Making a Good 401(k) Plan Even Better (Credit Union Conference Presentation)

MAKING A GOOD 401(k) PLAN EVEN
BETTER

Presented by:
Richard W. Rausser, CPC
Vice President
Pentegra Retirement Services

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

Your Retirement Plan Is An Important
Factor In Your Credit Union’s Success

• Retirement plans represent a large expense
that credit unions incur to attract, retain,
and motivate employees


Make Your 401(k) Plan Work Harder
For You

• Define what you want to accomplish with your
plan
• Ensure that your plan design aligns with your
corporate benefits strategy


Aligning Your 401(k) Program With Your
Corporate Benefits Strategy
• 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”


Measuring The Effectiveness Of Your
401(k) Program

• Begin by benchmarking specific plan features
• Evaluate each feature in terms of how it
compares to:
 Industry standards

 Your competitors


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
rrausser@pentegra.com
800.872.3473


Making a Good 401(k) Plan Even Better (Credit Union Conference Presentation)

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Making a Good 401(k) Plan Even Better (Credit Union Conference Presentation)