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ABC Company Logo. The ABC Company 401(k) / Profit Sharing Plan The ultimate solution for your retirement program Presented by First National Bank and BPAS. Discussion outline. Introduction Firm qualifications and capabilities Review of current situation and ABC Company’s key goals
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ABC Company Logo The ABC Company 401(k) / Profit Sharing Plan The ultimate solution for your retirement programPresented by First National Bank and BPAS
Discussion outline • Introduction • Firm qualifications and capabilities • Review of current situation and ABC Company’s key goals • Our proposal • Highlights • Service team • Investments • Education • New website highlights • How the FNB / BPAS solution is unique • Transition steps • Fee summary
About First National Bank • Headquartered in ________ (locally invested and focused) • Nationally chartered trust company (examined by OCC) • Over 60 years in the trust, fiduciary and wealth management business • More than $1 billion in assets under management • Team approach provides maximum service and coverage • Retirement plans: a major area of focus • Senior investment management service provides direct assistance to participants (what many other programs lack) • A strategic partner to maximize efficiencies in cost and service (a key benefit for our retirement plan clients)
Who is BPAS as our administrative partner? Full-service retirement provider, servicing entire spectrum DC, DB, and nonqualified plans Five offices, two time zones Administering 1,900 DC plans 283,000 employees tracked 188,000 participants with a balance $4.4 billion in DC plan assets “In-sourcing”. BPAS acts as recordkeeper, agent-to-trustee and NSCC member, all in one firm – this is extremely unique within the industry. Wholly owned subsidiary of a NYSE-traded company (NYSE: CBU), which has 1,800 employees in total. Profitable. Reliable. Committed to the retirement plan business.
The corporate structure of BPAS Community Bank System, Inc. (NYSE: CBU) Benefit Plans Administrative Services, Inc. (BPAS) Community Bank, N.A. - Regional Bank BPA HB&T Harbridge FlexCorp Institutional Trust Company (Member NSCC) DC Plan Administration National Actuarial Practice (formerly PWC) Section 125Practice
ADM Corporation Bausch & Lomb Black & Decker Boston College Braun Corporation Burger King Corporation Chili’s Restaurants Church's Chicken CNA Insurance Coca Cola ConAgra DaimlerChrysler Financial Services Direct T.V. Empire State Carpenters Union First Security Mortgage Various “household name” clients of BPAS(across U.S. and P.R.) • General Electric Corporation • Golub Corp. (Price Chopper supermarkets) • Heineken, Inc. • Helen Keller National Center • International Food Network • Kelly Services • KFC / Taco Bell / Pizza Hut of P.R. • Kinney Drugs USA • Levitt Homes • Lexmark Corporation • Marriott Corporation • McDonald's Corporation • Nestle Corporation • Oracle • Pacific Life Insurance • Pall Corp. • Pay and Save, Inc. • SAP • Sephora • St. Jude Medical Center • Stony Brook University • Suzuki • Syracuse University • The Doug Flutie Foundation • Twentieth Century Fox • Unilever • Verizon • Waste Management Between our business in the 50 U.S. states plus Puerto Rico, our client base includes divisions or subsidiaries of the above companies and orABC Company, Inc.nizations.
Current situation: Two separate plans • 401(k) plan – $8.3 million in assets and 337 participants (277 active plus 60 terminated) • Daily valued, participant directed • Serviced by FNB and BPAS • Profit Sharing Plan – $12 million in assets, approximately 920 participants (645 active participants plus 277 terminated participants) • Quarterly valued, trustee directed (approximately 80 / 20 allocation of stocks to bonds and cash at present) • Serviced by local TPA and independent advisor
ABC Company frustration points • The number of current contacts – leads to inefficient service • Custodian and Directed Trustee (401k) • Directed Trustee (Profit Sharing) • Investment Advisor • Record keeper for Profit Sharing Plan • Plan attorney • Auditors • Profit Sharing Plan risk profile not appropriate for all • Workload – at times too much • Excessive fiduciary liability • Cost of two separate plans
Goals of the new retirement plan • Move Profit Sharing Plan to participant direction, eliminating significant fiduciary liability • Reduce cost • Streamline processes - efficient service, superior service! • Engage and motivate participants to invest for their future • Improve the results of annual compliance tests so HCEs can contribute more • Enhance plan (safe harbor, moving to match, combination, etc) • Maintain the integrity of fund monitoring / review process, with institutional, best-in-class funds
Our Proposal • Combine Profit Sharing Plan with 401k Plan • Move entire plan to participant direction, daily valuation • Consolidate to single BPAS plan document • Consider changes to employer contribution (safe harbor, match, combination) • Implement automatic rollover program • Required minimum distribution process will cover entire plan (initiated by BPAS) • Simplify audit with unique BPAS approach (certified audit package) • Continue with online enrollment (consider automatic enrollment?)
Single website and one point of entry for participants BPAS call center services entire plan One set of forms Combined statements and reports Work with one Plan Consultant to oversee entire program A single process for contributions, loans, hardships, distributions and other activity Eliminate several contact points from the mix Consolidated plan sponsor website for managing entire program Restate plan onto a single prototype document - eliminates legal cost No timing differences on valuation dates or distributions Eliminate ‘fairness issues’ on Profit Sharing Plan distributions One set of compliance tests, combined Form 5500, BPAS handles all participant notices Reduce audit costs dramatically Benefits of combining into a single program In summary, we will dramatically streamline the plan and your service experience!
Service team Simplify to two main points of contact • First National Bank – Mary Jones • Peter Miller • Alice Greenwald • BPAS - Amy Shaub • Census Team • Customer Service Rep Team
Assisting participants through the BPAS Call Center CSR Team Manager • instant management reports • real-time reporting of: • incoming call volume • number of calls on hold • average hold time • call abandonment rate • individual CSR performance • can add additional CSRs to queue at any time based on volume • ideal system for managing, training individual CSRs CSR CSR CSR CSR CSR CSR CSR CSR • All calls recorded and archived • ‘Next available routing’ across multiple offices • If queue exists, approximate hold time is provided • Option to hang up, receive immediate callback when next CSR becomes available • Translator line covers approximately 100 additional languages • Current team hours: 8:00 AM – 6:30 PM EST • Email and voicemail available 24 / 365
Our open architecture platform – a decided advantage • Over 210 fund families currently traded across our platform (1,900+ funds currently traded) – mutual funds and daily valued collective funds (e.g., American, Vanguard, PIMCO, Black Rock, Fidelity, Dodge & Cox, Federated, etc) • No variable annuities or separate accounts; all funds are transparent, ‘known quantity’ investments (no load, same day / late day trading) • Any revenue sharing is offset against theplatform charge for each fund • This eliminates any conflicts of interest in the fund review, fund monitoring and participant education process (a key focus of new fee disclosure regulations) • Ensures that fees are borne equitably across all participants
Critical considerations in selecting a provider • Will the selected firm act as RIA, Trustee or broker of record ? • FNB operates as discretionary trustee • No conflicts of interest in the fund monitoring, fund selection or participant education process • No limitations on the funds we can use (Vanguard versus American, etc) • Any 12b-1s or revenue sharing are used to offset your fees (at the fund level) • Level compensation by fund – a critical distinction • Allows us to be 100% objective in servicing the plan and your participants • BPAS also operates in a level compensation environment
Why is level compensation so critical in a provider?? It is impossible to be objective when a provider is paid like this: = Mutual fund revenue sharing (basis points) This “incurable conflict of interest” will impact: fund selection fund monitoring, recommendations over time participant education and advisory services
Our solution for participant education • FNB conducts onsite one-on-one quarterly meetings • Participating in new hire orientations • Conducting open enrollment meetings • Quarterly statements and newsletters • Education and guidance delivered via participant website and advice software • Enrollment booklets, workbooks, slide rules and other printed pieces • Customizable education pieces for various needs • Explore advertising opportunities to build employee awareness Communicating with your employees on their level – in a friendly, unintimidating way.
The Annual Plan Review Report (APRR) prepared for your plan annually
How we simplify life for you, the plan sponsor • We track all employees on our system (not just those with a balance) • We process census files for a variety of edits before notifying employer of amount to be funded • Eligibility determination by source: standard service • Online enrollment, deferral rate changes (enrollment through census files) • Vesting updates real time • HR outsourcing for loans, hardships, distributions • Greatly reduced workload for compliancetesting and Form 5500 process • Certified audit package (significant advantage) • Interacting with HR through “Action Items” in plan sponsor website and real-time emails “You’d be amazed how many errors are found in a typical payroll system. The BPA approach to administration provides a vital ‘check and balance’ tocatch many possible errors before they are traded into your Plan. This additional audit is a major advantage of BPA versus other providers we have worked with.”- Recent comment from plan sponsor client
What the flow looks like for new contributions If approved by 3:30 PM EST, BPA initiates mutual fund purchases at that evening’s prices. If after 3:30 PM EST, purchasesmade on next business day. Plan sponsor logs onto CensusPro, reviews / approves ACH verification Plan sponsor logs onto CensusPro, reviews / approves ACH verification Plan sponsor logs onto CensusPro, reviews / approves ACH verification Plan sponsor logs onto CensusPro, reviews / approves ACH verification 3 3 3 4 Plan Sponsor Plan Sponsor Plan Sponsor Plan Sponsor 1 Plan sponsor imports census file into CensusPro, submits to BPA The next morning, participants see trades reflected on website. BPA ‘ACH pulls’required funds from plan sponsor checkingaccount to settle prior day’s contributions. 2 2 5 BPA reviews file for numerous edit checks, sends email to plan sponsor instructing them to log onto CensusProand review ACHverification, which includes corrections we made to data Note: for plan sponsors who prefer, authorization can be given to have BPA automatically trade new contribution if there are no edits on ACH verification.
Our certified audit package – another big advantage • BPAS acts as recordkeeper, clearing firm and directed trustee/custodian • Since plan and trust are held on the same system (Sungard OmniPlus), all reports are consolidated and there are no plan-to-trust reconciliation issues • Type II SAS-70 audit report covers the plan and the trust • Our certified audit package is delivered to your auditors through a secure, web-based link, including all documents needed for audit • Certified trust statements, allocation reports, contributions, loans, distributions, transactions, compliance tests, etc. • When auditors have questions or need additional information, they call your BPAS Plan Consultant directly • The bundled nature of our solution allows us to greatly simplify the audit process and reduce work for our clients (cost and time savings)
Small benefits that made a big difference • We adjudicate loans, hardships and distributions, dealing directly with participants • We handle all age 70 ½ notices for the entire plan • We prepare all required notices (safe harbor, QDIA, SMM, SAR) • No redemption fees (opposite way trade block used where needed) • No blackout period for fund changes • Plan sponsors can assist participants in a variety of ways (obtaining paperwork in website,transactional access, etc) • Benefits of new website rolling out later in 2011 (additional streamlining of many processes)
The steps involved in a plan combination • Select a date for consolidation (e.g., 4/1/2011) • Determine how profit sharing assets will be mapped by fund (maintain similar objectives for initial map-over) • Communication process with participants (memo, onsite meetings, Brainshark presentation, etc) • Restate plan document - BPAS • Calculate final valuation as of 3/31/2011 - RPC provides valuation files to BPAS • Map assets over into new funds • Complete interim valuation for PS source (e.g., 4/1 through 4/20) - BPAS • New source becomes “active” on participant website, so all assets can be viewed • Memo mailed to all participants, asking them to make any desired investment changes
Fee summary ($20 million plan with 920 participants) • See attached fee schedule for details • Base fee waived • Recordkeeping fee: $2.50 / month / participant (charged against participant accounts) • Platform fee: 65 basis points on plan assets, offset at the fund level by any forms of revenue sharing (30 bps to FNB, 35 bps to BPAS) • Option to have FNB trustee fee invoiced or paid from plan assets • Activity-based fees (loans, distributions, paid by participant)
= custodial fee = revenue sharing How the platform charge works (30 or 55 bps, same concept) Our Platform Charge: 55 basis points on mutual fund assets, offset by any forms of “revenue sharing” 65 basis points 35 bpcustodial fee 50 bpcustodial fee 30 bpcustodial fee 65 bpcustodial fee AmericanFundsGrowthR435 bps Buffalo Small CapStock 30 bps “Pure institutional” funds (Vanguard,Signal Shares, etc) TR PriceValue 15 bps Any custodial fee is applied as a level monthly charge against holdings in the fund. For example, if a 25 basis point custodial fee is required, it would be charged as 2.08 basis points / month from that fund, or $2.08 / month for a participant with $10,000 invested. This fee is does not appear on quarterly participant statements (it is netted from earnings), but would be found in the “activity history” area of the participant website.
Transparency of fees • Our fees can be invoiced, paid from plan assets, or a combination • If any funds offer various types of revenue sharing, this will be offset at the fund level within the plan • This method ensures that all participants pay an equitable portion of fees, regardless of fund utilization or asset allocation. • We are willing to guarantee these fees for a two year time period. • We recommend that you use the “vendor cost comparison matrix”, to obtain a clear, apples-to-apples comparison of fees among all vendors.
Closing thoughts • Our program offers flexibility and a powerful combination of services • We can satisfy all of your stated goals for the combined plan while delivering substantial benefits to ABC Company and your plan participants (minimizing costs, maximizing efficiencies, reducing workload for ABC Company, etc) • Position your participants for success through our best-in-class menu of mutual funds and open architecture platform • Our advisory services will reduce risk for your organization and formalize the fiduciary process • Our education program will motivate your employees, maximizing the plan’s value as a wealth creation tool • Benefit from a competitive fee schedule with full transparency, and the ability to determine what level of fees are paid by ABC Company and plan participants
