Update on BPAS as Your Retirement Plan Partner and Evolution of the DC Service Model

STRONGER
Strategies
for success
2015 Partner Conference
together
BPAS Partner
Conference
June 15 – 17,
2015
Barry S. Kublin,
Chief Executive Officer
Benefit Plans Administrative
Services, Inc.

2015 Partner ConferenceStronger Together
WELCOME and THANK YOU
• Attendees
• Sponsors
• Guest Speakers
• BPAS Staff
— Marketing the Program
— Developing Program Content
— Logistics
• Web Success Agency
• BTI Travel
2

AGENDA
• BPAS Firm Profile
• Issues Affecting Retirement Plan Service Providers
— Coverage and Participant Rates
— State Initiatives
— Fiduciary Regulations
• Service Provider Trends in the Industry
• Business Opportunities by Segment
3

AGENDA
• Evolution of “401k” Accumulation Plans into
“401k” Lifetime Retirement Plans
— “Managing Through Retirement vs. Managing to
Retirement for
Plan Participants”
4

Firm Profile
• 250 Professional Employees
• 9 Office locations
— Rochester, Syracuse, Utica, and NYC, NY
— Philadelphia and Pittsburgh, PA
— East Hanover, NJ
— Houston, TX
— San Juan, PR
5

Firm Profile
• $18.6 billion assets under custody
• 3,600 engagements
• 375,000 plan participants
Plus acquisition of the Oneida Financial Group practice,
pending regulatory approval
6

BPAS Lines of Business
• Plan Administration and Recordkeeping Services
— Bundled administration, recordkeeping and custody services for
defined contribution-type plans and IRAs
• TPA Services
— Unbundled retirement plan services in support of balance forward
and third-party recordkeeping plans
• Actuarial and Pension Services
— Actuarial services for traditional defined benefit, cash balance,
executive supplemental retirement and other post-retirement
benefit plans
7

• Benefit Consulting Services
— Health and welfare benefit plan consulting
• VEBA/HRA Services
— Bundled administration for retiree medical plans
• Fiduciary Services
— ERISA 3(21) and 3(38) services for retirement and VEBA plans, in
support of brokers and directed trustees
8

• AutoRollover and MyPlanLoan Services
— Service bureaus for other providers supporting EGTRAA
distributions and non-payroll-deduct loan administration
• BPAS Trust Company of Puerto Rico
— Directed trustee services for PR 1081 plans
• Hand Benefits & Trust, a BPAS Company
— Collective Investment Fund administration
9

BPAS Sales Map
10

BPAS DC Differentiators
• Auto Escalation Plans
• Employer Stock / PR 1081 Plans
• Multiple Employer Plans / Multiple Employer Trusts
• VEBA / HRA
• TRO / HR Outsourcing Solutions
— 3(16)
— 180° / 360°payroll integration
• Commitment to Financial Advisor Service Model
— Level comp by fund service model
11

BPAS DB and EBT Differentiators
• Actuarial and Pension Services
— 27 actuaries supporting plans with 1 – 20,000 participants
— Expert knowledge of PR 1081/PBGC and PR Cash Balance plans
— Bundled provider of GASB 45, VEBA/HRA services
• EBT Services
— NSCC Member Firm, vertical integration of daily valuation
administration and custodial processes
— Administering CIFs since 1964 (51 years), 287 tickers
— BPAS Trust Company of PR
12

Issues Affecting Retirement Plan
Service Providers
• Retirement Savings Crisis
— Not having enough money for retirement is the number one
concern for Americans in every age bracket
— Over 20 million private sector workers earning between $30
- $100k do not have access to a retirement plan at work
13

Service Providers
• Federal Response
— Senator Tom Harkin USA Retirement Funds
• Auto-enrollment into a series of collective funds
• Benefits payable as lifetime annuity
• No distributions until retirement
• According to GAO, IRS takes in $5 billion annually in early
withdrawal penalties
— Senator Marco Rubio TSP Proposal
• “That is why I propose we give Americans who do not have
access to an employer sponsored plan the option of enrolling in
the federal Thrift Plan.”
14

STATE INITIATIVES
Enacted in California, Connecticut, Illinois, Massachusetts,
Utah, Virginia, Washington
15
Service Providers

States with Retirement Proposals
for Private Sector Employers
16

Elements of State Run Plans
• No required employer contribution, no employer
administrative fees
• Exempt from ERISA
• Illinois Secure Choice Savings Program
— 25+ employees, $250 fine per employer per year for non-compliance
— Auto-enroll at 3%, non-ERISA plan
— Roth IRA contribution limit ($5,500/$6,500)
— Participant directed
— Expense ratio not to exceed 75 bps
— State Board to create vendor website to assist employers
in identifying provider
17

Competing Against the States
• Private Sector Service Providers
— Commit to participation rates, not just AUM
— Expand coverage to part-time employees, notwithstanding
statutory exclusions for employer contributions
• Expanded use of Multiple Employer Plans and Trusts for
small businesses
• Competitive HR outsourcing model – 180 / 360 integration
• Expanded use of auto features, including escalation
• Deliver value-added education
— Financial literacy vs. savings rates and asset allocation
18

Fiduciary Regulations
• Impacts any investment professional or organization
that works with plan sponsors, participants or IRA
account owners
• Covers advice about buying, selling or holding
investments in plans or IRAs
— Recommendations to take a distribution from a plan or IRA
— Recommendations of persons to serve as investment
manager or to provide investment advice to plan or IRA
owners
19

• How to Avoid Prohibited Transactions
— The Best Interest Contract Exemption
• Written contract committing to Best Interest Standard
• Disclose any material conflicts of interest
— Level comp, Limitations on investment offerings
20

• Accelerated migration of plans from
generalists to specialists
• Open architecture
• Level compensation
• Directed Trustee vs Discretionary Trustee
Model
• IRA Rollovers vs Plan to Plan transfers
21

• 401k Accumulation Plans vs 401k for Life Plans
• 401k Accumulation Plans vs 401k for Life Plans
• Increase in non-revenue sharing investment
products
• Education models vs CIFs
22

Service Provider Trends
• There has been a bifurcation of advisors into
generalists and specialists with very different product
preferences and support needs
• Rapid growth of fee-based advisors and a
commensurate decline of the commission
compensation model
• Rapidly growing presence of the fiduciary advisor
23

Service Provider Trends
• Insurance-based advisors, typically commission-based and
non-fiduciary, have declined from 25% of all advisors in
2011 to 12% in 2015 (RRI, 2015)
• Channel Affiliation
— Growing: Ind BD, RIA, Bank Trust
— Declining: Insurance, Wirehouse
24

Business Opportunities
Corporate Market Retirement Plan Penetration 2014 (RRI, 2015)
25
# Employees # Firms % w/DC Plan
< 10 4,600,000 5.5%
10-50 985,000 23.9%
51-100 121,000 51.6%
101-250 66,500 57.1%

• % Plans with Auto Features by Plan Size – 2013
• % Plans with Auto Features, of those with Escalation
26
Plan Size 1-49 50-199 200-999 1,000-
4,999
5,000+ Total
19% 45% 54% 64% 67% 50%
2005 2007 2009 2013
w/auto 17% 36% 38% 50%
Of those
w/escalation
15% 33% 40% 35%

Reasons Cited for Not Using Auto Features – 2013
27
Reason 1-49 50-199 200-999 1,000-
4,999
5,000+ Total
Satisfied w/
participation rate
73.1% 56.1% 22.0% 19.0% 13.8% 43.7%
Philosophy 19.2% 43.9% 36.6% 40.5% 34.5% 32.5%
Cost 3.8% 2.4% 17.1% 35.7% 41.4% 16.5%
Added work 10.3% 19.5% 14.6% 11.9% 3.4% 12.1%

Projected Corporate DC Sales in 2015
28
Book Turnover Sales
Plans (000) Plans Assets (B)
< $1 m 352.0 6.5% 22,900 $9.8
$1-5 m 205.0 8.0% 16,400 $40.4
$5-10 m 31.2 8.5% 2,700 $20.8
$10-25 m 18.1 8.5% 1,550 $26.3
$25-50 m 6.2 7.0% 435 $17.2
$50-250m 5.6 6.5% 365 $44.8
$250-1b 1.4 6.0% 85 $46.5
>$1b .5 5.5% 30 $116.0

• 403(b) by Type of Plan Sponsor - 2014
29
Sponsor # Plans (000) # Parts (M) Assets (B)
Public K-12 15.3 3.5 $190
Private K-12 and
Higher Ed
5.3 2.0 $225
Public Higher Ed 1.2 2.5 $320
NFP Hospital/
Healthcare
1.5 2.4 $175
Charitable/Other
NFP
11.7 .9 $65
Total 403(b) 35.0 11.3 $975

DC Plan Asset Allocation - 2014
30
401k 403b 457
Dom Equity 39% 40% 41%
Int Equity 8% 5% 8%
Er Stock 9%
Bal/Lifecycle 24% 12% 16%
Stable Value 10% 35% 23%
Bond/MM 10% 8% 12%
Total Equity 70% 52% 59%

Percentage Cash Balance Plans – 2012 (5500 data)
31
Total Plans Total Assets
# Parts # Plans (000) % CB (Billions) % CB
<10 24.7 19% $21.4 12%
10-50 8.6 37% $12.7 27%
51-100 2.2 20% $8.9 21%
101-250 2.4 10% $23.2 13%
251-500 1.8 9% $34.9 12%
501-1,000 1.5 8% $58.1 9%
1,001-5k 2.5 15% $320.6 16%
>5k 1.3 30% $2,223.5 35%
Total 45.0 21% $2,703.3 32%

Evolution of 401k Plans
“Houston, in addition to coverage
and other systemic plan and
regulatory issues, we have a
spending problem.”
32

“Financial Wellness” (Aon Hewitt Hot Topics 2015 – Survey of
very large plan sponsors)
33
Subject Matter % Plans Offering % Plans Likely to Add in
2015
Basic of Financial
Markets
41% 27% of the 59%
Healthcare Planning 32% 38%
Financial Planning 29% 23%
Debt Management 25% 9%
Budgeting 26% 13%
Saving for Life Stages 22% 15%

• Education
— Only 30% of participants understood the term “asset allocation,” and
only 36% said the understand the term “diversification.”
— 38% of participants are satisfied with the financial education
programs from their respective providers (NARPP, 2014)
• Financial Planning
— 70% of employees live paycheck to paycheck
— 24% of that paycheck goes to nonmortgage debt
• Curriculum
— Budgeting, debt management, Social Security options, retiree medical
coverage, decumulation of retirement assets, college savings,
insurance
34

• “Participants”
— The fiduciary regulations will lead to more participants leaving
their balances in the plan
— Accordingly, education programs should consider the terminated
participant audience
— Traditional methods of workplace education should be re-
evaluated
• Education and Fee Compression
— Holistic financial planning commands a premium
— Financial wellness has a proven ROI
• Stress, absenteeism, turnover, positive turnover
35

• Coverage and Participation Rates
— Expanded use of MEP and MET arrangements
— Universal eligibility for K participant
• Similar to 403b regs
— Fees for non-statutory eligible participants
• Similar to terminated participant regs
— Expanded use of auto features
• State plan provisions will create pressure for a mandate within
qualified plans
— Federal pre-emption for auto plans in non-ERISA plans
• 403b and 457
36

• Reducing Leakage and Retaining Assets Post Termination of
Employment – 401k for Life
— Installment payment plan provisions
— Rollover plan provisions
— Loan plan provisions (limits and continuity)
— Lifetime income products
— Longevity insurance
— Plan vs. participant level advice
— “Distributable event”
37

• Regulatory Issues
— Plan audits attributable to terminated participant counts
— Fiduciary liability for terminated participant balances
— Electronic notices
• Service Requirements
— 3(16) level for terminated participants
38

Summary
• We, as a professional society, must increase the
percentage of working Americans who are retirement
income ready
• Many of the tools to accomplish such are available; we
need to find more cost effective ways to serve the non-
covered constituency
39

Summary
• We must break through the resistance to auto plans
— Auto enrollment without auto escalation is an ineffective and
misleading strategy
• Addressing broader aspects of financial wellness will create
opportunities for higher retirement savings rates
• Limits on IRA rollover transactions will create opportunities
for Specialist Investment Advisors to increase AUM through
reduced leakage
40

Next Up!
• Paul Neveu, President, BPAS Plan Administration and
Recordkeeping Services
• Steve Saxon, Groom Law Group
— Update on Proposed Fiduciary Regs
• Ralph Acampora, Altaira Wealth Management
• Tom Kmak, Fiduciary Benchmarks, Inc.
• Brian Bouchard, Thornburg Investment Management
— Fee Policy Statements
• Several Panel and Group Presentations
41

Questions
Thank you
Barry S. Kublin, Chief Executive Officer
Benefit Plans Administrative Services, Inc.

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