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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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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 Presentation

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Page 1: 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

ABC Company Logo

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Roadways to Retirement ABC Company Logo

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

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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

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Review of current situationand ABC Company’s key goals

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Roadways to Retirement ABC Company Logo

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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Roadways to Retirement ABC Company Logo

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

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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

35

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

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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

1

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)

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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

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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