fee disclosure regulations)
Ensures that fees are borne equitably across all participants
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Quarterly Fund Monitoring Reports
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Critical considerations in selecting a provider
Will the selected firm act as RIA, Trustee or broker of record ?
– FNB operates as discretionary trusteeNo conflicts of interest in the fund monitoring, fund selection or
participant education processNo limitations on the funds we can use (Vanguard versus American, etc)Any 12b-1s or revenue sharing are used to offset your fees (at the fund
level)Level compensation by fund – a critical distinctionAllows us to be 100% objective in servicing the plan and your
participantsBPAS also operates in a level compensation environment
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Why is level compensation so critical in a provider??
This “incurable conflict of interest” will impact: fund selection fund monitoring, recommendations over time participant education and advisory services
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50
40
25
60
50
0
10
20
30
40
50
60
70
Fund A Fund B Fund C Fund D Fund E Fund F
= Mutual fund revenue sharing (basis points)
It is impossible to be objective when a provider is paid like this:
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Our solution for participant education
FNB conducts onsite one-on-one quarterly meetings– Participating in new hire orientations– Conducting open enrollment meetings
Quarterly statements and newslettersEducation and guidance delivered via
participant website and advice softwareEnrollment booklets, workbooks,
slide rules and other printed pieces Customizable education pieces for various needsExplore advertising opportunities to build employee
awareness
Communicating with your employees on their level – in a friendly, unintimidating way.
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Various presentations we use
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Highlights of new website (short web demo)
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The Annual Plan Review Report (APRR) prepared for your plan annually
How the First National Bank / BPAS solution is unique
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How we simplify life for you, the plan sponsor
We track all employees on our system (not just those with a balance) We process census files for a variety of edits before notifying employer of
amount to be funded Eligibility determination by
source: standard service Online enrollment, deferral rate
changes (enrollment through census files)
Vesting updates real time HR outsourcing for loans, hardships, distributions Greatly reduced workload for compliance
testing and Form 5500 process Certified audit package (significant advantage) Interacting with HR through “Action Items”
in plan sponsor website and real-time emails
“You’d be amazed how many errors are found in a typical payroll system. The BPA approach to
administration provides a vital ‘check and balance’ tocatch many possible errors before they are traded
into your Plan. This additional audit is a major advantage of BPA versus other providers we have worked with.”
- Recent comment from plan sponsor client
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What the flow looks like for new contributions
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Plan sponsor imports census file into CensusPro, submits to BPA
BPA reviews file for numerous edit checks, sends email to plan sponsor instructing them to log onto CensusProand review ACHverification, which includes corrections we made to data
2
Plan Sponsor
Plan sponsor logs onto CensusPro, reviews /
approves ACH verification3
Plan Sponsor
Plan sponsor logs onto CensusPro, reviews /
approves ACH verification3
Plan Sponsor
Plan sponsor logs onto CensusPro, reviews /
approves ACH verification
2
3
Plan Sponsor
Plan sponsor logs onto CensusPro, reviews /
approves ACH verification 4
If approved by 3:30 PM EST, BPA initiates mutual fund purchases at that evening’s prices. If after 3:30 PM EST, purchases
made on next business day.
5The next morning, participants see trades
reflected on website. BPA ‘ACH pulls’required funds from plan sponsor checkingaccount to settle prior day’s contributions.
Note: for plan sponsors who prefer, authorization can be given to have BPA automatically trade new contribution if there are no edits on ACH verification.
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Our certified audit package – another big advantage
BPAS acts as recordkeeper, clearing firm and directed trustee/custodianSince plan and trust are held on the same system (Sungard OmniPlus),
all reports are consolidated and there are no plan-to-trust reconciliation issues
Type II SAS-70 audit report covers the plan and the trustOur certified audit package is delivered to your auditors through a
secure, web-based link, including all documents needed for audit– Certified trust statements, allocation reports, contributions, loans,
distributions, transactions, compliance tests, etc.When auditors have questions or need additional information, they call
your BPAS Plan Consultant directlyThe bundled nature of our solution allows us to greatly simplify the
audit process and reduce work for our clients (cost and time savings)
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Small benefits that made a big difference
We adjudicate loans, hardships and distributions, dealing directly with participants
We handle all age 70 ½ notices for the entire planWe prepare all required notices (safe harbor, QDIA, SMM, SAR)No redemption fees (opposite way trade block used where needed)No blackout period for fund changesPlan sponsors can assist participants in a variety of ways (obtaining
paperwork in website, transactional access, etc)Benefits of new website rolling out later in 2011 (additional
streamlining of many processes)
Transition Steps
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The steps involved in a plan combination
Select a date for consolidation (e.g., 4/1/2011) Determine how profit sharing assets will be mapped by fund (maintain similar
objectives for initial map-over) Communication process with participants (memo, onsite meetings, Brainshark
presentation, etc) Restate plan document - BPAS Calculate final valuation as of 3/31/2011 - RPC provides valuation files to BPAS Map assets over into new funds Complete interim valuation for PS source (e.g., 4/1 through 4/20) - BPAS New source becomes “active” on participant website, so all assets can be
viewed Memo mailed to all participants, asking them to make any desired investment
changes
Fee summary
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Fee summary ($20 million plan with 920 participants)
See attached fee schedule for detailsBase fee waivedRecordkeeping fee: $2.50 / month / participant (charged
against participant accounts)Platform fee: 65 basis points on plan assets, offset at the
fund level by any forms of revenue sharing (30 bps to FNB, 35 bps to BPAS)– Option to have FNB trustee fee invoiced or paid from plan assets
Activity-based fees (loans, distributions, paid by participant)
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65 basis points
AmericanFundsGrowth
R435 bps
Buffalo Small Cap
Stock30 bps
35 bpcustodial
fee
TR PriceValue
15 bps
50 bpcustodial
fee 65 bpcustodial
fee
“Pure institutional” funds (Vanguard,Signal Shares, etc)
Any custodial fee is applied as a level monthly charge against holdings in the fund. For example, if a 25 basis point custodial fee is required, it would be charged as 2.08 basis points / month from that fund, or $2.08 / month for a participant with $10,000 invested. This fee is does not appear on quarterly participant statements (it is netted from earnings), but would be found in the “activity history” area of the participant website.
= revenue sharing
= custodial fee
How the platform charge works (30 or 55 bps, same concept)
Our Platform Charge: 55 basis points on mutual fund assets, offset by any forms of “revenue sharing”
30 bpcustodial
fee
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Transparency of fees
Our fees can be invoiced, paid from plan assets, or a combination If any funds offer various types of revenue sharing, this will be offset at
the fund level within the planThis method ensures that all participants pay an equitable portion of
fees, regardless of fund utilization or asset allocation.We are willing to guarantee these fees for a two year time period.We recommend that you use the “vendor cost comparison matrix”, to
obtain a clear, apples-to-apples comparison of fees among all vendors.
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Closing thoughts
Our program offers flexibility and a powerful combination of servicesWe can satisfy all of your stated goals for the combined plan while
delivering substantial benefits to ABC Company and your plan participants (minimizing costs, maximizing efficiencies, reducing workload for ABC Company, etc)
Position your participants for success through our best-in-class menu of mutual funds and open architecture platform
Our advisory services will reduce risk for your organization and formalize the fiduciary process
Our education program will motivate your employees, maximizing the plan’s value as a wealth creation tool
Benefit from a competitive fee schedule with full transparency, and the ability to determine what level of fees are paid by ABC Company and plan participants