Decumulation & PRPP

8/3/2019 Decumulation & PRPP

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Employee enefit lans,Retirementrograms, elfareBenefitPlans, xecu[ive enefits"' age1 of 11

IRS announces 2012 dollar limits on contributions and benefits

l0 | 21 2011Posted YJerryKalish

Eachyear he nternalRevenue ervice nnounceshecost-of-livingadjustmentspplicableo

qualified etirement lans or the ollowingyear.Unlike2001 n whichmost imits did not change

fromtheprioryear,most limits ncreased:

Following re hekeyretirement lan imitsannouncedesterdayy the RS:

. The401(k)and403(b) imit for employeeontributionsncreaseso $17,000rom$16'500-

. Thecatcljupcontributionimit for participants ge50 andolder emainshesame t$5,500.

. Themaximum llocationo adefined ontributionlan ncreaseso $50,000rom$49,000.

. Themaximumannualbenefitpayable roma definedbenefitpension lan ncreaseso

$200,000rom$ 9:5,000.. Themaximumannual ompensationhatcanberecognizedor retirement lanpu{poses

increaseso $250,0t00rom$245,000.. The hresholdompensationor HighlyCompensatedmployeencreaseso $115,000orm

$110 ,000 .

Here s a ink to ourcharrtistingall theretirement lan imits for 2012comparedo 201 .

Postedn 401&)Plans,:lO3lb)Jlals,Qashalaqae-PlansDefinsdEsnafi!-Psnsignllaru,EmploveeStock-Ow-nelgtripansCommentsQuestions0i I Permalink

The New World of 403(b) and 457 plans

l0 | 16 2011PostedBy JerryKalish

That's a map of theNew World circa 1540by SebastianMunster,a German

cartographer. t depicts he Europeanview about he New World and

especiallyNorth America".

It's my visualmetaphoraboutwhere he403(b) and457marketsarenow -'

almost hreeyearsafter he final regulations ecameeffectiveJanuary1,2009.

The inal regshavebecornehe ocalpointfor anew and apidly changing 03(b) and457world.

One n which heOldwasa40-plus earoldenvironmentharacterizedy limitedemployer

http //www. etirementplarrblo .com/ 301r0/20r1



Emproyeeenefitplans,Retirementrograms, elfareBenefitplans,Executive enefits...age of 11

involvementoneon aretailbasis. heNew sbecoming newithERIS'A-likeestpracticesn an

institutional etting.

Thatwas he hemeof my presentationnOctob r7,2011,apartof the cours€ t JohnMarshallLaw

School, .L.M. n empfoyieBenefitsProgram,Non-Traditionaletirernerttrograms", hich

follows:

JohnMarshallLaw Sghqql,4QS(...

J#HN h4AR$F{ALLAW S*T"{**L

F,IOhI,TRADITI{}FJALET REMENTPLANSBU

NewRud**or F{sl+Tr Rs,tirern*nthtrs*$dsrls$ is*rm*icn

SyJerrYKatrielt

Fresld*nt, l*tbna|Beneffi ;Sry,iees,ne,,

+30,'r!tfriiiss{l

tvtore ouerPqinlpresentallglgi'ome;.ry-(3lish

Thiswasyear hreeof thisprogramwhichhasbeenorganized nd edby attorney qL Tothwho

regularlyomments naO:iU)andother etirementlans nhisblog, h.e-Businessf Benefitg.

Postedn 403(.b) lans

ep@J-ausslietsj0/ IBermallnk

Book Review: THE VIGILANT INVESTOR: A Former IiEtCEnforcer Reveals

How To Fraud Proof-Your Investments

10 10 2011Posted y JerryKalish

My bloggingbuddysecgrityawyerBill Singeron hisblog,Btpkg-aud-Brokgt':InIrieVglgnt.Itrall_gfieet,t_ggalwaysa good ead),posts requently bou'tnvestment

scams ndscoundrels.n oneof his latest,Bill writes hatFedsBustBankGuarantee

Scarg.

But heFeds on'thavehemanpower nd esourceso get o all of the$40billionayear

that heFBI saysnvestorsose o fraud. n otherwords,watchout,youL'renyourown.

1'X

http //www.retirementplanblo .com/ 30n0t20t1



EmployeeBenefitplans,RetirementPrograms,WelfareBenefitPlans,ExtlcutiveBenefits"'Page3 of 11

Sohow do you go aboutprnotectingourself? Educateyourself, andhere'san excellentstartingpoint.

It's PatHuddleston'secentlypublishedbook picturedabove,IHEJIGII-AI\T INVESJO-R:A

Former SECEnforcer RevealsHow To Fraud Proof-Your Investments.

Intriguing title, eh?But before I tell you about he book itself, let me tell yor-r little aboutPat and

how this book came o be written.

After leavingthe U.S. Securitiesand ExchangeCommissionwherehe w,asan EnforcementBranch

Chief, pat was a private attorneyfor ten years epresentingdefrauded nvestors.As Pat tells it in the

Introduction, he closedhis law practice n July 2006 aftermeetingwith ar7O-yearold man who lost

his entire savings n a Ponzi ..he-". But since he con man had no assetrso go after, chances or

recoverywere slim.

So saysPat, hat was whe,nhe launched rygSlqfgUlalgtld9g'-L!,t, a finnproviding investment

protection services o investorsand subsequently ctingascourt-appointed eceivers n SECfraud

cases.

pat'sexperience ndwriting stylehas esultedn a book lrom which investorscan earnhow to betterprotect hemselves.He uses eal storiesandprovideschecklistsn his book organizedn two easily

readable ections:

. pART 1: The Wide World of Fraud:First Stepsand AdvancedTattics on the Path o Vigilant

Investing. PART Z: fne Securitiesndustry:HuntingtheWolf with the Million-Dollar Smile

It's not ust seniors hatarevulnerable,of course.Retirernent lanscan bre t risk also. n fact,Pat

estimateshat approximartely 0o/o f investment raud is perpetratedagainst etirementplans

includingsmallplans.

Attorney and SusanWynn wrote aboutthat very subject n February20()9 n her post,Madoff V-iqtim;

tnglude_Small,Pgn;lgn..P_lang.Noteer commentabout he efficacy of the enforcementagencies:

Oneof the nteresti.ngointsof the Madoff storywhen t comes o,re1;irementndpension

plans s that none of the 4 governmentalagencieswhich regulateand audit retirement and

pensionplanssawMadoff coming.

So f you'rea fiduciary of'a fiduciary of a retirementplan, n addition o Pat'sbook, thereare other

resources vailable.Here'san excellentone, hewebcast,FiduciaryLessions earned rom Scoundrels

An{ThlgJg.g resentedn 2009 by Blaine Aikin andRich Lynch, CEO and COO respectively f ft360.

Posted n 401(h_P-l.gnsl:lqakRqylgwl, CAshBalanceBlan*s-, efined lenefit PensionPlansComments Questions ()- | Permalink

Meet the "ERISA Accountrro he newcomer to the small 401(k) plan scene

10 3 | 2011Posted y Jr:rry alish

Let me ntroduceou o 1l[reERISAAccount", relative ewcomero the small401(k)planmarket.It's been artof the argeandmedium lanmarket or some ime.Onlyrecently as t migrated own

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EmployeeBenefitplans,RetirementPrograms,WelfareBenefitPlans,Execurlive enef,tts"' age4 of I I

streambecause f (yes,yc)uguessed t) the increased egulatory emphasir; nLd

fiduciaryattention o feeclisclosure.

OverviewEFI9fficcor.nqr

ERISA Accountsaresometimes eferred o as"ERISA BudgetAccounts",'"ERISA Expense

Accounts,"ExpenseRecapfureAccount", or "RevenueSharingAccount". We use he term ERISA

Accountbecauset succin.ctly escribeshe essence f what t is:

A plan level account that capturesexcessncomecollectedby the recordkeeper hat can be

used opay etigible plan expenses r evenallocated to participant's.

Let's separatehis discussionnto its elements:1) where he ncomecom.esrom, and}) how it canbe

used.

Where he IncomeComesi rom

A mutual fund chargesa tfee hat encompasses ll the various fees hat a participant s charged o

invest n the particuiar furrd. It's usually referred o as he ExpenseRatio, In addition to themanagementee chargedby the fund manager o manage he fund assets,he ExpenseRatio may

include:

. I2(b)(l) Fee:the feepaid by themutual und to a a0lft) provideror broker or including n it

in theplan and serl'icing it after the sale.. Sub Tiansfer Agent (Sub-TA)Fees: the ee paid by the fund when it subcontractshe participanl

accountingo transfbragents, .g.,bankor trust company,o execute, lear,and settle rades,

andmaintiin sharelholder wnershiprecords.Theseorganizationsare called Sub-Transfer

Agents.. Piovider Compensution: hefee paid by the fund to the serviceprovider, sometimes eferred o

asRevenueSharing, or administrativeor contractowner or participant servicesprovided on

behalf of the tund.

The ExpenseRation is usually statedas a percentage f assetsundermanagement,and is netted rom

mutual fund performance ather than being paid directly by the plan.

How the IncomeCanBe lJsed

At somepoint, the ncome eceivedby the recordkeeper ecomes xcess,ive,.e.,more revenuehat s

needed o run theplan,and can beused o pay plan level expenses r reaLllorcatedo participants.

Plan Expenses

The expenseshatcan be paid by theplan arepartof that ERISA basic:a firluciarymust'oact or the

exclusivepurposeof providing benefits o plan participantsand defrayinLg,easonable xpenses f

administeringhe plan."

The Department f Labor: ays hat reasonable dministrative xpenses oulld nclude:

. Plan amendments equired by change n law

. Plan amendmentsnecessary o maintain tax qualified status

. Nondiscriminationesting

. Recordkeeping

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EmployeeBenefitplans,RetirementPrograms,WelfareBenefitPlans,ExecutiveBenefits"'Page5 of I I

. Planaccounting

. Preparation f Form 5500

plan assets, owever,cannotbe used or "settlor Functions", i.e., thoseexpenseshat are for the

benefit of the employer. SettlorExpensecould include:

. Studiesof options fbr amendingplan to maintain tax qualified statusor for meetingnew legal

requirements. Terminating plan. Testing o exploreplan design. Union negotiations boutplan provisions

The Departmentof Labor alsopermitsparticipants o be charged or the reasonable ost of

transactions ttributable o individual participants,e.g., oans,QDROs, hardshipwithdrawals,

calculations o determinebenefitsunder various distribution altematives,and benefit distributions.

Allocation to ParticiPants

In addition to paying for reasonableplan expenses,unds in an ERISA A.ccountmay be reallocated oparticipant aciountJpro-r'atabasedon their accountbalancesat the end of the year, or on a per capita

tasis. ilote, however, that funds must be usedby the endof the plan year. They cannotbe rolled over

to anotherplan year,or returned o the employer.

Plan Documentation

As with all thingsERISA, therehas o be properdocumentation. estpractiLcesould be to

specifically state n the plan document hat the plan may pay reasonableoperatingexpenses,eflect

that in the SummaryPlan Description or Material Modification thereof,and have a written Expense

Policy.

Conclusion

Not all 401(k)planswill seeexcessncome hat canbe used n an ERISI\ A,ccount.However,aswe

move more into the "Age of Transparency",expect o seeERISA AccouLntsmore prevalent n the

smallplanmarket.And vrhat'sa "small plan'? We've seen$1 million plans'withERISA Accounts.

Posted n 40_1(k) lans, |iduc-iar)Ll$:suesComments Q-uestions6[ | Permalink

BalanceForward Plans: The More Things Change,The MloreThey StayThe

Same

08 11 2011 ostedvJerrv alish

If you're a Bon Jovi fan, you'll recognize he expressionn theheadline, T'heMore

Things Change,The More They StayThe Same". t's Track 12 onDisc 1Z l their

album,Bpn Jovi Greatesl.Hits The Ultimate Collection.

But, of course, hat's not Jonpicturedhere. t's Jean-Baptiste lphonseKam

(November24, 1808 Septemb r 29, 1890),a Frenchcritic, oumalist, andnovelist, o

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EmployeeBenetitplans,RetirementPrograms,WelfareBenefitPlans,ExecutiveBenefits"'Page6 of I I

who was attributed he epiLgram,plus ga change,plus c'est a m6mechos,e"whichusually translates

to "the more things chang,:,,he more they staythe same"'

Neverheardof MonsieurKarr?Well, he'sactuallygot a Facebook age.

Soyou're asking,what this has o do with balance orward plans?You may alsobe askingwhat

exactly s a balance orward Plan?

Let me fast forward to the,bottom ine (literally and figuratively).

If you're aplan sponsorcrra 401(k)plan participant, today's nvestment limate s not a good time to

bepart ofone.

Let me explainwhy.

BalanceForwardis an ndustry erm given o thoseoriginalparticipantdirected401(k) andprofit

sharingplans, many of which are still around.Unlike the more commondaily valuation plans,

participants' accountsare valuedmonthly, quarterly or annually.After alll he balance orward plan

u".ounti.rg takesplace, t oanbe 4-8 weeks after the valuation datebeforeparticipants receivestatements.

What's theproblemyou might ask?Let's hearkenback o November,2C108t which tirne blogged,

BalanceForward40i(K) Ptans:Someone's ot Losqand BalanceForward

PlansRe_visite4.

Now consider hese wo zrlternative cenariosof a participant n a balance orward plan with a

$50,000accountbalanceas of September 0, 2008. Theparticipant eceiver; distribution or $50,000

on November1, 2008,bui betweenSeptember 0 and hedistributiondaLte,he plan lost2}Yo.Thus,

theplan - which is to say- all the remainingparticipants ad o eat he $10,()00oss.

But say, nsteadof October,2008beingOctober2008, lteplan'sassetsncreased y 2}%.Thatparticipantreceives he same$50,000distribution, but only the remaining participantsshare n the

$10,000 ain.

See he problem.

So now herewe are again today ("the more things change, he more they' stay the same"),when there

couldbe a decideddifferencebetween he June30,2011valuationand Sieptember0, 2011 valuation.

What's the solution?Maybe balance orward plans shouldprovide for inLterim aluations.But with all

mattersERISA, therearecomplicated egal, ax, fiduciary andhuman esoulce ssues nvolved.No

easyanswers, ut definitely a situation hat shouldbe discussed ith adrzisc,rs.n the meantime, ereis an excellentdiscussion f the ssues nvolved by SungardRelias, nterim Valuations n a Falling

Market- It's ddjdvu all <2ver gain.

Now dailyvaluation sn'tperfect ither,bu t ......

Photosraphabove:Woothufylyrycirca lB70s. Photo by AntoineSamuglAdam-Salomon.

Postedn 401(k)Plans

Comments Ouestions [] IPgrmalink

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EmployeeBenefitplans,RetirementPrograms,WelfareBenefitPlans,ExecutiveBenefits...Page7 of 11

What do modern art and definedbenefitpensionplanshal'e n common?

0S 3 I 2011PostedBY JerryKalish

The answer s obvious.Both can be difficult and often impossible o undrersl'and.

Modern art enthusiasts o havehelp. They canturn to the UnderstendM,cdernArt

tgstantly Breath Spray as shown here from the website !j441pgqp[-a_9ry'9d'

Unfortunately, there s no suchcanned pardon he pun) explanation o help

communicatea definedbenefit plan to employees.Hence,no surprisewith the resul

of a recentFidelity surve)/conductedonline by l&nlajggg4lgb, an Evatston,

IL basedmarket esearch ndpublic opinionpolling firm.

The 506 respondentswho were participants n both currentand frozen defined benefit pensionplans

indicated hat:

. 3lo/odon't know their plan's vestingschedule.

. 40o percentdon't know what their distributions will be at retirement.

. 27o/o on't know don't know at what age hey canbegin to receivepalrments.

That'swhat they saidthe;, don't know. I can tell you directly from workirng'with defined benefit

pensionplans for more than a few years, t's ust the tip of the iceberg.So let's approach t from the

itandpoint of what employeesneed o know abouttheir definedbenefit pensionplan. Here are some

of the basics:

Type of Plan

1. The plan is fundedby the employer andpromises o pay a participant a specific benefit at

retirement.2. lf thePlan s coVererdy the PensionBenefitGuarantyCorporation I'BGC), a certainamounl

of retirementbenefits are guaranteedf the if the plan is terminaterlwithout enoughmoneyto

payall of thepromisedbenefits.

3. There s no PBGC ooverageor for definedcontributionplanssuchas401(k).

Plan Provisions

1. When anemployee' ecomes ligible..

2. How benefitsaccrue accumulate).

3. How benefitsvest ibecome on-forfeitable).4. When distributions can be taken.5. What distribution options are available.6. Whether benefitscan be reducedor the plan terminated.

It's obviouslya more difficult and complicatedemployeeeducation rocess hanfor 401(k)plans.

Insteadof explaining401(k) conceptsike dollar cost averaging, ompounding, nd asset llocation,

employeeeducation rogramshave o dealwith more esoteric oncepts ike actuarialequivalence,joint andsurvivor,and he plan's unded status.

Nonetheless, he effort has o be made so that employeescan understand. hen and how much

monthly retirement ncon:le hey could expect and to factor that into their personalplanning. That is,

of course, or thosestill fbrtunate to be part of a definedbenefit pension plan.

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Employee enefitPlans,Retirement rograms, elfareBenefitPlans, xeculive enefits"' age of 11

E-commerceNote:Lestyou think I was oking about he Jnderstandufodern rt instantlyBreath

ipiiy,it'savailableontitt.ifromHyau'sAll nr-iqgq! 4I . But sufficet to say, ou'reonyourown'

Postedn DefinedBenefit.Pensionlans

CommentsOuestioqg0| | Lerualbk

0n a clear daY,You can see...a QDRO?

07 122 2011Posted YJterry alish

That's the albumcoverof the originalBroadwaycast ecordingof the 1965

musical, On a ClearDay You Can SeeForever ('whiLch ubsequentlywent on

tc,becom" a rnoui. ttu.ting BarbaraStreisand n 19'70andwhich will be

returning to Broadway starringHarrL-Conqick.J1' lhisFall)'

It's the story of clairvoyant Daisy Gamblewho erttends class aughtby a

psychiatrisifot tt"lp in kicking her smokinghabit. while undergoing

iryprrorir, t is discovered hehada past ife in late l8th centuryEngland'And

.rritil th" recentAppellate Court decision n Brorvn'v. Continental,shemight

havehad a future as a PlarnAdministrator dealingwith QDROs.

That,sthe acronymfor q,sa1i6"dDomestic RelationsOrderswhich is a court order that createsa right

for an alternative ayee ,c eceivesomeor all of a participant'sbenefits n a qualifiedretirement lan.

It,s oneof thoseexceptio,rrso the InternalRevenueCode'sgeneral ule thatprohibitsbenefits n a

qualified retirement rom being assignedor alienated.

And it,s up to the plan A<lministrator o determinewhethera DRO (anotther neof thoseacronyms)or

DomesticRelationsOrde,rssuedby ajudge pursuanto a statedomestic e.lationsaw is, in fact,a

QDRO.

Maybe Daisy could havehelped wo yearsago when ContinentalAirlinr:s claimed that nine pilots

usedshamdivorces o co,lleci heir pensionsarly, a situationaboutwhich Jt logged,QDROs:The

View From 39.000Feet.

Continentalwent on to sue hosepilots alleging hat he pilots filed divorcepapersbut continued o

live with their spouses nd didn't1ell atryone including their children.Once he divorceswere inal,

the former rpoui.t recei,,redights to the pilots' pensionsand appliedfor lu'mp-sumdistributions,

which Continental aidwereworth asmuchas$900,000apiece.Continentillalsoalleged hat after

they got themoney, he couples emarried.

Continental laimed hat the pilots were concerned bout osing significantpartsof their pensions

because f the financial riifficulties the airline industry was encountering,a,ndhat the maximum

annualpensionguaranteed y the PensionBenefit GuarantyCorp. (PBC}C)was less han a typical

airlinepilot pension.

But now, in the aforementionedBfqty|r-v-lg!1iqgnlAl case,The United Stertes ourt of Appeals for

the Fifth Circuit agreedvrith the District Court (SouthernDistrict of Texas')decisionthat ERISA does

not doesnot authoiize al>lanAdministrator to investigateor evenconsider he good faith, or lack

thereof,underlyinga divorce.

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Employee enefitPlans,Re'lirement

Sowhatare he akeawaYsere'

Programs,WelfareBenefitPlans,Exer;utiveBenefits.' .Page9of11

Froma egalstandpoint, liuiamMgMahgs,anattorney.withQgqsl4y-iBro'oksandSmith'L-L-B

writing ritris firm'-sblog, fimployee enefitsUnplugged, ays

... the Court is prom,crtingimplicity for administrators.Look at the court order, confirm

that t complieswith. hJcriteiia roi a eDRo set orth in section206(dD(3XD)' nd hen

stop.Don't out-thinkYourself.

From a moral standpoint, /ou'reon your own'

Posted n 401 klBlans, Dpfined-Bqnefi Pen$eg-Bluq

Comments Questions 0) | Pe-fmalink

Inside the actuarial '"black boxt': what employersneed o lrnow to better manage

their pensionPlans

061292011 ostedYJerry alish

In the world of scienceandengineering, blackbo>l s a deviceor systemor

ob;..rt which can be viewed solely in termsof its input and output without the

userknowing how it works.

In the world of ERISA, a black box canbe an actuarialvaluation, the report that

your actuaryprovidesyou on an annualbasis ellin€,youhow well - or not well

your definedbenefitpensionplan s "funded"'

So let,s takea peak nside the black box to help you betterunderstandwhat it all meansandwhy this

understandings crucial tr:,managing he plan andyour company's objectives.Here is a very briefexplanation ltht.. ways to view the "fundedstatus"of your pensionplan:

l. MinimumFundingRequirements.ThelnternalRevenueCode(the"Clode") mposes ertain

minimum funding'requirements n an employer o fund theplan on a annual,on-goingbasis.

Generally, he coirtribution s basedon plan's "normal cost", .e.,cosl of benefitsearnedn the

cl]Irent year,plus an amount sufficient io amortize he plan's shortfal.l gap betweenassets nd

liabilities) ovir 7 yr3ars. ailure to meetminimum funding requiremetrts an result in an excise

tax of up to 100%.

2, BenefitRestrictionr;. he PensionProtectionAct of 2006("PPA") addeda fundingmeasure

calledAdjustedFundingTargetAttainmentPercentage"AFTAP") vrhich s theplan's asseto

liability funding ral.io.Benefitsmust berestricted f certainpercentagehresholds renot met,e.g., f less han80'%, here s a 5Oohestrictionon lump sumsand an:luitypurchases.

3. Plan Termination. n order o terminatea pensionplan, he plan rnustbe fully funded, .e.,plan

assetsmust be equal o or exceedplan iabilities. f theplan is sub.iecl;o lhe PensionBenefit

GuarantyCorpoiation ("PBGC"), it must demonstratehat assetsare sufficient to meet

liabilities. the CodLendIRS regulations equire the useof interest aLtes ndmortality

assumptionshataregenerally ower than hoseused or funding he planon an on-goingbasis,

i.e.,morecostly.

So why is all this important?Simply this: the "fundedstatus"of your pe.nsion lan, howeverviewed,

directly mpactsbothyourr ontributionand nvestment trategy.

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Employee enefitplans,Retirement rograms, elfareBenefitplans,Execul.iveene... Page10of 11

Andmore mportant tiil if yourplan spartof thea0%of.p-lans

hathavebeen rozen, hesubject f

the200gGovernment coountabilityOfirceReport,DEHMD-BENEFII-IENSIoNS: BlanEre-"ezeqA f^^+ r\r:rt:^-- ^rDo.rininqnrc and Mav Pose Rltirement tnCome Challg4geli.Are your objectives

clearlydefinedanda strategyn place?

Postedn DefingdBeLefl!.PensjsnlAnsCommentsOuestions0il Permalink

some fiduciary servicesare more equal than others

06 18 20ll Posted YJterry alish

One hingyoucansay or:sureabouthe401(k)business,t's responsiveo theneeds

of themarketplace.

since hebeginning f 4cr1(k) lans n theearly1980s, 01(k)service roviders ave

introduced n ncreasirrg,rrnb",of serviceso staycompetitivewith othLerroviders'

We'veseenheproliferatiion f such eatures s:

Daily valuation

LoansSelf-directedbrokerageaccounts

Web accessInvestment ducation ools

Multi-shareclasses;

Index funds

ETFsTargetmaturity funds

Participant nvestnlent advice

Now with the ncreasedbcus by the Department f Labor on the fiduciary aspects f a01(k)plans,

themarketplacehas espronded.01(k) providersoffer services llowing fiduciaries o delegate ome

or all of their responsibiiity or plan investments. ut as he headlinesa:[s,,someiduciary services re

more equal hanothers.

So here s a brief descriptionof the services vailable n the orderof lowesl;o highest iduciary

protection:

l. Due DiligenceSupport. Employersuse he provider'sevaluationprocesswith regard o the

available nvestmelit options. It's usually known asdue diligence sup'port.Employersuse histool to helpconstrr;ct n appropriateine-up or theirplan, but they are still responsibleor

selecting ndmonitoring he plan investment ptions.

2. Fiduciary Certifiaate or Warranfy. Employers eceivea Certificateor Warrantygenerally

available o plan sponsorsf they selectat leastone und from the prrlvider's ineup n

designated ssetciasses. n addition to duediligence support or evalluatingheir funds,

"*ploy"trhave ast-resortiduciary liability protection f numerous onditionsaremet.

3. Aclnowledgment as a Fiduciary under Section3(2lXAXii) of EFISA. An independent

registered nvestmentadvisor (RIA) agrees o becomean investmentadvice fiduciary under

section3(21XAXii). The RIA recommends ndmonitors unds crr heplan's fund menu.

However, employr:rsare still responsible or selectingand monitorin.g unds on the menu.

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EmployeeBenefitplans,RetirementPrograms,WelfareBenefitPlans,ExeculjveBene"' Page 1 of 1l

4. Acknowledgment as a Fiduciary under Section3(3S)of ERISA'_As n #3 above,employers

use he servicesof an RIA. But with this service, he RIA agrees o be'comean investment

advisor iduciary unLder ection3(38)of ERISA. A Section3(38)arraLngementrepresentshe

mosrcomprehensiv,;evel of fidu.iury supportpossible underERII}A since he RIA assumes ll

responsibility or selectingandmonitoring he funds.

Which one s best s a decision that each iduciary has o makebasedon lhis/her ndividual facts and

circumstances.But remember,all fiduciary responsibilitiescannotbe delegaledaway' The

responsibility emains o monitor the serviceprovider on a periodicbasis'

Posted n 401(k) Plans, E-rdugja{yl$uggComments Questions 0ll Permalink

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"Decumulation": a concept about which you will hearing nnolre

PostedBy JerryKalish

See ull-siztl mage.

o.Decumulation",in definitional erms,means he conversi0nof pensionassetsaccumulate,Curing an employee'sworking life into pensi6n ncome o be spentduring

retired ife. But in practicaiteims,decumulation mbodies significantnew.risk or the

record numberof future retireesmoving from the accumulationphaseof their lives to

thedistributionphase.The actuaries all it "longevity risk". But thoseof us in the

financialservice ndustrysimply call it "running out of money"'

It will requirea major charngen thinking for them. Away from conceptswhich have beendiscussed

aspart of most40lik) pr.rui=d.trnvestmenteducationprograms:assetallocation, dollar cost

averaging,and the iosiol'waiting. But ratherrequiringthem to think about having to makea whole

new setofdecisionssuchas:

. Whether o continueto work

. When to apply for isocialSecurity benefits

. What to do, if anything, abouthousing

. What choices o make about nsuranceandhealthcare

. How financial assets houldbe invested

. What distribution 6,ptions o take from employer retirementplansand IRAs

Soyou'll be hearingmoreabout"decumulation" s t becomes major f<rcus f futureresearch, ublic

policy, and inancialservices.

Picturecredit:WaterSecrqetslog.

0 3 1 r s 1 2 0 0 8

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Decumulation & PRPP