Today’s Objectives

• Introduce you to Sucré-Vail Wealth Advisors• Discuss the best of defined benefit and defined

contribution plans• Examine the risks and responsibilities associated with

being a plan sponsor• Discuss what a retirement plan fiduciary is• Introduce ways for you to mitigate fiduciary risks and

responsibilities• Your fiduciary responsibility – A Second Opinion

Sucré-Vail Wealth Advisors

• Experts with over 50 years of combined experience• An RIA since 1997 in the State of Texas• SVWA makes available to our clients

• Premier wealth management services• Fiduciary retirement plan management

Defined Contribution (DC) Plans: provides for set contribution to be deducted, employees contributions are always 100% vested whereby employers contributions more often have vesting schedules which are stated under the terms of the plan (this plan is also referred to as individual account plan since each participant has a separate accounts for accruing plan contributions and bear the investment risk)

Here are some examples of DC plans-Defined Contribution Plan Types:

•Simple 401(k)- $11,500/$2,500 Limits•SEP-IRA•Profit Sharing•Money Purchase

The maximum contribution to an employee’s account during plan year 2010 is $49,000 with the catch up provision for employees over the age of 50 their maximum is $54,500

Defined Contribution Plans – Defined

Profit Sharing Plans provide the maximum flexibility in employer contribution. A specified contribution is not required each year. The employer may vary the contribution from year-to-year or not contribute at all, to reflect the cash flow profitability of the practice or other business considerations.

Minimum Contribution: NoneMaximum Contribution: 25% of total payrollMaximum Allocation to an Individual: Lesser of 100% of W-2 or

$50,000 Types of Profit Sharing Plans•Integrated Profit Sharing Plan•Age-weighted Profit Sharing Plan•Cross-Tested Profit Sharing Plan (also referred to as Super Integrated, New Comparability or Tiered Allocation)

Profit Sharing Plans - Defined

Defined Benefit Plans (DB): promises to provide a participant a monthly benefit beginning at retirement and payable as long as he lives. The amount of this benefit is usually based on age, years of service and how much the participant earned during his highest-paid three consecutive years of employment while the plan continues to be in place. The maximum annual lifetime benefit payable to participant upon retirement is $195,000 in 2010.

•DB plans provide employers with the potential for much higher contribution levels than defined contribution plans. T•DB plans maximize the contributions to older employees.

There are two types of Defined Benefit Plans Traditional Cash Balance (differs because the annual contribution has a guaranteed interest rate for accrual proposes)

Defined Benefit Plans - Defined

Example of DB Plan Contribution

As previously mentioned Defined benefit plans benefit older employees.

All things being equal given a 55 year old employee with a retirement age of 65 will have 10 years to accumulate his life

time benefit verses a 30 years old employee with a retirement age of 65 will have 35 years to accumulate his life time benefit,

which means the annual contribution for the older employee would be much higher.

A Cash Balance Plan May Be For You!

Make tax deductible contributions over the $49,000 DC limit

Slant contribution amounts in your favorIncremental increase of employee contribution

costsConservatively invested

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Cash Balance Plan – A Closer LookDisadvantages

• Required funding each year• Must be in place a least three

to five years• Potential differences between

actual plan assets and theoretical cash balance at termination

Advantages•Looks like a DC plan to participants•More attractive to younger employees•Set rate of return reflected on statements •Higher accruals are permitted (with larger deductions)•Conservative investments

Reason for Using a Combined DB/DC Plan• With a Defined Benefit Plan the benefit provided at retirement is

subject to a benefit limit. ($195,000 for 2010) For this reason Defined Benefit Plans are often considered to favor older employees.

• A much higher contribution can be allocated for the benefit of a participant in the Defined Benefit Plan and is mandatory funding each year giving employers little or no flexibility

• A combination of Defined Benefit and Defined Contribution Plans can achieve the following objectives:– A higher total contribution amount in both plans for owners.– Flexibility to design classes of participants that will receive benefits at

different levels.– A smaller allocable share of costs for employees.– The continued opportunity for participants to regulate their contributions

by their elective deferral and catch up contributions.

Fiduciary – What and Who

• ERISA (the Employee Retirement Income Security Act of 1974)states the requirements for enforcement of fiduciary responsibilities amongst other items for these plans

• A retirement plan fiduciary is anyone who is named as a fiduciary in the retirement plan documents or who exercises discretionary control over the plan’s operation.

• An individual committee or company may be a fiduciary if it is named in plan documents, exercises discretionary control over the management or administration of the plan or its assets, provides ongoing investment management or advice to the plan or to plan participants, selects or supervises other plan fiduciaries

Department of Labor (DOL) DefinesResponsibilities of a Fiduciary

• Duty of Loyalty (Exclusive Benefit Rule)• Duty of Prudence (Prudent Expert Rule)• Duty to Follow Plan Documents• Duty to Diversity (Duty to Avoid Large Losses)• Duty to Pay Reasonable Plan Expenses Relative to

Services Provided

Role of a Fiduciary

• Ongoing• Time Consuming• Involves Legal Exposure• Under Scrutiny by Regulators

– Department of Labor– ERISA (if you have employees)

Risks for Fiduciaries

• Running Corporate Retirement Appropriately– Appropriate analysis– Expenses in line with the industry– Prudent investment choices– Reasonable investment results– Ongoing monitoring

• La Rue vs. DeWolff, Boberg & Associates, Inc.

Employers are being scrutinized and your risk of being under the regulators microscope is increasing

Broker & Registered Investment Advisor Key Distinctions

Registered Investment Advisor• A RIA, subject to the Investment Advisors

Act of 1940 and has a fiduciary duty to place a client’s interests ahead of his own.

• Fees tend to be less with an RIA.. • An RIA gets paid for advice rather than for

trades, thus no incentive to do trading in client accounts

• An RIA cannot sell commission products nor are they allowed proprietary products.

• An RIA provide a level of independence unavailable with traditional Brokers.

• Assets are typically held with qualified third-party custody firm.

Broker•A Broker is not a fiduciary. A broker, or registered representative, is required only to recommend investments that are “suitable.”•Lack of requirement to provide full disclosure – possibility of multiple layers of fees.•A broker is essentially a sales agent of his/her firm•Brokers are often tied to specific products because of negotiated deals between vendors and their parent company. •An investor should consider the parent firm of the broker and the stability of the custodian among many other factors.

Sucré-Vail Wealth Advisors Offers You Solutions giving you a multitude of advantages over

more traditional plan structure, set-up and services– Institutional investment management expertise– Quality investment options – State-of-art recordkeeping and plan administration– Customizable employee education and communication

program– Fiduciary protection program– Reduction of legal exposure– Deliver ongoing client communications and performance

reports– Help to mitigate fiduciary risks

How We Work Together

Sucré-VailWealth Advisors

•Prudent Expert•Co-Fiduciary

•Navigating away fiduciary risk

Plan Sponsor•Files plan reports with Government

•Delegates responsibilities as necessary•Hires, monitors and holds accountable other

fiduciaries and/or service providers ERISA AttorneyOversees legal

compliance

Third Party Administrator

(TPA)•Provides operational

compliance and reporting requirements

Record keeper•Maintains individual

plan participant information

Qualified Custodian•Holds plan investments

Formal Written agreement of

Specific Fiduciary Responsibilities

Plan Participants

2 way coordination

•Broadly diversified investment portfolios designed to reduce the risk of large losses•Ongoing communication and access to SVWA team•Individual quarterly participant progress meetings

•Transparent and appropriate information to monitor and evaluate investment management•Documentation to assure costs are reasonable relative to services provided

2 way coordination

Your Fiduciary Responsibilities

Your Check List of “To Do’s” Get a second opinion Understand who within your firm is a fiduciary –

educate yourself and those with fiduciary responsibilities

Review a second opinion to see how you can improve your retirement offering and mitigate risks associated with being a fiduciary

In ClosingGive us the opportunity to show you how our solution will

• Assist you as the plan Sponsor in understanding your fiduciary obligations

• Facilitate the MOM program an institutional investment process that provides the foundation of fiduciary compliance for you as plan sponsor

• Leverage technology from our partners to document the process while providing state of the art recordkeeping and plan administration.

• Illustrate our commitment of full disclosure on all fees• Provide customize on going education for your employees to

successfully prepare for retirement

16862 Royal Crest DriveHouston TX, 77058

Phone: 888.286.9991 www.sucrevailwa.com