making a good 401(k) plan even better (credit union conference presentation)

National Association of Federal Credit Unions l www.nafcu.org

Presented by:

Richard W. Rausser, CPC

Vice President

Pentegra Retirement Services

MAKING A GOOD 401(k) PLAN EVEN

BETTER


• Retirement plans represent a large expense

that credit unions incur to attract, retain,

and motivate employees

Your Retirement Plan Is An Important

Factor In Your Credit Union’s Success


• Define what you want to accomplish with your

plan

• Ensure that your plan design aligns with your

corporate benefits strategy

Make Your 401(k) Plan Work Harder For You


• Consider these factors:

Participant demographics

Maturity of credit union

Competitive considerations

Benefits philosophy

Compensation strategy and budget

Overall cost and benefit objectives “cost

vs. adequacy”

Aligning Your 401(k) Program With Your

Corporate Benefits Strategy


• Begin by benchmarking specific plan features

• Evaluate each feature in terms of how it

compares to:

Industry standards

Your competitors

Measuring The Effectiveness Of Your 401(k) Program


Eligibility

• Employers are making it easier than ever for

employees to participate in 401(k) plans

• Relaxed eligibility and enrollment

requirements


Salary Deferral Rates

• Are participants maximizing deferral rates?

• What are your highly compensated employees

able to defer?

• Are participants using the plan effectively to

meet their retirement goals and achieve

financial security?


Employer Contributions

• The majority of 401(k) plans offer matching

contributions

• Is your match designed to maximize deferrals?


Step Up Contributions

• To help increase participant deferral rates,

many plans are providing “step-up”

contribution features


Design Trends—Automated Solutions

• Automated solutions have a positive impact on

participant behavior and participation

• Education alone does not drive participant

behavior

• “Studies show that if people default in, they

stay in.” Dallas Salisbury, Employer Benefits

Research Institute


Automatic Enrollment

• Automatic enrollment can help achieve

satisfactory participation rates, but can have

unintended consequences


Automatic Contribution Arrangements

Two types of automatic contribution arrangements:

• Qualified Automatic Contribution Arrangement

(QACA)

• Eligible Automatic Contribution Arrangement

(EACA)


Qualified Default Investment Alternative

• Investment elections under an automatic

enrollment/contribution arrangement invested in a

Qualified Default Investment Alternative (QDIA)


Roth 401(k) Option

• A Roth 401(k) option combines the features of a traditional 401(k) with a Roth IRA, providing employees with a potential source of tax-free retirement income

• Consider adding a Roth Conversion feature


Safe Harbor Plan Design

• Adopting a Safe Harbor 401(k) plan design allows

an employer to avoid discrimination testing of

employee elective deferrals and/or employer

matching contributions (ADP/ACP testing)


Plan Investments

• Consider the clarity of your plan’s investment

platform and ease of use

• Does your plan have an investment

philosophy, or an inventory of funds?


Asset Allocation

• Asset allocation decisions comprise more than

90% of the variability of a portfolio’s

investment performance over time

• Automated solutions help do-it-for-me

investors—and nearly 80% of participants

consider themselves this type of investor


Investment Policy Statement

• A plan’s Investment Policy Statement (IPS)

serves as a guide for evaluating and monitoring

the plan’s overall investment portfolio and

investment options


Fiduciary Responsibility

• How important is fiduciary responsibility to

your management and Board of Directors?

• Do they truly understand the risk associated

with this role?

• Trend toward outsourcing this responsibility

with the rise of multiple employer plans that

offer comprehensive fiduciary relief


Plan Fees

• Do you completely understand all 401(k) plan

fees and expenses?

• Who bears the cost of plan fees—the plan sponsor, participant, or both?

• Increased emphasis on fee disclosure and

transparency with new DOL regulations that

take effect January 1, 2012


Employee Education

• Ensure participant education strategies are

suited to your plan’s demographics at the

micro level

• Employees understand how 401(k) plans work,

today there is greater emphasis on retirement

readiness and using the plan to achieve

financial goals


Next Steps

•Initiate review of retirement benefits strategy and evaluate how well it aligns with your credit union’s corporate goals

•Perform a plan review to determine the effectiveness of your 401(k) and other retirement benefit programs

•As a NAFCU Services Preferred Provider for qualified retirement plans, Pentegra offers NAFCU members a free retirement program review and analysis


About The Speaker

Richard W. Rausser, CPC Vice President, Consulting Services Rich oversees Pentegra's Consulting, Product Development, Client Transition and Marketing practice groups. Rich joined the Pentegra organization in 1997 and has more than 25 years of experience in the retirement benefits field. His extensive knowledge of the retirement plan industry includes a unique mix of small company and Fortune 500 level consulting work, as well as strategic product development. His knowledge of the retirement plan marketplace, and insights in benefit plan design and customer needs have been instrumental in not only expanding Pentegra’s product lineup and customer base, but in helping clients nationwide design effective benefits and compensation strategies. He is a frequent speaker on retirement benefit topics. Rich is a Certified Pension Consultant (CPC), a Qualified Pension Administrator (QPA), a Qualified 401(k) Administrator (QKA) and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.


Thank You

Questions?

Contact us at www.pentegra.com

Richard W. Rausser

[email protected]

800.872.3473

http://www.pentegra.com/

mailto:[email protected]