Regardless of what your advisor says, 401(k)s are not free. Benefit consultant Mike Kiley reveals how fees and expenses are hidden by many 401(k) vendors and explain to plan sponsors how to expose the real costs they – and their employees – are paying for their defined contribution benefits. What factors impact how much you and your employees are paying for their 401(k)? Kiley outlines the strategies informed companies are using to lower fees and help employees put more toward retirement.

1. 401(k)s Are Not Free The Real Cost of Your Plan Presented by Michael Kiley, QPA, QKA www.nyhart.com Copyright 2011. All Rights Reserved.

2. Mike Kiley Retirement Plan Consultant mike.kiley@nyhart.com | (317) 845-3512 Qualifications or certifications:American Society of Pension Professionals and Actuaries (ASPPA) qualified pension administrator (QPA) Qualified 401(k) Administrator (QKA); Series 65 licensed as a registered investment advisor representative.

3. Today’s Discussion Why is knowing my plan’s 401(k) fees important? Who are the players and the associated fees in a 401(k) plan? What is the ‘shell game?’ Action items/possible solutions What’s on the horizon for fees? 3

4. Why is Knowing My Plan’s 401(k) Fees Important? For plan sponsors, it is your fiduciary duty to make sure fees are reasonable! For plan participants, excessive fees can rob you of your retirement savings! 4

5. Who are the Players and the Associated Fees in a 401(k) Plan? Investment advisory fees Fees to select and monitor the plan’s investment options Typically as a percentage of assets or a flat dollar Recordkeeping and administration fees Typically a flat dollar, per participant or asset-based fee Mutual fund expense ratios Fund management expenses Broker fees/commissions Other compensation (‘revenue sharing’) Typically the highest plan expense 5

6. Who are the Players and the Associated Fees in a 401(k) Plan? Custodial/trustee fees For insurance company products: Group annuity fees Sub-advisory fees Other fees Annual audit fees Legal fees 6

7. Breakdown of Costs

8. What is the average total plan cost per person, per year? $670/per

9. Different vendors use different approaches to charging fees.It’s often tough to do an apples-to-apples comparison.

10. What’s the ‘Shell Game’? Explicit vs. implicit fees Explicit: Plan sponsor is invoiced directly for the fee Clean and easily disclosed Implicit: Fee is deducted automatically from the plan, or paid/offset by other compensation A source of much confusion 10

11. What’s the ‘Shell Game’? Implicit fees - Revenue sharing Compensation paid from mutual fund companies directly to service providers (typically recordkeepers and brokers) Varies by mutual fund and by share class How is it applied? 11

12. What’s the ‘Shell Game’? Implicit fees Offsetting fees from providers offering multiple services (‘bundled’ providers) Revenue from other service(s) is sufficient to offset a separate service Sometimes limitations on investment options Be aware of restrictions – ‘you get what you paid for’ 12

13. What’s the ‘Shell Game’? Additional fees to be aware of: Insurance contract fees Sub-advisory fees 13

14. Action Items & Possible Solutions Know all fees – request an ‘all-in’ fee disclosure from your current vendor Demand ongoing disclosure of all fees Request a benchmarking of your total fees 14

15. Action Items & Possible Solutions Some plan sponsors going to ‘no-load’ or passive investment style Moving to mutual funds and/or share classes with no revenue sharing Dramatically lowers investment expense Fees become more clear - explicit instead of implicit 15

17. Participant-level fee disclosures also coming16

18. Any Questions? This concludes our discussion

19. Looking for more benefit presentations? So Where is the Peak? Register for upcoming educational events on pensions, 401(k), healthcare and other actuarial and employee benefits topics at: www.nyhart.com/events/

20. ACTUARY & EMPLOYEE BENEFITS 16 Actuaries Consulting In 48 States. Nyhart is one of the nation’s largest independent actuarial and employee benefit firms, consulting to and administering the plans for clients with more than $14 billion in assets. Our team of benefit advisers deliver personalized analysis and recommendations, translating complex calculations and issues into common language that enables corporations, associations, churches and governments to effectively manage their retirement and health care benefits.

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