Fiduciary Oversight: A Process & Approach to Best Practices

1. Fiduciary Oversight:A Process & Approach to Best Practices Charles A. Bruder, Esq. Scott Rappoport The material provided herein is for informational purposes only and is not intended as legal advice or counsel.

2. Please help yourself to food and drinks Please let us know if the roomtemperature is too hot or cold Bathrooms are located past the reception desk on the right Please turn OFF your cell phones Please complete and returnsurveys at the end of the seminar

3. Fiduciary Oversight & Timely Topics For Benefit Plan Sponsors

4. Fiduciary Oversight In The Spotlight LaRue v. DeWolff (Supreme Court 10/2007) ERISA litigation up 25%/year (past 4 years) Pension Protection Act (2006) DOL disclosure initiatives (2008) Changes to Form 5500

5. Who is a Fiduciary? Any person who: Exercises any discretionary authority or discretionary control in managing the plan or who has any authority or control in managing or disposing of its assets; Has any discretionary authority or responsibility in administrating the plan; or Renders investment advice for a fee or compensation with respect to any monies or other property belonging to the plan.

6. Responsibilities Of a Fiduciary Under ERISA Fiduciaries are required to perform their duties solely in the interest of the plan participants and their beneficiaries. Fiduciaries must exercise the care, skill, prudence, and the diligence of a prudent person who is acting in a like capacity and is familiar with such matters.

7. What are Fiduciaries’ Exposures Under ERISA? Fiduciary liability is personal, absolute and unlimited. ERISA holds fiduciaries personally liable for their actions.

8. Safe Harbors Voluntary May insulate from liability Must demonstrate compliance with requirements: • Prudent selection • Prudent Monitoring • Acknowledgement of fiduciary status

9. 404(a) Safe Harbor Provisions Investment decision delegated to “prudent expert” Experts selected by due diligence process Experts exercise discretion over assets Expert acknowledges co-fiduciary status in writing Fiduciary must ensure that experts perform the agreed upon tasks using agreed upon criteria

10. 404(c) Safe Harbor Provisions Requires notification in writing of intent to comply with 404(c) safe harbor Three different investment options with differing risk/return profiles Information and education on the different investment options Opportunity to change investments with appropriate frequency.

11. Fiduciary Adviser Safe Harbor Provisions Select a qualified fiduciary adviser who: • Acknowledges fiduciary status in writing • Discloses all conflicts of interest • Discloses all forms of compensation

12. Qualified Default Investment Alternative (QDIA) Plan sponsor can avoid liability for participant investment decisions by offering QDIA • Age-based funds or models • Risk-based funds or models • Age-based managed accounts • Money market accounts for 90-120 days

13. Fiduciary Oversight Benefit Sources & Solutions Best Practices Creation of the Investment Policy Statement/Governing Body Document Creation of the Investment Committee Designation of qualified professional investment counsel Ongoing monitoring & reporting

14. Monitoring & ReportingBenefit Sources & Solutions Best Practices Review actual Portfolio for MPT Statistics Appropriate Index Peer group Compare investment expenses for risk & reward Create a quarterly correlation matrix Review operational quality of investment managers Disclose plan expenses and revenue sharing Create “plain English” quarterly “minutes” for plan sponsor tied to an annual IPS review Standards defined in the IPS

15. Monitoring & Reporting Investment Committee Meeting Minutes Information that is provided must be evaluated and actions that are considered must be documented Watch list procedures must be followed

16. How Can Benefit Sources & Solutions Help • Fiduciary Review • Checklist • Mutual Fund Review • Source of technical information 888-560-5171

18. ARRA COBRA Subsidy Became Law February 17, 2009 Involuntary Terminees from 9/1/2008-12/31-2009 Effective March 1, 2009 65% Premium Subsidy COBRA Beneficiary remits 35% of 102% Difference is offset by payroll tax credit Employer is not responsible for determining income eligibility

19. ARRA Notice Requirements By April 18, 2009, notice of new COBRA eligibility enrollment option to eligible beneficiaries who did not elect COBRA 9 Month Subsidy period

20. Children’s Health Insurance Program (CHIP) Effective April 1, 2009 Applies to all plans including self insured Children eligible for premium assistance under state programs can elect employer sponsored plans This necessitates new eligibility period for those choosing the employer sponsored plans. SPD’s for Medical and Cafeteria plans require updated language.

21. Do These Things Keep You Awake at Night? Controlling Expenses Employee Retention Leveraging Resources Human Capital Challenges Lack of Control Regulatory Burden

22. Why Benchmarking Does the “annual train wreck” work for you? Do you have a benefits and comp philosophy? Desire to be a competitive employer Turnover Issues Morale Issues Communications

23. About the Survey • Conducted Q1 & Q2 2008 • Joint effort of 142 UBA Members • 12,680 Employers Survey • 168,019 Health Plans • National In Scope

24. Who is United Benefit Advisors? Consortium of 140 of the Nation’s Premiere Benefits Firms Community of peers learning, sharing & focusing on better serving their clients Leverage our connections, experience & wisdom to enhance the client experience Work in tandem to maximize the impact technology has on improving business processes

25. Full-Time Eligibility Requirements

26. Full-Time Employee Waiting Period Immediately Following First of Month Following

27. Type of Plan Offered

28. Annual Cost Per Employee - Total Cost

29. Total Monthly Premiums 25th Percentile 75th Percentile Median Average

30. Changes to Total Premiums 25th Percentile 75th Percentile Median Average

31. Monthly Employee Share –% of Premium 25th Percentile 75th Percentile Median Average

32. Average CoPays

33. In-Network Deductibles 25th Percentile 75th Percentile Median Average

34. Out-of-Network Deductibles 25th Percentile 75th Percentile Median Average

35. Wellness Programs and Incentives Incentives Included

36. Wellness Programs & Components

37. HRA And HSA Plans HRAs HSAs

38. Annual HRA Funding Levels

39. Type(s) of employee communication tools utilized: (Note: More than one response could be selected, so the percentage of the total responses exceeds 100%)

40. Type(s) of employee communication tools utilized: (Note: More than one response could be selected, so the percentage of the total responses exceeds 100%)

41. Employer-Paid group benefit programs:

42. Employee access to financial advice regarding retirement plan savings and investment options: (Note: More than one response could be selected, so the percentage of the total responses exceeds 100%)

43. Employee programs or services in place or planned:

44. Participate in the 2009 Benefit Sources & Solutions/UBA Survey and Receive Custom Benchmarking Report Results Go to www.benefitsource.com and see National Health Plan Survey

45. Fiduciary Oversight:A Process & Approach to Best Practices Charles A. Bruder, Esq. Norris McLaughlin & Marcus, P.A.

46. I may have violated the provisions of a company sponsored retirement plan…what can I do?

47. Fiduciary Duties and Corrective Action – A Practical Approach • Several available options • Do nothing, and hope that the problem is not discovered • “Self correct” the potential fiduciary breach • Disclose the breach to the appropriate government agency/program • The key to addressing a breach of a fiduciary duty is identifying the available correction methods and determining the appropriate course of action

48. The “Do Nothing” Approach • Pros • No action or cost involved • Does not require disclosure to any government agency/plan participant • May result in cost savings to the plan sponsor • Permits the plan sponsor to continue with its current form of plan administration

49. The “Do Nothing” Approach • Cons • The “ticking time bomb” • Raises the potential costs associated with corrective action • Failure to address a fiduciary breach may be a further breach of fiduciary duty • Audit Lottery – Are you feeling lucky?

50. Fiduciary Duties and Corrective Action – A Practical Approach Available Corrective Programs • Employee Plans Compliance Resolution System (“EPCRS”) • Voluntary Fiduciary Correction Program (“VFCP”) • Internal Revenue Service (“IRS”) Notice 2008-113