Service Solution Handbook REV 01 07 08

A HANDBOOK FOR RETIREMENT PLAN SPONSORS AND FIDUCIARIES
Written by Financial Service Standards, LLC

Donald J. Settina, CFP®, AIFA®, PPC™
Sharon A. Pivirotto, AIF®, PPC™
Foreword by J. Richard Lynch, Executive Director, Foundation for

Fiduciary Studies
the 401k Service SOLUTION™

HANDBOOK
The duty to act prudently is one of a fiduciary’s central responsibilities

under ERISA. Prudence focuses on the process for making fiduciary
decisions. Therefore, it is wise to document decisions and the basis
for those decisions.
The development of the 401k Service Solution™ was based on the above
guidance by the Department of Labor and further defined by The
Foundation for Fiduciary Studies.
The goal of this Handbook is to:

1) Educate sponsors and fiduciaries on how to affectively address the key
issues involved in setting up and managing an employer-sponsored
plan;
2) Provide a process for making fiduciary decisions;
3) Educate sponsors and fiduciaries on the methods and tools available
for documenting their decisions; and
4) Provide useful resources to assist in all aspects of plan setup,
management, and review.
1
© Copyright 2006-2008 Financial Service Standards, LLC. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any manner whatsoever
without written prior permission from Financial Service Standards, LLC, except in the case of brief quotations embodied
in critical articles and reviews. For information, address Financial Service Standards, LLC, 2652 Hidden Valley Drive,
Suite 100A, Pittsburgh, PA 15241.
Financial Service Standards, LLC publications may be purchased for educational, business, or sales promotional use. For
information, please write: Handbook Requests, Financial Service Standards, LLC, 2652 Hidden Valley Drive, Suite 100A,
Pittsburgh, PA 15241.
Copies of this Handbook may be obtained from:
Financial Service Standards, LLC

www.financialservicestandards.com
2652 Hidden Valley Drive, Suite 100A
Pittsburgh, PA 15241
FIFTH EDITION
Printed in the United States of America
Published in 2007 by Financial Service Standards, LLC.

Pittsburgh, Pennsylvania
Library of Congress Control Number: 2005936058
ISBN: 978-1-4116-8248-1
2
TABLE OF CONTENTS
F OREWORD BY J. R ICHARD LYNCH ......................................................................................4
INTRODUCTION ................................................................................................................6
T HE 401 K SERVICE S OLUTION OVERVIEW .............................................................................7
SOLUTION #1 THE VISION SESSION—DEFINING YOUR VISION OF PLAN SUCCESS ..............................................8
SOLUTION #2 A SOLID FOUNDATION—USING AN INVESTMENT POLICY STATEMENT EFFECTIVELY........................10
SOLUTION #3 THE LEAD FIDUCIARY PRACTICE—MEETING YOUR FIDUCIARY RESPONSIBILITIES ...........................12
SOLUTION #4 DUE DILIGENCE REVIEW—COMPARING PLANS AND REVIEWING EXPENSES ...................................14
SOLUTION #5 THE ADVANCED INVESTOR SERIES—DEVELOPING AN EFFECTIVE EMPLOYEE
EDUCATION PROGRAM ......................................................................................................16
SOLUTION #6 THE PEAK ADMINISTRATION GUIDE—STAYING INFORMED AND EDUCATED ABOUT
YOUR PLAN .....................................................................................................................18
CONCLUSION ................................................................................................................. 20
WHAT TO LOOK FOR IN A SERVICE PROVIDER

UNDERSTANDING PROFESSIONAL DESIGNATIONS .................................................. 22
SELECTING AN INVESTMENT PROFESSIONAL .......................................................... 23
WORKING WITH A PROFESSIONAL PLAN CONSULTANT ............................................ 24
R ESOURCES
PRUDENT INVESTMENT PRACTICES ..................................................................... 26
DOL............................................................................................................ 28
ERISA.......................................................................................................... 29
ERISA SECTION 404(C) .................................................................................. 30
FIDUCIARY IMPORTANCE ................................................................................... 31
THE PENSION PROTECTION ACT OF 2006 ........................................................... 34
EDUCATION VS. ADVICE .................................................................................. 36
SERVICE PROVIDER OPTIONS ............................................................................. 37
RETIREMENT PLAN TYPES ................................................................................. 38
MAXIMUM BENEFIT AND CONTRIBUTION LIMITS ...................................................40
RETIREMENT PLAN TABLES.................................................................................41
PLAN PROVISIONS ...........................................................................................44
IN-SERVICE DISTRIBUTION OPTIONS ................................................................... 45
COMPLIANCE CALENDAR .................................................................................. 46
FEES AND EXPENSES ........................................................................................ 47
INDEX OF TERMS ............................................................................................48
TOOLS AND RESOURCES...................................................................................60
SOURCE CREDITS ............................................................................................................ 64
3
FOREWORD
“Fiduciaries have the most important, yet most misunderstood role in the
investment process: to manage the investment practices, without which the
other components of the investment plan can be neither defined,
implemented or evaluated…”
- Foundation for Fiduciary Studies
2003 Prudent Investment Practices Handbook
In an industry where the retirement plan participants have become

increasingly skeptical of those who are managing their financial assets, there
is a real need for clarity on how best to ensure that a prudent investment
process is being followed. As spectacular as the scandals like Enron,
WorldCom, and Tyco were; the money lost through the illegal activity and
greed that was prevalent in these cases pales in comparison to that which is
lost regularly through simple mismanagement of retirement plan assets. In
the vast majority of cases, it is not a matter of willful misconduct on the part
of the fiduciary, but simply a lack of understanding of how best to manage
their responsibility.
The Practices developed by the Foundation for Fiduciary Studies provide the
framework for a prudent investment process. They were written with the
expectation that forward-thinking organizations like Financial Service
Standards, LLC would provide more specific guidance on how best to
implement them. The 401k Service Solution applies practical experience and
expertise to provide detailed, comprehensive guidance on how to establish
and properly maintain a retirement plan. It is information that is critical to
both the plan fiduciaries and the professionals that advise them. We are very
pleased to be associated with Don Settina and Sharon Pivirotto as they work
to advance proper fiduciary conduct. I encourage all who have or share
responsibility for the management of retirement plan assets to become
familiar with their message and heed their advice.
J. Richard Lynch
Executive Director, Foundation for Fiduciary Studies
4
The legislative act that forms the basis for establishing
general guidelines for the prudent management of a qualified
retirement plan is ERISA—the Employee Retirement Income
Security Act.
The most widely accepted reference guide that explains the

practices that define a prudent process for investment
fiduciaries is the Prudent Investment Practices Handbook (by
The Foundation for Fiduciary Studies www.fi360.com).
The Prudent Investment Practices Handbook states that “by

following a structured process based on these Practices,
the fiduciary can be confident that critical components of
an investment strategy are being properly implemented.”
The 401k Service Solution™ was developed to provide that

structured process as it relates to the management of a
qualified plan.
5
INTRODUCTION
Consider the origin of the word “fiduciary.” It stems from the Latin “fiducia”
meaning “trust” and is closely related to the words “faith” and “fidelity.”
These roots reflect proper fiduciary conduct in a retirement plan.
Plan sponsors and fiduciaries have a unique and increasingly complex set of issues
that must be properly addressed in order to show prudence in the management of
their qualified plan. With more attention being paid to the practice of ‘fiduciary
compliance,’ it is important to follow a structured process that shows the steps
you are taking to meet the established guidelines set forth by ERISA.
The 401k Service Solution™ was developed to provide sponsors the structured
process necessary to fill the gap between practical knowledge and practical
application. (It is one thing to know what must be done; it is another to actually
do it and document your decisions and decision-making process.)
Professional
Each step in The 401k Service Solution™ addresses a critical issue faced by plan Plan
sponsors and fiduciaries. The first step, The Vision Session (defining your vision
of plan success), is intended to be the starting point to help you understand the Consultant
key issues and begin to document the reasons behind the decisions made on your Educate. Advise. Guide.
plan.
The remaining steps are intended to:

1) Educate sponsors and fiduciaries on the key issues;
2) Provide a process for making fiduciary decisions;
3) Provide the tools to document those decisions; and
4) Provide guidance for the ongoing compliance as it relates to plan
setup, management, and review.
Each step addresses several of the Practices (as defined by the Prudent Investment
Practices Handbook), and together they provide sponsors and fiduciaries the tools
to help show that the critical components of an investment strategy are being
properly implemented. This handbook is intended to give
you an overview of the steps that
It is recommended that plans go through each step, starting with the Vision
make up The 401k Service
Session. If there are any issues not currently being addressed by your plan
(service and fiduciary issues), the summary from the first step will reveal this and
Solution™, as well as bring
guide you to the additional steps that should be completed. If you are setting up together the key issues and
a new plan or changing plans, it is recommended that each step be completed to resources you should be aware of
fully document your decisions as they relate to each issue. as you look to run a successful
and compliant employer-
sponsored plan.
(This handbook is not meant to be an interpretation of the regulations outlined by ERISA, nor is
it meant to provide legal or investment advice. The purpose of the handbook is to educate and
provide an overview of a structured process that can help sponsors meet ERISA’s guidelines.)
6
THE 401K SERVICE SOLUTION OVERVIEW
Education Summary &

Workbook
Guide Checklists
The 401k Service Solution™ is a program designed to guide Plan Sponsors and Fiduciaries through
plan development and design, investment management selection, employee education, legislative
changes, and ongoing plan administration and monitoring.
Each step takes you through a unique process to educate you on the key issues, identify your plan’s
particular needs, help you document your decisions, and create a clear course of action for the
ongoing management of your plan in accordance with the guidelines set forth by ERISA.
First, each step has an education guide that addresses a specific subject of importance to plan
sponsors and fiduciaries. These guides are designed to educate you on the important issues and
walk you through methods to identify your plan’s needs as they relate to those issues.
Second, each step has a workbook of accompanying forms that allow you to document your
company’s specific needs and your decision-making process.
Finally, the worksheets in the workbook are used to compile a summary report that provides you
with the documentation behind the decisions made on your plan, an action plan for moving forward
on your decisions, and checklists to ensure continued compliance as it relates to the guidelines set
forth by ERISA.
This handbook describes the processes that make up The 401k Service Solution. The steps
that make up each process are described to give you a brief overview of the information
presented in the education guides. The education guides and accompanying handbooks are
available by contacting a Professional Plan Consultant™ (PPC™).
A PPC™ is a financial service professional that has made a commitment to education and service
excellence in the retirement plan industry. This professional has completed an extensive training
program, exam, experience requirements, and has signed off on a code of ethics.
Professional Plan Consultants have access to the tools to take you through each process, assist you
in documenting your decisions, and compile the summary report that serves to record your plan
decisions and guide you on the future compliance of your plan. To find a PPC™ near you, log on
to www.401kservicesolution.com.
7
SOLUTION 1—THE VISION SESSION
Defining Your Vision of Plan Success
P ROCESS OVERVIEW
“The starting point for the fiduciary is to analyze and review all of the
documents pertaining to the establishment and management of the
investments. As in managing any business decision, the fiduciary has to
set definitive goals and objectives that are consistent with the portfolio’s
current and future resources; (and) the limits and constraints of applicable
trust documents and statutes…”
Prudent Investment Practices Handbook

Fiduciary360 (www.fi360.com)
The Vision Session is a process to assist fiduciaries in determining

the needs of the plan and its participants, and in defining the plan’s
goals and objectives.
As you review an existing plan or look to set up a new one, it is critical to

define what it is you are trying to accomplish by offering an employer-
Fiduciaries are required to determine
sponsored plan. You must also define your vision of plan success.
whether the investments are suitable and
appropriate for the needs of the plan
What makes a retirement plan successful?
and its participants.
The answer depends entirely on your idea of success.
As stated by the Liss v. Smith court:
What makes an employer-sponsored plan successful cannot be measured "[fiduciaries] have an obligation to ...
by investment performance or participation rates alone. select the provider whose service level,
quality and fees best match the fund's
Success depends on what objectives an employer has when establishing the needs and financial situation." [991 E
plan. It depends on how much sponsors understand about the plan and the Supp. 278, 300 (S.D.N.Y. 1998)] For
amount of work required from HR to manage it. Success also depends a example, fiduciaries should ensure
great deal on how much the employees understand the benefit that is that their expert will take into
provided to them. It depends on if they take advantage of the benefit and account the investment abilities of
feel like their plan is providing the resources to help prepare them for the participants and will give proper
retirement. consideration to the plan's needs.1
This first step is the most extensive as it touches on each issue you
must address as you set up and manage your plan. This step is
designed to gauge what you want from your plan, define your plan’s
needs and your participants’ needs, and give you an idea of how well
what you are currently doing matches your vision.
1
Report of the Working Group on Optional Professional
Management In Defined Contribution Plans November 7,
2003. ERISA Advisory Board.
The Practice associated with this process (as defined by The Prudent
Investment Practices Handbook by The Center for Fiduciary Studies): 1.4
8
SOLUTION 1—THE VISION SESSION
STEP-B Y-STEP
The following steps make up the process in The Vision Session:
1. R EVIEW WHAT MAKES A PLAN SUCCESSFUL

Everyone has a different idea of what success means. While many companies share some
of the same basic goals in setting up a plan, not every plan is “successful.” This step
evaluates plan set-up and management issues that could hinder plan success.
2. UNDERSTAND THE R EGULATIONS GUIDING QUALIFIED PLANS
The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets
of millions of Americans so that funds placed in retirement plans during their working
lives will be there when they retire.
The Department of Labor is responsible for enforcing ERISA. In some ways, the DOL
has responsibilities similar to that of a plan fiduciary—it keeps a close eye on employers
to ensure that the interests of plan participants are adequately served.
3. UNDERSTAND THE EIGHT KEY ISSUES R EQUIRED FOR A SUCCESSFUL PLAN
These issues involve meeting the basic requirements of ERISA for the prudent
management of a qualified plan, as well as issues critical to both you and your employees.
1. Documenting Plan Goals and Objectives
2. Developing a Statement of Investment Policy
3. Monitoring Plan Assets
4. Documenting Fiduciary Standards of Care
5. Selecting and Monitoring Service Providers
6. Understanding Plan Expenses
7. Understanding Participant Communication Guidelines
8. Staying Informed of Changes that Affect 401(k) Plans
4. IDENTIFY R ESOURCES A VAILABLE TO PLAN S PONSORS
There are many issues to address in order to run an effective and compliant plan. Here
you will find a variety of resources and tools to assist you as you work toward defining a
vision of success for your plan.
5. R EVIEW THE T OOLS PROVIDED BY THE 401 K SERVICE S OLUTION
The 401k Service Solution is a complete set of resources designed to meet the needs and
requirements of managing a successful employer-sponsored plan. Through the Vision
Session process, you will:
1. Review what makes a plan successful
2. Define your vision of success
3. Determine how well you are fulfilling your plan management responsibilities
4. Identify service shortfalls in your plan
5. Identify solutions to help you achieve plan success
9
SOLUTION 2—A SOLID FOUNDATION
Using an Investment Policy Statement Effectively
P ROCESS OVERVIEW
“The preparation and maintenance of the Investment Policy Statement

(“IPS”) is one of the most critical functions of the fiduciary. The IPS
should be viewed as the business plan and the essential management tool
for directing and communicating the activities of the portfolio.”

The foundation of every employer-sponsored plan should be a written

document that outlines how you intend to select and manage the
investments in your plan.
How do you limit liability on your retirement plan? While you cannot
eliminate liability, you can limit it with the USE of an Investment Policy
Statement.
‘USE’ is emphasized because while most plans will admit to having an

Investment Policy Statement, seldom is the IPS reviewed or actively
engaged while monitoring plan investments. In many cases, adopting a
formal policy that is not appropriate or complete, or adopting a policy and According to the U.S. Department of
not using it to manage your plan is worse than not having a formal policy. Labor, the statement of investment
policy must be referred to both by
Formalizing a policy for your plan and referencing it as you monitor your fiduciaries who manage plan assets,
investments is perhaps the biggest step you can take toward showing and fiduciaries who appoint and
prudence in carrying out your responsibilities as a fiduciary. monitor those who manage plan
assets. It is not a document to be
Prudence focuses on the process for making fiduciary decisions. One way created, then filed away and ignored.
fiduciaries can demonstrate that they have carried out their responsibilities
properly is by documenting the processes used to carry out their fiduciary
responsibilities. The Investment Policy Statement serves as your
documentation for managing your plan and limiting liability.
The Practices associated with this process (as defined by The Prudent
Investment Practices Handbook by The Center for Fiduciary Studies): 1.1,
1.2, 2.1, 2.2, 2.3, 2.4, 2.5, 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7
10
SOLUTION 2—A SOLID FOUNDATION
STEP-B Y-STEP
The following steps make up the process in A Solid Foundation:
1. R EVIEW THE DUTIES OF A F IDUCIARY UNDER ERISA

Before you create your IPS, you should review the duties under ERISA of those
responsible for investment decisions involving plan assets. The Employee Retirement
Income Security Act of 1974, or ERISA, is a federal law that sets minimum standards for
pension plans in private industry. This step outlines ERISA’s function, what it requires
from fiduciaries, the significance of being a fiduciary, and how to limit liability on your
plan.
2. T EST YOUR IPS IQ
The amount of information and knowledge necessary to prudently manage a qualified plan
can be intimidating. Each person named as a fiduciary on your plan bears a responsibility
to ensure they understand and comply with the regulations outlined by ERISA. How
much plan fiduciaries understand in relation to their management responsibilities is
integral to determining whether a plan is successful and how open it is to liability issues.
3. R EVIEW THE KEY COMPONENTS OF A N IPS
While every plan has specific needs that dictate what goes into your formal IPS, there are
some general topics that should be included in a typical IPS. The best way to make sure
your IPS fulfills its intent to limit liability, is to structure one around your particular plan’s
needs.
4. DEVELOP Y OUR OWN P OLICY
Your customized IPS provides several important benefits:
• A tool to provide guidance throughout the investment process;
• A basis to discuss and establish investment guidelines and retirement expectations
with your investment professional;
• A basis for measuring investment success or failure through clearly defined
guidelines;
• A structured “business plan” for the direction of all investment assets;
• Long-term investment direction;
• Portfolio management and accountability; and
• The documentation necessary to guard against participants who may not understand
or agree with decisions made on their plan.
5. UNDERSTAND H OW TO USE AN IPS TO LIMIT LIABILITY
An IPS is not effective unless it is formally adopted and used to guide the management of
the plan. Once you create your Investment Policy Statement, several things must happen
in order for your IPS to be an effective tool to limit liability. First, it is recommended that
you have it reviewed by your attorney before you use it. Second, this document must be
reviewed and signed by all fiduciaries on the plan to acknowledge their understanding of
the guidelines set forth and their intention to manage the plan in compliance with those
guidelines. Third, your IPS must become an integral part of monitoring your plan’s
investments as it sets the criteria for doing so, and failure to monitor your investments
against the guidelines set forth in this document can be a breach of fiduciary
responsibility.
11
SOLUTION 3—THE LEAD FIDUCIARY PRACTICE
Reviewing Your Plan’s Investments
P ROCESS OVERVIEW
“Critical Concept: Liability is not determined by investment performance,

but rather on whether prudent investment practices were followed.
“Fiduciaries have the most important, yet most misunderstood role in the
investment process: to manage the investment practices, without which the
other components of the investment plan can be neither defined,
implemented or evaluated.”

How well are you fulfilling your F IDUCIARY obligations?
With the responsibility of overseeing participants’ retirement plan assets

comes the obligation of a fiduciary to not only select and monitor the
plan’s investment options, but also to stay informed about what regulatory
standards must be adhered to and to document the fact that they are
observing procedural prudence.
Being a fiduciary is a matter of complying with the requirements outlined in

ERISA—the Employee Retirement Income Security Act of 1974—which
governs the management and operation of retirement plans and protects
the interests of those invested in the plan.
Corporate officers who appoint fiduciaries must "ensure that the appointed
fiduciary clearly understands his obligations, that he has at his disposal the
appropriate tools to perform his duties with integrity and competence, and
that he is appropriately using those tools."
Martin v. Harline, 15 EBC 1138, 1149 (D. Utah 1992)
This Lead Fiduciary Practice is designed to educate you on the basic

requirements outlined in ERISA, evaluate your fiduciary management
structure, and implement a Fiduciary Risk Management program to help
document the steps you are taking to meet your fiduciary responsibilities.
1.5, 1.6, 4.1, 4.3, 4.4, 5.1, 5.2, 5.3, 5.4, 5.5
12
SOLUTION 3—THE LEAD FIDUCIARY PRACTICE
STEP-B Y-STEP
The following steps make up the process in The Lead Fiduciary Practice:
1. UNDERSTAND T HE R OLE OF A F IDUCIARY

A plan fiduciary must act solely in the interest of plan participants and beneficiaries. In
ensuring that the plan provides the participants and beneficiaries with the benefits due
them and in defraying reasonable plan expenses, a plan fiduciary must follow the basic
responsibilities defined by ERISA.
2. R EVIEW ERISA GUIDANCE FOR PLAN F IDUCIARIES
Any investment fiduciary who has the legal responsibility for managing someone else’s
money needs to fully understand what is required.
3. UNDERSTAND H OW TO MEET INDUSTRY ‘BEST PRACTICES’
Uniform Fiduciary Standards of Care make up the foundation that guides a fiduciary as
the traditional investment management process is carried out.
(As defined by Prudent Investment Practices—a Handbook for Investment Fiduciaries,
written by the Foundation for Fiduciary Studies.)
4. F ORM AN INVESTMENT COMMITTEE
An effective Retirement Plan Committee is the cornerstone of a successful employer-
sponsored plan. A committee assists in implementing a process to help manage the key
fiduciary responsibilities. It also helps to ensure that your plan remains competitive while
continually offering a solid array of investment options.
5. IMPLEMENT A SET OF T OOLS TO DOCUMENT YOUR F IDUCIARY PROCESS
To help you document the steps you are taking toward fiduciary compliance, a set of tools
called the Fiduciary Risk Management Kit is provided, including sample meeting minutes,
bylaws, and fiduciary appointment and acknowledgement letters, as well as ongoing plan
monitoring checklists covering all aspects of plan management.
13
SOLUTION 4—DUE DILIGENCE REVIEW
Comparing Plans and Reviewing Expenses
P ROCESS OVERVIEW
“Custodial selection is a very important fiduciary function. Most fiduciaries

abdicate the decision to a vendor, advisor, or money manager. Yet, as with
other prudent practices, there are a number of important decisions that
need to be managed.
“The fiduciary must establish procedures for controlling and accounting for
investment expenses in order to fulfill the obligation to manage investment
decisions with the requisite level of care, skill, and prudence; and to fulfill
the specific obligation of the fiduciary to pay only reasonable and necessary
expenses.”

How do you SELECT a plan provider and how do you know if the
EXPENSESbeing paid on your plan are ‘reasonable’?
The Department of Labor makes it very clear that a plan fiduciary must
conduct a thorough and diligent investigation and a rigorous analysis of
relevant information when selecting and reviewing plan providers and
investment options.
As a retirement plan sponsor and fiduciary, you are responsible for

selecting and monitoring providers for your company’s plan. You need to
have either a single provider or a combination of providers that offer:
• A broad selection of quality investments;
• Recordkeeping and administration options that meet your needs;
• An effective participant communications program that meets the
guidelines outlined by ERISA as well as the needs of plan participants;
and
• An expense structure appropriate for your plan and service options.
Most companies do not have a system in place to compare their existing

plan against what is available in the marketplace. Companies reviewing
proposals for a new or takeover plan have a difficult time comparing
proposals on a level playing field because each provider has a different
format for presenting the information. This process was developed to
provide a structured method to review and compare plans and expenses.
2.2, 2.3, 2.4, 2.5, 4.1, 4.3, 4.4, 5.4, 5.5
14
SOLUTION 4—DUE DILIGENCE REVIEW
STEP-B Y-STEP
The following steps make up the process in the Due Diligence Review:
1. R EVIEW THE KEY F EATURES OF R ETIREMENT PLANS

Qualified plans are not one-size-fits-all. Comparing plan options based on expenses and
past performance alone does not meet the fiduciary responsibility of prudence. Important
decisions surrounding a plan’s features, provisions, and investments should be made
according to your company’s unique goals and objectives.
2. R EVIEW THE BENEFITS OF OFFERING AN EMPLOYER -S PONSORED PLAN
A retirement plan can provide valuable benefits to both a company and its employees,
including the ability to attract and retain qualified employees. A retirement plan can also
provide an incentive benefit for key personnel and valuable tax benefits to the company
setting up the plan.
3. R EVIEW AND C OMPARE THE T YPES OF R ETIREMENT PLANS
Your company’s specific needs, goals, and objectives play a critical role in determining
which type of plan is best for your organization. There are several types of plans from
which to choose, including:
• Defined Benefit Plan
• Defined Contribution Plan
• Simplified Employee Pension Plan (SEP)
• Profit Sharing Plan or Stock Bonus Plan
• 401(k) Plan
• Employee Stock Ownership Plan (ESOP)
• Money Purchase Plan
• Cash Balance Plan
4. UNDERSTAND PLAN F EES AND EXPENSES
Having the cheapest plan or the best performing investments is not necessarily a good
measurement of a successful retirement plan. When it comes to meeting your fiduciary
responsibility, having a plan whose service level, quality, and fees meet the needs of your
company and your employees is the main objective. Once you’ve made your decision, you
can adopt your new plan with the confidence that you have taken the steps to help satisfy
ERISA's standards of prudence for the selection of your plan provider. If your comparison
report is for an existing plan, you may find changes need to be made in order to reduce
expenses or enhance what you have to better meet your company’s needs.
5. DOL GUIDANCE FOR SELECTING AND M ONITORING PLAN PROVIDERS
As sponsors of workplace plans, business owners generally are responsible for ensuring
that their plans comply with Federal law, including the Employee Retirement Income
Security Act (ERISA). Employers should establish and follow a formal review process at
reasonable intervals to determine whether it is in the best interest of their plans to
continue using the current service providers or look for replacements. The Department of
Labor and the Employee Benefits Security Administration offer guidance to assist
business owners in the prudent selection and monitoring of service providers.
15
SOLUTION 5—THE ADVANCED INVESTOR SERIES
Developing an Effective Employee Education Program
P ROCESS OVERVIEW
“If you don’t provide education, you open yourself to liability, because you
haven’t provided sufficient support to participants who must make
investment choices.”
David L. Wray
President - Profit Sharing Council of America
One of the ways to limit potential liability is to set up your plan to give
participants control of the investments in their accounts. For participants
to have control, they must have sufficient information on the specifics of
their investment options. If properly executed, this type of plan limits
your liability for the investment decisions made by participants.
Whether you intend to meet ERISA Section 404(c) requirements or retain

the liability for participant investment decisions, providing a quality
education program is essential. ERISA has guidelines for certain
communication that you are required to provide employees. Educating
them on their plan features and benefits is equally as important.
A retirement plan cannot be considered successful if employees do not

understand the benefit being offered and do not participate in the plan.
Most employees do not fully understand the benefit provided to them in

their company retirement plan. When it comes to educating participants,
each location has a unique set of education and demographic needs that
must be understood to make any program effective.
This process takes you through several steps to help you understand
exactly what is required communication from the direction of DOL and
ERISA, what your company’s unique education challenges are, and what
participants want and need to empower them to take control of their own
retirement.
16
SOLUTION 5—THE ADVANCED INVESTOR SERIES
STEP-B Y-STEP
The following steps make up the process in The Advanced Investor Series:
1. DEVELOP A SUCCESSFUL PARTICIPANT EDUCATION PROGRAM

An employee education program is a great tool to help increase participation and create
better overall understanding and satisfaction among employees—but it can also be used
to help you decide whether to add new features to your plan and when to make changes.
Each company has a unique set of educational and logistics issues that must be
understood when developing an education program for participants. Specific
circumstances that should be considered include:
• Language barriers
• Demographics
• Shift work
• Industry cycles
• Location
2. UNDERSTAND P ARTICIPANT NEEDS
Employees often have interests and needs that are not adequately addressed by their
employer’s retirement plan. A successful plan requires a thorough understanding of the
issues that are important to your employees.
3. R EVIEW AND SELECT E DUCATION F ORMATS AND T OPICS
When designing a program and selecting topics, there are basic guidelines. One—you
need to address the standards set forth by the Financial Industry Regulatory Authority
(FINRA), the Department of Labor (DOL), and ERISA Section 404(c) of the Internal
Revenue Code. Two—you want your employees to have a good understanding of how the
plan works and how it benefits them. Three—you want to meet the needs identified by
your employees. And four—you want to give your employees enough information to help
them make good financial decisions.
4. R EVIEW PARTICIPANT COMMUNICATION GUIDELINES
Certain standards must be met for the investment communication materials you distribute
to plan participants. Standards to follow include those set forth by FINRA, DOL, and
ERISA.
5. R EVIEW ERISA R EQUIREMENTS
ERISA requires plans to provide participants with information about the plan, including
important information about plan features and funding. Some materials must be provided
to participants regularly and automatically; others are to be provided upon request, free
of charge, or for copying fees.
6. IMPLEMENT AND M ONITOR Y OUR PROGRAM
Implementing an education program is simple with the use of a well-prepared and
carefully thought-out plan. But how will you know if your plan is effective? How do you
monitor the results of the efforts put forth and material provided? You cannot call a
program successful unless you have a method for monitoring the results.
17
SOLUTION 6—THE PEAK ADMINISTRATION GUIDE
Staying Informed and Educated About Your Plan
P ROCESS OVERVIEW
Administering a plan and managing its assets require certain actions and
involve specific responsibilities.
The vast amount of information necessary to effectively manage a qualified

plan can be daunting. Change is constant.
How do you stay informed and keep up with the changes that affect
your company retirement plan?
For most plan sponsors, the amount of time available to devote to the
management of your employer-sponsored retirement plan is minimal
compared to other areas of employee benefit management. However, as a
fiduciary, you have an obligation to ensure your plan is compliant with the
legislative acts that govern it.
All of those involved in the management of a qualified plan must

understand the critical issues that affect their plan, including being aware
of IRS regulation changes and having a thorough understanding of all plan
documents.
This step helps identify the sources of information affecting your plan and
lays the groundwork for keeping up with the administrative changes in a
proactive manner.
This is perhaps one of the most important processes a fiduciary can

complete. Without a clear understanding of what the regulations are, you
cannot show prudence in the management of your qualified plan. This
process helps to educate sponsors and fiduciaries on the regulations that
govern qualified plans and keeps you updated on issues critical to plan
management.
By completing this step, you receive a checklist that helps you address
each issue that might pose a liability to the plan. As a fiduciary, you have
the ability to implement an education program specific to those areas
where you feel you need a clearer understanding. This process also allows
you to take a proactive approach in getting updates from ERISA and the
Department of Labor that impact the management of your employer-
sponsored plan.
Investment Practices Handbook by The Center for Fiduciary Studies): 1.5, 4.2
18
SOLUTION 6—THE PEAK ADMINISTRATION GUIDE
STEP-B Y-STEP
The following steps make up the process in The Peak Administration Guide:
1. UNDERSTAND R ETIREMENT PLAN A DMINISTRATIVE ISSUES

When you actually step back and review all that is involved in setting up, managing, and
monitoring a qualified plan, it is little wonder why plan sponsors turn to retirement plan
consultants for help. Even with assistance understanding the information, plan fiduciaries
are still responsible for acting prudently in the active management of their plan, which
means dealing with many issues.
2. UNDERSTAND BASIC PLAN PROVISIONS
It is imperative that you have a thorough understanding of the details in your plan
documents as well as a comprehensive understanding of each plan option.
3. R EVIEW SOURCES OF CHANGE
In order to keep up with changes affecting your plan, you must understand what the
changes are and who initiates them.
4. T AKE A PROACTICE A PPROACH
Oftentimes, changes that you need to be aware of are presented to you by your plan
advisor, trustee, accountant, or administrator. Many sponsors find it helpful to
proactively receive information regarding changes and updates directly from the source,
and there are a variety of ways to do this.
5. DEVELOP A PLAN MANAGEMENT CALENDAR
The following items should be included in your Planning Calendar:
• Quarterly Plan Reviews
• Topic Specific Conference Calls
• Participation in Regular Email Update Programs
• Annual Plan Reviews
6. IMPLEMENT A PLAN MANAGEMENT PROCESS
Being proactive is a prudent way to show your intent to comply with fiduciary regulations.
By using a checklist, you invite all those associated with your plan to inform you of
updates or changes that could affect your plan. This checklist provides documentation
that you have sought information regarding any issues that may affect how your plan is
managed.
19
CONCLUSION
There is no way to eliminate the potential liability that comes with being a
fiduciary. There is no way to pass 100% of the fiduciary responsibility to
others, as the mere action of appointing another fiduciary is, in and of
itself, a fiduciary act.
There are, however, steps you can take to limit your liability. ERISA offers
some solutions such as allowing participants to direct their own
investments and provides guidance for demonstrating that prudent
practices were followed in the management of your plan.
The Center for Fiduciary Studies outlines twenty-seven Practices that, when
used to guide your actions, can help to show that a sound investment
strategy was followed.
The 401k Service Solution™ provides structured processes to follow to

document your decisions and show prudent practices are being followed in
the setup, management, and review of your qualified plan.
The education guides take you through each process step-by-step,

educating you on the key issues and having you document your plan’s
decisions in the accompanying workbooks. Based on your documented
decision-making process, a summary is prepared for you to show that you
are following prudent practices. Guidance is provided to help you address
any service and fiduciary shortfalls, and an ongoing program is
implemented to help you continue to show fiduciary compliance.
To learn more about how to take your plan through The 401k Service
Solution™ six-step program, contact a Professional Plan Consultant™ by
visiting:
www.401kservicesolution.com.
20
CONCLUSION
Corporate officers who appoint

fiduciaries must "ensure that the
appointed fiduciary clearly
understands his obligations, that he
has at his disposal the appropriate
tools to perform his duties with
integrity and competence, and that he
is appropriately using those tools."
Martin v. Harline, 15 EBC 1138, 1149
(D. Utah 1992)
Professional
Plan
Consultant
Educate. Advise. Guide.
21
Understanding Professional Designations
Investors can sometimes become confused by the many designations used by

investment professionals. You should be careful judging anyone's qualifications
from a set of initials following a name.
Some credentials can, however, let you know that a professional has received
training specific to retirement plan management. These programs include:
• Accredited Investment Fiduciary (AIF)

• Accredited Investment Fiduciary Auditor (AIFA)
• Certified Employee Benefit Specialist (CEBS)
• Certified Pension Consultant (CPC)
• Certified Retirement Administrator (CRA)
• Certified Retirement Counselor (CRC)
• Professional Plan Consultant (PPC)
• Qualified 401(k) Administrator (QKA)
• Qualified Plan Administrator (QPA)
• Registered Employee Benefits Consultant (REBC)
(This list is not meant to be all inclusive or imply endorsement of any specific
designation listed.)
Each program has certain experience levels, training, and continuing education
requirements.
To learn more about these designations, you can go to the FINRA website and In Liss v. Smith, the court said,
view a list of professional designations to better understand what education "where the trustees lack the
and experience requirements are necessary for a designation and whether the requisite knowledge, experience
granting organization mandates continuing education, offers a public and expertise to make the
disciplinary process, provides a means to check a professional's status, and necessary decisions with respect
otherwise ensures that a professional designation is more than just a string of to investments, their fiduciary
letters. obligations require them to hire
independent professional
You can view this listing in a printer-friendly chart by going to www.finra.org advisors." [991 F. Supp 278, 297
and following links to ‘Understanding Professional Designations.’ (S.D.N.Y. 1998)]
FINRA does not endorse any professional designation. Please read the
disclaimer on their site (www.finra.org) for important information.
Other Terms Used by Investment Professionals
Financial Analyst, Financial Adviser (Advisor), Financial Consultant,

Financial Planner, Investment Consultant or Wealth Manager are generic
terms or job titles used to refer to investment professionals. Anyone can use
these terms without registering with securities regulators or meeting any
educational and experience requirements.
22
Selecting an Investment Professional
As sponsors of 401(k) and other types of pension plans, business owners generally are responsible for ensuring
that their plans comply with Federal law—including the Employee Retirement Income Security Act (ERISA). Many
businesses rely on other professionals to advise them and assist them with their employee benefit plan duties. For
this reason, selecting competent service providers is one of the most important responsibilities of a plan sponsor.
The process of selecting service providers will vary depending on the plan and services to be provided. To assist
business owners in carrying out their responsibilities under ERISA to prudently select and monitor plan service
providers, the Employee Benefits Security Administration has prepared the following tips which may be a helpful
• Consider what services you need for your plan – legal, accounting, trustee/custodial,
recordkeeping, investment management, investment education or advice.
• Ask service providers about their services, experience with employee benefit plans, fees and
expenses, customer references, or other information relating to the quality of their services and
customer satisfaction with such services.
• Present each prospective service provider identical and complete information regarding the needs
of your plan. You may want to get formal bids from those providers that seem best suited to your
needs.
• You may also wish to consider service providers or alliances of providers who provide multiple
services (e.g., custodial trustee, investment management, education or advice, and recordkeeping)
for a single fee. These arrangements are often called “bundled services.”
• Ask each prospective provider to be specific about which services are covered for the estimated
fees and which are not. Compare the information you receive, including fees and expenses to be
charged by the various providers for similar services. Note that plan fiduciaries are not always
required to pick the least costly provider. Cost is only one factor to be considered in selecting a
service provider. More information on pension plan fees and expenses can be found in
Understanding Retirement Plan Fees and Expenses and the 401(k) Fee Disclosure Form, located at
www.dol.gov/ebsa.
• If the service provider will handle plan assets, check to make sure that the provider has a fidelity
bond (a type of insurance that protects the plan against loss resulting from fraudulent or
dishonest acts).
• If a service provider must be licensed (attorneys, accountants, investment managers or advisors),
check with state or federal licensing authorities to confirm the provider has an up-to-date license
and whether there are any complaints pending against the provider.
• Make sure you understand the terms of any agreements or contracts you sign with service
providers and the fees and expenses associated with the contracts. In particular, understand what
obligations both you and the service provider have under the agreement and whether the fees and
expenses to be charged to you and plan participants are reasonable in light of the services to be
provided.
• Prepare a written record of the process you followed in reviewing potential service providers and
the reasons for your selection of a particular provider. This record may be helpful in answering
any future questions that may arise concerning your selection.
• Receive a commitment from your service provider to regularly provide you with information
regarding the services it provides.
• Periodically review the performance of your service providers to ensure that they are providing the
services in a manner and at a cost consistent with the agreements.
• Review plan participant comments or any complaints about the services and periodically ask
whether there have been any changes in the information you received from the service provider
prior to hiring (e.g., does the provider continue to maintain any required state or Federal
licenses).
23
Working with a Professional Plan Consultant™
The information in this handbook was compiled by Financial Service

Standards, LLC (FSS)—a Pittsburgh company devoted to identifying and
raising the service standards of financial professionals. The mission of FSS is
to be the ruler by which service excellence is measured in the financial
industry. Our goal is to define the minimum standards of service and provide
solutions that exceed those standards.
Striving to meet our mission objectives for the retirement plan market,
Financial Service Standards, LLC sponsors The 401k Service Training
Program™ at the School of Adult and Continuing Education at Robert Morris
University.
The Professional Plan Consultant™ designation is awarded to those that

successfully complete The 401k Service Training Program™, including
passing a final course exam.
This designation signifies a commitment to education and service excellence

in the qualified plan industry. The 401k Service Training Program™ is the
only course that sets service standards in the retirement plan industry and
imparts professionals with not only the knowledge, but the tools needed to
meet (and exceed) those standards.
Those awarded the designation of Professional Plan Consultant™ have

successfully completed a specialized program on the service issues
facing everyone involved in the development, management, and monitoring of Fiduciaries are required to engage
a qualified plan, and have subsequently passed a comprehensive examination. in prudent processes when
selecting and monitoring
Designees must be able to understand and articulate the six critical issues competent advisors (which, for
faced by plan sponsors and fiduciaries and the unique service challenges investments, might include
faced in addressing those issues. They must further be able to implement the investment advisors, consultants,
processes taught in the course and use them to effectively meet the service and brokers). The court in Bussian
challenges faced. Equally as important, they must commit to using the v. RJR Nabisco, Inc., explained:
service model in a manner consistent with its development to demonstrate "whether a fiduciary's reliance on
superior service in the retirement plan market. an expert advisor is justified is
informed by many factors,
To earn the PPC™ designation, a candidate must satisfy requirements including the expert's reputation
involving: and experience, the extensiveness
and thoroughness of the expert's
· Professional experience, investigation, whether the expert's
· Coursework, opinion is supported by relevant
· Final exam, material, and whether the expert's
· Business character, and methods and assumptions are
· Continuing education. appropriate to the decision at
hand." [223 R3d 286, 301 (5th Cir.
2000)]
24
Those awarded the designation of Professional Plan Consultant™ are given exclusive access to the
licensing rights to offer The 401k Service Solution™ set of processes to plan sponsors and
fiduciaries.
By having access to these tools, a PPC™ can assist you in understanding what is required, provide
the means for documenting your plan’s decisions and decision-making process, and provide you
with a comprehensive course summary.
Each summary provided by a PPC™ includes your documented worksheets, a results page that
outlines the decisions made, and various checklists for the ongoing management and review of your
plan in accordance with the regulations set forth by ERISA.
By following the processes that make up The 401k Service Solution™, which are based in part on
the Practices as defined by The Prudent Investment Practices Handbook (Fiduciary360), you should
feel confident that the critical components of an investment strategy are being properly
implemented.
Professional
Plan
Consultant
Educate. Advise. Guide.
Monitoring A Service Provider

The Department of Labor provides the following guidance on how to monitor those who help you
with your plan:
An employer should establish and follow a formal review process at reasonable intervals to decide
if it wants to continue using the current service providers or look for replacements. When
monitoring service providers, an employer may take various actions to ensure the agreed-upon
services are being performed, including:
• Reviewing the service providers’ performance;

• Reading any reports they provide;
• Checking actual fees charged;
• Asking about policies and practices (such as trading, investment turnover, and proxy
voting); and
• Following up on participant complaints.
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RESOURCES
Prudent Investment Practices
Uniform Fiduciary Standards of Care1
The Uniform Fiduciary Standards of Care are seven standards that are common
to the three legislative acts that shape investment fiduciary standards. (The
three legislative acts that shape investment fiduciary standards are: ERISA,
UPIA, and MPERS.)
1. Know standards, laws, and trust provisions.

2. Diversify assets to specific risk/return profile of client.
3. Prepare investment policy statement.
4. Use “prudent experts” (money managers) and document due diligence.
5. Control and account for investment expenses.
6. Monitor the activities of “prudent experts.”
7. Avoid conflicts of interest and prohibited transactions.
These standards make up the foundation that guides a fiduciary as the

traditional investment management process is carried out.
Prudent Investment Practices, a Handbook for Investment Fiduciaries, is a

tool that Financial Service Standards, LLC believes every plan sponsor should
have on hand and should refer to as you strive to meet the standards set forth
by ERISA. The 401k Service Solution™ was developed, in part, based on the
Practices outlined in the Handbook, to provide the process to accomplish what
The Center for Fiduciary Studies outlines as key elements in a prudent
management practice.
The Prudent Investment Practices Handbook covers twenty-seven Practices

that define a prudent investment management process from beginning to end.
The following list is a brief description of each of the twenty-seven Practices as
defined by The Center for Fiduciary Studies:
1.1 Investments are managed in accordance with applicable laws, trust

documents, and written investment policy statements.
1.2 Fiduciaries are aware of their duties and responsibilities.
1.3 Fiduciaries and parties in interest are not involved in self-dealing.
1.4 Service agreements and contracts are in writing, and do not contain
provisions that conflict with fiduciary standards of care.
1.5 There is documentation to show timing and distribution of cash flows, and
the payment of liabilities.
1.6 Assets are within the jurisdiction of U.S. courts, and are protected from
theft and embezzlement.
2.1 A risk level has been identified.
2.2 An expected, modeled return to meet investment objectives has been

identified. 1 Fiduciary 360 - www.fi360.com
2.3 An investment time horizon has been identified.
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RESOURCES
2.4 Selected asset classes are consistent with the identified risk, return, and time horizon.
2.5 The number of asset classes is consistent with portfolio size.
3.1 There is detail to implement a specific investment strategy.
3.2 The Investment Policy Statement defines the duties and responsibilities of all parties involved.
3.3 The Investment Policy Statement defines diversification and rebalancing guidelines.
3.4 The Investment Policy Statement defines due diligence criteria for selecting investment
options.
3.5 The Investment Policy Statement defines monitoring criteria for investment options and service
vendors.
3.6 The Investment Policy Statement defines procedures for controlling and accounting for
investment expenses.
3.7 The Investment Policy Statement defines appropriately structured, socially responsible
investment strategies (when applicable).
4.1 The investment strategy is implemented in compliance with the required level of prudence.
4.2 The fiduciary is following applicable “Safe Harbor” provisions (when elected).
4.3 Investment vehicles are appropriate for the portfolio size.
4.4 A due diligence process is followed in selecting service providers, including the custodian.
5.1 Periodic reports compare investment performance against appropriate index, peer group, and
IPS objectives.
5.2 Periodic reviews are made of qualitative and/or organizational changes of investment decision-
makers.
5.3 Control procedures are in place to periodically review policies for best execution, soft dollars,
and proxy voting.
5.4 Fees for investment management are consistent with agreements and with the law.
5.5 “Finder’s fees,” 12b-1 fees, or other forms of compensation that have been paid for asset
placement are appropriately applied, utilized, and documented.
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RESOURCES
The Department of Labor (DOL)
The following is the stated mission of the DOL:
The Department of Labor fosters and promotes the welfare of the job seekers,
wage earners, and retirees of the United States by improving their working
conditions, advancing their opportunities for profitable employment,
protecting their retirement and health care benefits, helping employers find
workers, strengthening free collective bargaining, and tracking changes in
employment, prices, and other national economic measurements. In carrying
out this mission, the Department administers a variety of Federal labor laws
including those that guarantee workers’ rights to safe and healthful working
conditions; a minimum hourly wage and overtime pay; freedom from
employment discrimination; unemployment insurance; and other income
support.
The Department of Labor (DOL) administers and enforces more than 180
federal laws. These mandates and the regulations that implement them cover
many workplace activities for about 10 million employers and 125 million
workers.
The Employee Retirement Income Security Act (ERISA) regulates employers

who offer pension or welfare benefit plans for their employees. Title I of
ERISA is administered by the Employee Benefits Security Administration
(EBSA) (formerly the Pension and Welfare Benefits Administration) and
imposes a wide range of fiduciary, disclosure and reporting requirements on
fiduciaries of pension and welfare benefit plans and on others having dealings It is the responsibility of the DOL
with these plans. These provisions preempt many similar state laws. Under to enforce ERISA. In some ways,
Title IV, certain employers and plan administrators must fund an insurance the Department of Labor has
system to protect certain kinds of retirement benefits, with premiums paid to similar responsibilities to that of a
the federal government's Pension Benefit Guaranty Corporation (PBGC). plan fiduciary—it keeps a close
EBSA also administers reporting requirements for continuation of health-care eye on employers to ensure that
provisions, required under the Comprehensive Omnibus Budget plan participants’ best interests
Reconciliation Act of 1985 (COBRA) and the health care portability are adequately served.
requirements on group plans under the Health Insurance Portability and
Accountability Act (HIPAA).
The DOL has a comprehensive website with resources and publications that
can assist plan sponsors and fiduciaries navigate through the decision-making
process as it relates to their retirement plans. To view these resources, visit
www.dol.gov.
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RESOURCES
ERISA
WHAT IS ERISA?1
The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of
Americans so that funds placed in retirement plans during their working lives will be there when
they retire.
ERISA is a federal law that sets minimum standards for pension plans in private industry. For
example, if an employer maintains a pension plan, ERISA specifies when an employee must be
allowed to become a participant, how long they have to work before they have a non-forfeitable
interest in their pension, how long a participant can be away from their job before it might affect
their benefit, and whether their spouse has a right to part of their pension in the event of their
death. Most of the provisions of ERISA are effective for plan years beginning on or after January 1,
1975.
ERISA does not require any employer to establish a pension plan. It only requires that those who
establish plans must meet certain minimum standards. The law generally does not specify how
much money a participant must be paid as a benefit.
ERISA does the following:

• Requires plans to provide participants with information about the plan including important
information about plan features and funding. The plan must furnish some information
regularly and automatically. Some is available free of charge, some is not.
• Sets minimum standards for participation, vesting, benefit accrual, and funding. The law
defines how long a person may be required to work before becoming eligible to participate in
a plan, to accumulate benefits, and to have a non-forfeitable right to those benefits. The law
also establishes detailed funding rules that require plan sponsors to provide adequate funding
for your plan.
• Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who
exercises discretionary authority or control over a plan's management or assets, including
anyone who provides investment advice to the plan. Fiduciaries who do not follow the
principles of conduct may be held responsible for restoring losses to the plan.
• Gives participants the right to sue for benefits and breaches of fiduciary duty.
• Guarantees payment of certain benefits if a defined plan is terminated, through a federally
chartered corporation, known as the Pension Benefit Guaranty Corporation.
1
www.dol.gov.
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RESOURCES
ERISA Section 404(c)
How can sponsors reduce their liability? - Section 404(c) Guidelines
By adhering to regulations under Section 404(c) of the Employee Retirement

Income Security Act (ERISA), plan sponsors can protect themselves from
liability for their employee’s investment decisions.
The guidelines for complying with Section 404(c) include informing your
employees that they are responsible for the investment results of their
directed accounts and providing them with:
Diversified Investment Choices

Employees must be given at least three choices with materially different risk/
reward attributes.
Transfer Flexibility
Employees must have the ability to move their account balances from one
investment option to another at least once quarterly (more often if the
investment option is unstable).
Named Fiduciaries
Section 404(c) requires that the plan specify who is responsible for providing
investment information to plan participants and who is responsible for
receiving and processing participant investment direction.
Notice of Intent to be a Section 404(c) plan

The ERISA Section 404(c) regulation requires Notice be given to participants
of the plan’s intent to have no liability for the results of participants directing
the investments of their accounts.
Investment Information
Employees must receive adequate information to make informed investment
decisions. This information includes:
• A description of the investment alternatives available under the
plan, including investment objective and risk and return
characteristics.
• A copy of the most recent full prospectus for each fund in
which the participant invests (to be provided either
immediately before or after a participant initially invests).
• An explanation of how and when participants may give
investment instructions.
• A description of any transaction fees and expenses, including
any commissions or sales loads, redemption or exchange fees.
• Information about voting rights and who can exercise them.
Adhering to the regulations in Section 404(c) does not absolve the plan
sponsors from liability. Responsibility for selecting and monitoring plan
investments remains with the plan sponsor. To limit liability, a plan sponsor
must comply with the specific requirements of 404(c).
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RESOURCES
Fiduciary Importance
Who is considered a fiduciary?
The following excerpts are from a Department of Labor booklet “Meeting Your Fiduciary
Responsibilities”—May 2004:
Many of the actions involved in operating a plan make the person or entity performing them a
fiduciary. Using discretion in administering and managing a plan or controlling the plan’s assets
makes that person a fiduciary to the extent of that discretion or control. Thus, fiduciary status is
based on the functions performed for the plan, not just a person’s title.
A plan must have at least one fiduciary (a person or entity) named in the written plan, or through a
process described in the plan, as having control over the plan’s operation. The named fiduciary
can be identified by office or by name. For some plans, it may be an administrative committee or a
company’s board of directors.
A plan’s fiduciaries will ordinarily include the trustee, investment advisers, all individuals exercising
discretion in the administration of the plan, all members of a plan’s administrative committee (if it
has such a committee), and those who select committee officials. Attorneys, accountants, and
actuaries generally are not fiduciaries when acting solely in their professional capacities. The key
to determining whether an individual or an entity is a fiduciary is whether they are exercising
discretion or control over the plan.
A number of decisions are not fiduciary actions but rather are business decisions made by the
employer. For example, the decisions to establish a plan, to determine the benefit package, to
include certain features in a plan, to amend a plan, and to terminate a plan are business decisions.
When making these decisions, an employer is acting on behalf of its business, not the plan, and,
therefore, is not a fiduciary. However, when an employer (or someone hired by the employer) takes
steps to implement these decisions, that person is acting on behalf of the plan and, in carrying out
these actions, is a fiduciary.
A fiduciary should be aware of others who serve as fiduciaries to the same plan, since all fiduciaries
have potential liability for the actions of their co-fiduciaries. For example, if a fiduciary knowingly
participates in another fiduciary’s breach of responsibility, conceals the breach, or does not act to
correct it, that fiduciary is liable as well.
If a person no longer wishes to be a plan fiduciary, the DOL provides the following guidance:
Fiduciaries who no longer want to serve in that role cannot simply walk away from their
responsibilities, even if the plan has other fiduciaries. They need to follow plan procedures and
make sure that another fiduciary is carrying out the responsibilities left behind. It is critical that a
plan has fiduciaries in place so that it can continue operations and participants have a way to
interact with the plan.
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RESOURCES
What is the significance of being a fiduciary?
Fiduciaries have important responsibilities and are subject to standards of

conduct because they act on behalf of participants in a retirement plan and
their beneficiaries. These responsibilities include:
• Acting solely in the interest of plan participants and their
beneficiaries and with the exclusive purpose of providing
benefits to them;
• Carrying out their duties prudently;
• Following the plan documents (unless inconsistent with
ERISA);
• Diversifying plan investments; and
• Paying only reasonable plan expenses.
Acting solely in the interest of plan participants and their beneficiaries

and with the exclusive purpose of providing benefits to them:
Sponsors can show their intention toward meeting this responsibility by
understanding and documenting their understanding of the ‘interests of plan
participants.’ The Vision Session and The Advanced Investor Series both
provide the tools to document this information. Another way sponsors can
fulfill this responsibility is by understanding what ERISA deems ‘prohibited
practices.’ These include the sale, exchange, or lease between the plan and
party-in-interest; lending money or other extension of credit between the plan
and party-in-interest; and furnishing goods, services, or facilities between the
plan and party-in-interest.
ERISA holds plan fiduciaries to a
Carrying out their duties prudently: high legal standard. The
Prudence focuses on the process for making fiduciary decisions; therefore, it responsibilities of fiduciaries have
is wise to document decisions and the basis for those decisions. Each been described as "the highest
process in The 401k Service Solution provides the tools to allow you to known to the law." [Donovan v.
document your decisions and decision-making process. Bierwirth, 680 F.2d 263, 272 (2d
Prudent Investor Rule Cit. 1982)] When fiduciaries do
ERISA Section 403(c) also states that “A fiduciary shall discharge their duties not have the skills needed to
with respect to a plan with the care, skill, prudence and diligence under the satisfy these high standards,
circumstances then prevailing that a prudent man acting in a like capacity and ERISA permits fiduciaries – in fact
familiar with such matters would use in the conduct of an enterprise of a like requires them, to get help in those
character and with like aims.” areas where they lack expertise.
Following the Plan Documents:

Following the terms of the plan document is also an important responsibility.
The document serves as the foundation for plan operations. Employers will
want to be familiar with their plan document, especially when it is drawn up
by a third-party service provider, and periodically review the document to
make sure it remains current. The Peak Administration Guide process has
plan sponsors review their plan documents and sign off that this has been
done. The documented summary resulting from this process also includes a
checklist to ensure all fiduciaries are familiar with and review plan documents
on at least an annual basis (more often if changes are made).
www.dol.gov
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RESOURCES
The significance of being a fiduciary continued...
Diversifying Plan Investments:

Diversification – another key fiduciary duty – helps to minimize the risk of large investment losses to
the plan. Fiduciaries should consider each plan investment as part of the plan’s entire portfolio.
Once again, fiduciaries will want to document their evaluation and investment decisions. This is
accomplished in the Lead Fiduciary Practice. In this process, a complete plan investment review is
conducted and a strategy for the ongoing monitoring of plan assets, including reviewing plan and
participation allocations, is implemented.
Paying only Reasonable Plan Expenses:

The Due Diligence Review process walks sponsors through the steps necessary to evaluate their plan
expenses and compare their plan to other plans with similar investment and administrative options.
This process assists sponsors in determining what is reasonable and documenting their plan review to
comply with this responsibility.
Exclusive Benefit Rule

ERISA Section 403(c) states that, “The assets of a plan shall never inure to the benefit of any
employer and shall be held for the exclusive purpose of providing benefits to participants in the plan
and their beneficiaries, and defraying reasonable expenses of administering the plan.”
It is important to understand what could be considered a breach of fiduciary duties:

• Failure to offer a diversified selection if investment choices.
• Failure to monitor the plan’s investment options and, if necessary, replace investment options
that aren't producing adequate returns over time.
• Conducting self-dealing transactions, using plan assets for your own or the company’s benefit
(e.g., untimely remittance to the plan trustee of employee contributions, or receiving pay OR
benefits for selecting a particular investment or financial representative).
• Allowing party-in-interest transactions (e.g., loans or other extensions of credit; any sales,
exchange, or leasing of property; or furnishing goods or services) between the plan and any
person connected to the plan, including plan administrator, trustee, officer, custodian, counsel,
employer, employee and /or relatives of any of those mentioned.
• Making payments that might be considered duplicative, excessive, or unnecessary.
Co-fiduciaries may be held responsible for the actions of one another as well. If you knowingly
participate in or conceal any fiduciary misconduct, or discover another fiduciary's breach of conduct
and fail to take steps to correct it, you could be liable.
Penalties for noncompliance might include:

• Civil actions—in addition to suits filed by individual participants and others, DOL itself imposes
a 20% civil penalty for certain fiduciary breaches.
• Payment of attorneys’ fees.
• Payment of possible excise taxes.
• Surrendering any profits made by you from the plan.
• Criminal penalties of up to $100,000 for individual fiduciaries ($500,000 for corporations) and
up to 10 years in prison.
• Monetary penalties for failure to properly disclose information to plan participants.
• Having to restore/reimburse losses incurred by the plan and put back any money that the plan
might otherwise have made under normal circumstances, possibly even restoring the balances of
each participant’s account.
33
THE PENSION PROTECTION ACT OF 2006
Overview of the Act’s Impact on 401(k) Plans
Most of the changes enacted by the Pension Protection Act of 2006 relate to the funding of defined benefit plans and
become effective in 2008. However, the PPA also requires changes in the administration of defined contribution
plans, such as 401(k) plans, beginning in 2007. The following are the most relevant aspects of the Act.
Phased Retirement
The Act provides that defined benefit pension plans can provide for
in-service distributions to participants who are age 62 or older.
Automatic Enrollment in 401(k) Plans
The Act removes any perceived state-law impediments to automatic
enrollment in 401(k) plans and includes new rules to encourage
their adoption.
Nondiscrimination Safe Harbor
The Act creates an optional nondiscrimination safe harbor for
automatic enrollment plans. A plan is deemed to satisfy the
nondiscrimination rules for elective deferrals and matching
contributions if it provides a minimum match of 100% of elective
deferrals up to 1% of compensation, plus 50% of elective deferrals
between 1% and 6% of compensation.
Other Automatic Enrollment Rules
An employee who is automatically enrolled may be given a 90-day
window to elect out of the plan and withdraw the contributions
made on his or her behalf and the earnings related to those
amounts.
Diversification Requirements
The Act requires any defined contribution plan that holds publicly
traded employer securities (or non-traded tracking stock related to
the performance of a subsidiary of a public company) to permit
participants to diversify account balances invested in those
securities.
Investment Advice to Participants
For ERISA-covered, employer-sponsored plans, a fiduciary that is a
registered investment company, bank, insurance company, or
registered broker-dealer will be allowed to give investment advice to
participants without engaging in a prohibited transaction if either (1)
its fee does not vary depending on the investment choices that
participants make or (2) its recommendations are based on a
computer model certified by an independent third party.
Modifications to the Prohibited Transactions Rules
A new exemption permits service providers that are not fiduciaries
and have no other relationship to a plan to engage in sales,
exchanges, leases, and loans with plans, as long as the plan receives
adequate consideration.
ERISA Provisions
The required bond for plan officials is increased from $500,000 to
$1 million for plans holding employer securities effective for plan
years beginning after 2007.
34
THE PENSION PROTECTION ACT OF 2006
Overview of the Act’s Impact on 401(k) Plans
Roth 401(k) Plans

The Act permanently extends a provision allowing plan participants to qualify for the favorable tax
treatment of a Roth feature in a 401(k) or 403(b) plan. A Roth feature allows an employee to make
after-tax contributions, which, along with earnings, qualify for tax-free distribution if certain
conditions are satisfied.
Vesting
The Act changes the vesting rules for employer non-elective (e.g., discretionary employer or profit
sharing) contributions made to defined contribution plans. Beginning after December 31, 2006, all
employer contributions must be 100% vested after no more than 3 years, or must vest at a rate of
at least 20% a year from 2 to 6 years under a graded schedule.
Changes Affecting Plan Administration Simplification
The Act also made permanent a number of administrative simplifications introduced by the
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), including:
● Shortening from one year to six months the required suspension period for individuals who
take hardship distributions from a 401(k) or 403(b) plan
● Disregarding rollover accounts for the purpose of determining whether a participant’s account
balance did not exceed $5,000 and, therefore, could be distributed automatically without the
participant’s consent
● Easing the top-heavy rules (which require minimum contributions on behalf of non-key
employees covered by top-heavy plans) through changes that reduce the likelihood that a plan
will meet the criteria for top-heavy status
Benefit Statements
Beginning with plan years after December 31, 2006, individual account plans (including 401(k)
plans) must provide participant benefit statements at least quarterly to participants who have the
right to direct investments, and to other participants and beneficiaries who have their own account
under the plan at least annually. Quarterly statements to participants who have the right to direct
investments must contain information about the importance of account diversification. Defined
benefit plans must furnish a benefit statement at least once every three years to a participant with a
non-forfeitable accrued benefit who is employed by the employer maintaining the plan at the time
the statement is to be furnished. Alternatively, at least annually, defined benefit plans must provide
notice to each such participant of the availability of the pension benefit statement and how to
obtain it.
Investment Safe Harbor
Fiduciary Liability: Section 404(c) of ERISA has shielded plan sponsors from lawsuits stemming
from the investment choices made by plan participants provided (i) plan sponsors took the steps
needed to be 404(c) compliant, and (ii) the investment choices provided by the plan sponsor were
prudent. This liability shield, however, did not extend to default investment elections which were
made where participants failed to direct their investments. However, effective for plan years after
December 31, 2006, if certain requirements are met, plan fiduciaries will be shielded from liability
for certain legal actions arising out of investment results where a participant has failed to make an
election and the participant's account is invested in a default investment. The plan must provide
participants with notice explaining the participant's right to invest his account and how the
account will be invested if the participant fails to make an affirmative investment election. The
default account cannot be a money market or stable value fund. Rather, it must be a diversified
fund of one of three types: a lifecycle or targeted retirement fund that changes asset allocations as
the participant ages, a balanced fund for long-term appreciation and capital preservation, or an
investment fund management service that allocates assets according to the participant's age,
retirement date, and life expectancy.
35
RESOURCES
Education vs. Advice
Department of Labor's Interpretive Bulletin 96-1
Employers have a fiduciary responsibility to provide employees with access to fund

performance and investment education and tools to ensure they make informed
decisions related to their contributions. The good news is there is a lot you can
provide your employees, without taking on the liability of providing advice.
During your annual plan review, it is recommended that employers evaluate their
educational programs to determine the following:
• Education is free of bias or conflict of interest;
• Delivery methods meet the needs of employee population (online,
telephone, printed materials);
• Marketing and communication of educational resources are
effective;
• Employees are making use of educational resources; and
• Topics address the needs of employee population.
The Department of Labor's Interpretive Bulletin 96-1 outlines educational

activities that will not constitute "investment advice." There are four general
categories of investment-related information and materials that you can provide
employees.
1. Plan Information
Employers should provide information and materials that inform employees about
the benefits of plan participation, the benefits of increasing plan contributions, the
impact of pre-retirement withdrawals on retirement income, and the terms and
operations of the plan. Employers may also include information that is described
in the regulations under Section 404(c) of ERISA on investment alternatives in the According to the definition by
plan. the Department of Labor, here’s
the difference between education
2. General Financial and Investment Information and advice:
The information you provide cannot directly reference any of the investment
options available to employees and must be general in nature to satisfy the Education offers choices—
education safe harbor. Examples of this type of information include: general Advice offers recommendations.
financial and investment concepts such as risk and return, diversification, dollar
cost averaging, compounded return, and tax-deferral; historic rates of return Guide the discussion instead of
between different asset classes based on standard market indices; the effects of the decision.
inflation; estimating future retirement income needs; determining investment time
horizons; and assessing risk tolerance.
3. Asset Allocation
In order to help your employees understand how to allocate their funds, you may
also provide them with model portfolios showing different asset allocations for
different time horizons and risk profiles. These models must be based on
generally accepted investment theories that take into account historic returns of
different asset classes over defined periods. All material facts and assumptions on
which the models are based must accompany the models.
4. Interactive Investment Materials

This category includes questionnaires, worksheets, software, and similar materials
that provide employees with the means to estimate future retirement income
needs.
36
RESOURCES
Service Provider Options
There are three main models used to deliver qualified plan services to plan sponsors.
When doing a provider search, it is important that you understand the strengths and weaknesses of
each because each model will have a different affect on your workload, plan expenses, and the way
services are delivered to you and your employees.
BUNDLED
The bundled model is where one single vendor provides all investment, recordkeeping,
administration, and education services. This model generally requires at least some investment in
their proprietary funds. Bundled service providers are able to provide the entire range of
administrative services to a plan sponsor from within a "one-stop-shop." Examples include mutual
fund companies, banks, insurance companies, and brokerage firms.
Costs are generally lower because the vendor is able to offset recordkeeping and administrative
costs from investment management fees.
Bundled services are most prevalent among small plans.
UNBUNDLED
In this model, the plan sponsor becomes the "bundler." Plan sponsors use services through a
combination of in-house staff and independent service providers for each critical task. It allows for
maximum control and the ability to pick service providers that are the "best of the best," including
investment options. This model usually includes mutual fund companies, banks, insurance
companies, and/or brokerage firms in addition to Third Party Administrators.
This model is most prevalent among larger plans that have adequate resources to manage such a
plan. Independent consultants are often hired to help construct and manage unbundled plans.
A LLIANCE
This model combines features from both the bundled and unbundled models. The vendor generally
provides recordkeeping, administration, and education services just like the bundled provider, but
forms one or more alliances with partners to provide a wide array of investment options and other
specialty services.
The cost of providing recordkeeping and administration services is often subsidized by the alliance
partners through 12b-1 fees or other revenue sharing. This makes the alliance model cost
competitive with the bundled model.
This is one of the fastest growing models in the marketplace among all plan sizes.
37
RESOURCES
Retirement Plan Types
The Employee Retirement Income Security Act (ERISA) covers two types of
pension plans: defined benefit plans and defined contribution plans.
A defined benefit plan promises a specified monthly benefit at retirement.

The plan may state this promised benefit as an exact dollar amount, such as
$100 per month at retirement. Or, more commonly, it may calculate a benefit
through a plan formula that considers such factors as salary and service —
for example, 1 percent of average salary for the last 5 years of employment for
every year of service with an employer. The benefits in most traditional
defined benefit plans are protected, within certain limitations, by federal
insurance provided through the Pension Benefit Guaranty Corporation
(PBGC).
A defined contribution plan, on the other hand, does not promise a specific
amount of benefits at retirement. In these plans, the employee or the
employer (or both) contribute to the employee's individual account under the
plan, sometimes at a set rate, such as 5 percent of earnings annually. These
contributions generally are invested on the employee's behalf. The employee
will ultimately receive the balance in their account, which is based on
contributions plus or minus investment gains or losses. The value of the
account will fluctuate due to the changes in the value of the investments.
Examples of defined contribution plans include 401(k) plans, 403(b)
plans, employee stock ownership plans, and profit sharing plans.
A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated

retirement savings vehicle. A SEP allows employees to make contributions on
a tax-favored basis to individual retirement accounts (IRAs) owned by the
employees. SEPs are subject to minimal reporting and disclosure
requirements. Under a SEP, an employee must set up an IRA to accept the
employer's contributions. Employers may no longer set up Salary Reduction
SEPs. However, employers are permitted to establish SIMPLE IRA plans with
salary reduction contributions. If an employer had a salary reduction SEP, the
employer may continue to allow salary reduction contributions to the plan.
A Profit Sharing Plan or Stock Bonus Plan is a defined contribution plan

under which the plan may provide, or the employer may determine, annually,
how much will be contributed to the plan (out of profits or otherwise). The
plan contains a formula for allocating to each participant a portion of each
annual contribution. A profit sharing plan or stock bonus plan includes a
401(k) plan.
An Employee Stock Ownership Plan (ESOP) is a form of defined

contribution plan in which the investments are primarily in employer stock.
A Money Purchase Pension Plan is a plan that requires fixed annual

contributions from the employer to the employee's individual account.
Because a money purchase pension plan requires these regular contributions,
the plan is subject to certain funding and other rules.
38
RESOURCES
Retirement Plan Types
A 401(k) Plan is a defined contribution plan that is a cash or deferred arrangement. Employees
can elect to defer receiving a portion of their salary which is instead contributed on their behalf,
before taxes, to the 401(k) plan. Sometimes the employer may match these contributions. There are
special rules governing the operation of a 401(k) plan. For example, there is a dollar limit on the
amount an employee may elect to defer each year. An employer must advise employees of any
limits that may apply. Employees who participate in 401(k) plans assume responsibility for their
retirement income by contributing part of their salary and, in many instances, by directing their
own investments.
Safe Harbor Provisions: Every 401(k) must pass mandated compliance testing every year.
The tests compare the participation rates of different classes of employees. Employers can
choose to skip the tests and instead make a requisite contribution to their so-called non-
highly compensated employees' 401(k) accounts. This is called the safe harbor method of
plan administration.
The safe harbor method of plan operation lets 401(k) plans skip their annual 401(k)
nondiscrimination testing so long as the sponsoring employer meets certain employer 401(k)
contribution requirements designed to ensure broad participation in the company plan and
provides 100% immediate vesting of the contributions.
• To qualify a 401(k) plan as a safe harbor plan, an employer must make

matching contributions that fulfill the below requirements or make non-
elective contributions equal to 3% of each eligible employee's compensation.
• Non-elective contributions are made to all eligible employees, regardless of whether
the employees participate in the company 401(k) plan. Matching contributions, on the
other hand, being based upon salary deferral amounts, are made only to active 401(k)
participants' accounts.
• If the employer chooses to make safe harbor matching contributions, those
contributions must meet two requirements: First, each non-highly compensated
employee must receive a dollar-for-dollar match on salary deferrals up to 3% of
compensation and a 50¢ to the dollar match on salary deferrals from 3% to 5% of
compensation. Second, the rate of any matching contributions being made to highly
compensated employees cannot exceed that being made to non-highly compensated
employees.
• See also the Nondiscrimination Safe Harbor rules enacted in the Pension Protection
Act as outlined on page 34 of this handbook. (The Act creates an optional
nondiscrimination safe harbor for automatic enrollment plans.)
• The employer must provide annual information to employees explaining the 401(k)
plan's safe harbor provisions and benefits, including that safe harbor contributions
cannot be distributed before termination of employment and that they are not eligible
for financial hardship withdrawal.
• Employers can decide as late as 30 days before the end of each plan year whether or
not to take the safe harbor route. However, if, as its safe harbor contribution, the
employer wants to make matching contributions rather than the flat 3% of
compensation contribution, the employer must define the matching formula well ahead
of those 30 days; in fact, any safe harbor matching contribution must be defined and
communicated to employees no later than 30 days before the START of the applicable
plan year so employees have plenty of time to adjust their contribution rates
accordingly.
39
RESOURCES
Maximum Benefit and Contribution Limits
Maximum Benefit and Contribution Limits for 2007-2008 2008 2007

As published by the Internal Revenue Service:
The Elective Deferral Limit is the maximum contribution that can be made on a Elective
Deferrals (401(k) & $15,500 $15,500
pre-tax basis to a 401(k) or 403(b) plan (Internal Revenue Code section 402(g)(1)). 403(b) plans)
Some still refer to this as the $7,000 limit (its original setting in 1987).
The 457 Deferral Limit is a similar restriction, applied to certain government Annual Benefit Limit $185,000 $180,000
plans (457 plans).
The Annual Benefit Limit is the maximum annual benefit that can be paid to a
Annual
participant (IRC section 415). The limit applied is actually the lesser of the dollar Contribution Limit
$46,000 $45,000
limit above or 100% of the participant's average compensation (generally the high
three consecutive years of service). The participant compensation level is also
subject to the Annual Compensation Limit. Annual
$230,000 $225,000
Compensation Limit
The Annual Contribution Limit is the maximum annual contribution amount that
can be made to a participant's account (IRC section 415). This limit is actually
expressed as the lesser of the dollar limit or 100% of the participant's 457 Deferral Limit $15,500 $15,500
compensation, applied to the combination of employee contributions, employer
contributions, and forfeitures allocated to a participant's account.
Highly
In calculating contribution allocations, a plan cannot consider any employee Compensated $105,000 $100,000
compensation in excess of the Annual Compensation Limit (401(a)(17)). This Threshold
limit is also imposed in determining the Annual Benefit Limit. In calculating
certain nondiscrimination tests (such as the Actual Deferral Percentage), all SIMPLE
$10,500 $10,500
participant compensation is limited to this amount, for purposes of the calculation. Contribution Limit
The Highly Compensated Threshold (section 414(q)(1)(B)) is the minimum

compensation level established to determine highly compensated employees for SEP Coverage $500 $500
purposes of nondiscrimination testing.
The SIMPLE Contribution Limit is the maximum annual contribution that can be SEP
made to a SIMPLE (Savings Incentive Match Plan for Employees) plan. SIMPLE $230,000 $225,000
Compensation Limit
plans are simplified retirement plans for small businesses that allow employees to
make elective contributions, while requiring employers to make matching or non- Income
elective contributions. Subject to $102,000 $97,500
Social Security
SEP Coverage Limit is the minimum earnings level for a self-employed individual
to qualify for coverage by a Simplified Employee Pension (SEP) plan (a special Top-Heavy Plan Key
individual retirement account to which the employer makes direct tax-deductible $150,000 $145,000
Employee Comp
contributions).
The SEP Compensation Limit is applied in determining the maximum Catch-Up
$5,000 $5,000
contributions made to the plan. Contributions
Catch-up Contributions, SIMPLE Catch-up deferral: Under the Economic SIMPLE

Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), certain individuals Catch-Up $2,500 $2,500
age 50 and over can now make so-called 'catch-up' contributions, in addition to the Contributions
above limits.
EGTRRA also added the Top-heavy plan key employee compensation limit.
40
RESOURCES
Retirement Plan Tables
FEATURE 401(K) 401(K) SAFE H ARBOR PROFIT SHARING 401(K) SIMPLE SIMPLE IRA
$15,500 - 2008 $15,500 - 2008 No employee $10,500 - 2008 $10,500 - 2008

MAXIMUM
EMPLOYEE $15,500 - 2007 $15,500 - 2007 contributions $10,500 - 2007 $10,500 - 2007
DEFERRAL
MAXIMUM $5,000 - 2008 $5,000 - 2008 No employee $2,500 - 2008 $2,500 - 2008
EMPLOYEE $5,000 - 2007 $5,000 - 2007 contributions $2,500 - 2007 $2,500 - 2007
CATCH-UP
CONTRIBUTION
Discretionary. Mandatory. Discretionary. Mandatory. Mandatory.
Tiered Match: 100%

up to 3% and 50% of
EMPLOYER The lesser of 25%
the next 2%, 4% 100% up to 3% or 2% 100% up to 3% or 2%
CONTRIBUTION Match and/or profit of compensation or
maximum; or non- non-elective non-elective
sharing $45,000 in 2007 /
elective contribution contribution contribution
$46,000 in 2008
of 3% to all eligible
participants
Immediate for Tiered

Immediate, Match or non-elective
contribution
VESTING Options available Immediate Immediate
3-year cliff or 6-year Profit-sharing options
graded available
LOANS Yes Yes Yes Yes No
ADP/ACP
Yes No No No No
T ESTING
T OP-H EAVY
Yes Generally satisfied Yes No No
T ESTING
INVESTMENT
Choice of several Choice of several Choice of several Choice of several Single offering
PROVIDERS
41
RESOURCES
P AY RO L L
P RO FIT D E FIN E D
S E P - IRA D E D U C TIO N S IM P L E -I RA 4 01(k )
S H ARIN G B E N E FIT
I RA
Mu st be offered to Sh ould be made Mu st be offered to Mu st be offered to Mu st be offered to Mu st be offered

all employees wh o available to all all employees w h o all employees at all employees at to all employees
M I N IM U M are at least 2 1 years employees. h ave earn ed at least 2 1 years of least 2 1 years of at least 2 1 years
of ag e, employed least $5,000 in ag e wh o worked at ag e w h o worked of ag e wh o
EMPLOY EE
by th e bu sin ess for previou s 2 years. least 1,000 h ou rs at least 1,000 w orked at least
C O V E RA G E
3 of last 5 years an d in previou s year. h ou rs in previou s 1 ,000 h ou rs in
RE Q U IRE M E N TS earn ed at least year. previou s year.
$400
$500 in a year.
W ith drawals at W ith drawals at W ith drawals at an y Can n ot take May permit loan s Paymen t of
an ytime; su bject to an ytime; su bject to time. If employee with drawals u n til a an d h ardsh ip ben efits g en erally
curren t federal cu rren t federal is u n der ag e 59 specified even t, with drawals. at retiremen t,
in come taxes and a in come taxes an d 1/2 , may be su bject su ch as reach in g H ardsh ip may offer
possible 10% a possible 10% to a 2 5% pen alty if 59 1 /2 , death , with draw als may participan t loan s.
pen alty if th e pen alty if th e taken w ith in th e separation from be su bject to a
participan t is u n der participan t is first 2 years of service or oth er possible 10%
ag e 59 1/2 . u n der ag e 59 1/2 . participation an d even t as iden tified pen alty if
W ITH D RAW A LS ,
a possible 10% in plan . May participant is
L O AN S A N D pen alty if taken permit loan s an d u n der ag e 59 1/2 .
P AY M E N TS afterw ards. h ardship
with drawals. Paymen t of
W ith drawals may ben efits g en erally
be su bject to a at retiremen t.
possible 1 0%
pen alty if
participan t is
u n der ag e 59 1 /2 .
Employer can Employee can Employee can Employee makes Employer makes Employer makes
decide wh eth er or decide h ow mu ch decide h ow mu ch con tribu tion as set con tribu tion as con tribu tion s as
n ot to make to con tribu te at to con tribu te. by plan option . set by plan terms. set by plan terms.
con tribu tion year an y time. Employer mu st Th e employer may
C O N TRI B U TORS to year. make match in g match .
O P TI O N S con tribu tion s or
con tribu te 2 % of
each employee's
salary u p to th e set
maximu m.
42
RESOURCES
PAYROLL
PROFIT DEFINED MONEY
SEP-IRA DEDUCTION SIMPLE-IRA 401(k)
SHARING BENEFIT PURCHASE PLAN
IRA
Easy to set up and Easy to set up and Permits employee Permits employer Provides a fixed, Permits employer
Salary reduction
KEY
maintain. maintain. to contribute more to create large
plan with little pre-established to make a larger
ADVANTAGE
administrative than in other account balances benefit for contribution than
paperwork. options. for employees. employees. through other
Defined
Contribution
Plans.
Any business that Any business with Any business with Any business with Any business with Any business Any business with
does not currently one or more 100 or fewer one or more one or more with one or more one or more
EMPLOYERS
maintain any other employees. employees that employees. employees. employees. employees.
WHO CAN
retirement plan. does not currently
PROVIDE THIS
maintain any other
OPTION
retirement plan.
Set up plan by Set up Set up by There is no model There is no model There is no There is no model
completing IRS arrangements for completing IRS form to establish a form to establish a model form to form to establish a
Form 5305-SEP. No employees to make Form 5304- plan. Advice from plan. Advice from establish a plan. plan. Advice from
employer tax filing payroll deduction SIMPLE or 5305- a financial a financial Advice from a a financial
required. contributions. SIMPLE. No institution or institution or financial institution or
Transmit employer tax filing employee benefit employee benefit institution or employee benefit
contributions for required. Bank or advisor would be advisor would be employee benefit advisor would be
employees to financial necessary. necessary. advisor would be necessary.
funding vehicle. institution does necessary.
EMPLOYERS most of the
DUTIES No employer tax Annual filing of Annual filing of Annual filing of Annual filing of
paperwork.
filing required. IRS Form 5500 IRS Form 5500 is IRS Form 5500. IRS Form 5500 is
required. Also required. Actuary must required.
requires special determine
testing to ensure funding
plan does not obligations.
discriminate in
favor of highly
compensated
employees.
Employer Employee Employee salary Employee salary Employer Primarily Employer
contributions only. contributions reduction reduction contribution level employer; may contributions only.
FUNDING remitted through contributions contributions can be require or permit
RESPONSIBILITY payroll deduction. and/or employer and/or employer determined year employee
contributions. contributions. to year. contributions.
43
RESOURCES
Plan Provisions
VESTING
Employee salary deferrals are immediately 100 percent vested—that is, the
money that an employee has put aside through salary deferrals cannot be
forfeited. When an employee leaves employment, he/she is entitled to those
deferrals, plus any investment gains (or losses) on the deferrals.
In SIMPLE 401(k) plans and Safe Harbor 401(k) plans, all required
employer contributions are always 100 percent vested.
In Traditional 401(k) plans, all employee deferrals are 100 percent vested.
You can design your plan so that employer contributions become vested over
time, according to a vesting schedule.
CONTRIBUTIONS
A 401(k) can accept the following types of contributions:
• Elective contributions (sometimes referred to as employee pre-tax

contributions or salary deferrals). This type of contribution is made on a
pre-tax basis and is immediately 100 percent vested. This contribution
allows participants to save for their retirement.
• Catch-up contributions (employee contributions above and beyond the

legal limit for elective contributions available to participants who are at
least 50 years of age as of the end of the plan year). This type of
contribution allows participants who are at least age 50 during the year to
make pre-tax salary deferrals over a limit imposed by the law or by the plan
on a pre-tax basis.
• Employee after-tax contributions may be offered in addition to pre-tax

deferrals in a 401(k) plan.
• Employer matching contributions (contributions expressed in terms of

participants’ deferral amounts) provide an incentive to participants to
make pre-tax contributions to the plan. Matching contributions may be
made on pre-tax deferrals or employee after-tax contributions and may be
discretionary (determined by the employer each year), or the formula may
be defined in the plan document.
• Employer non-elective contributions (contributions that are typically

expressed in terms of participants’ compensation and are often called
discretionary employer or profit sharing contributions). This type of
contribution may be used to provide performance incentives and/or to
share company profits with eligible participants. Non-elective
contributions may be discretionary or may be defined in the plan
document.
44
RESOURCES
In-Service Distribution Options
Although 401(k) plans are meant to be long-term savings vehicles, participants cannot leave money in
a 401(k) account indefinitely:
• Plan participants generally MUST begin taking withdrawals from their 401(k) accounts when they
reach age 70½.
• Plan participants CAN begin taking withdrawals from their 401(k) accounts as soon as they reach
age 59½.
• Earlier withdrawals can be made without penalty if the participant dies or incurs a qualifying
permanent disability.
• At any time, a plan participant leaving the company can remove his or her 401(k) money without
subjecting it to early withdrawal penalties by rolling the money over into a Rollover IRA or new
employer's qualified retirement savings plan—401(k) or other.
Outside of these general instances, there are only two ways for participants to withdraw money from a
401(k) account while employed: hardship withdrawal and 401(k) loan. The table below gives you a
side-by-side comparison of the features of each withdrawal option.
(There are specific issues and, in some cases, exceptions, to each bullet point listed above.
Presented on this page is a simple overview of the basic rules surrounding an in-service withdrawal.
Be sure to review any withdrawal requests with a service professional to identify whether there may be
additional options available.)
HARDSHIP WITHDRAWAL 401(k) LOAN
Must be paid back within the agreed-upon time

Does NOT have to be paid back.
(within 6 months if the participant leaves the company).
No interest. Bears interest (market rate or thereabouts).
Substantial federal early withdrawal penalties. No federal early withdrawal penalties, unless the loan defaults.
Six-month suspension of 401(k) participation upon taking a

No participation suspension.
hardship withdrawal.
Substantial long-term negative effect on the compounding Less substantial long-term effect on the compounding growth of
growth of the 401(k) account. the 401(k) account, but still a significant negative effect.
There can be liquidation fees. There can be liquidation fees.

Plan participant generally ends up with about 1/2 of the amount
Plan participant generally ends up with most of the amount
withdrawn (the remainder goes to taxes and federal early
withdrawn.
withdrawal penalties).
Withdrawn money is taxed as income for the year. No tax consequences (unless participant defaults on loan).
Does not have to be included in 401(k) plans. Does not have to be included in 401(k) plans.
Generally involves nominal administrative processing costs. Generally involves nominal administrative processing costs.
Participant must exhaust all other resources to qualify. Qualifications much less stringent.
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Compliance Calendar
The calendar on this page shows the various plan reporting deadlines associated with a plan that has a January 1st anniversary.
Sample Date for Sample Date for

1/1 Anniversary Explanation of Compliance 1/1 Anniversary Explanation of Compliance
Deadline Plans Deadline Deadline Plans Deadline
December - Current Year April
Prior to plan Year- Receive Data Collection
end Mid December Package Initial minimum distributions
All plan amendments must be due for members who are age
Plan year-end 31-Dec signed 701/2 and have either retired
1-Apr 1-Apr or are 5% owners
401(k)/(m) refunds due to Refund of excess deferrals
Plan year-end 31-Dec avoid plan disqualification 15-Apr 15-Apr due
Review top-heavy test for July
Plan year-end 31-Dec accuracy
Last day of 7th Form 5500 Series Annual
Minimum distributions due month after plan Report due to IRS unless an
for members who are age 70 year-end 31-Jul extension has been filed
1/2 and have either retired or September
31-Dec 31-Dec are 5% owners Form 5500 Series Annual
January Report due to IRS if
6 months after corporate or federal income
Deadline for you to furnish corporate tax filing tax filing extension has been
31-Jan 31-Jan Form W-2 to your employees deadline 15-Sep filed
Make Summary Annual
Deadline for Provider to send 9 months after Report available to all plan
Form 1099-R to members plan year-end 30-Sep participants
31-Jan 31-Jan who received distributions October
February
Compliance Disk due to your 2 ½ months after Form 5500 Series Annual
1-Feb 1-Feb Plan Administrator original 5500 Report due to IRS if Form
March deadline 15-Oct 5558 extension has been filed
November
Top-heavy minimum
2 ½ months after contribution due if no When determining your employer contributions for plan year-end,
plan year-end 15-Mar corporate tax filing extension remember to discuss 404(a) deduction limits with your tax advisor.
December
2 ½ months after 401(k)/(m) refund deadline to Prior to plan Year- Receive Data Collection
plan year-end 15-Mar avoid the 10% employer tax end Mid December Package
All plan amendments must be
Information for IRS Form Plan year-end 31-Dec signed
5500 Series Annual Report 401(k)/(m) refunds due to
31-Mar 31-Mar Due to Plan Administrator Plan year-end 31-Dec avoid plan disqualification
Review top-heavy test for
Form 5330 due to the IRS to Plan year-end 31-Dec accuracy
pay 10% excise tax for any Minimum distributions due
401(k)/(m) refunds made for members who are age 70
15 months after more than 2 1/2 months after 1/2 and have either retired or
plan year-end 31-Mar the end of your plan year 31-Dec 31-Dec are 5% owners
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Fees and Expenses
What are the types of plan fees and who pays for them?
There are a variety of plan fees and expenses that may affect your retirement plan. The following is an
overview of some of those fees and expenses and the different ways in which they may be charged.
Plan fees and expenses generally fall into three categories:
• Plan Administration Fees. The day-to-day operation of a plan involves expenses for basic administrative
services—such as plan recordkeeping, accounting, legal, and trustee services—that are necessary for
administering the plan as a whole. In addition, a profit sharing or 401(k) plan also may offer a host of
additional services, such as telephone voice response systems, access to a customer service representative,
educational seminars, retirement planning software, investment advice, electronic access to plan
information, daily valuation, and online transactions.
• In some instances, the costs of administrative services will be covered by investment fees that are deducted
directly from investment returns. In other instances, when the administrative costs are billed separately,
they may be borne, in whole or in part, by the employer or charged directly against the assets of the plan.
In the case of a 401(k), profit sharing, or other similar plan with individual accounts, administrative fees are
either allocated among individual accounts in proportion to each account balance (e.g., participants with
larger account balances pay more of the allocated expenses – a “pro rata” charge) or passed through as a
flat fee against each participant’s account (a “per capita” charge). Generally the more services provided,
the higher the fees.
• Investment Fees. By far, the largest component of plan fees and expenses is associated with managing
plan investments. Fees for investment management and other related services generally are assessed as a
percentage of assets invested. Employers should pay attention to these fees. They are paid in the form of
an indirect charge against the participant’s account or the plan because they are deducted directly from
investment returns. Net total return is the return after these fees have been deducted. For this reason,
these fees, which are not specifically identified on statements of investments, may not be immediately
apparent to employers.
• Individual Service Fees. In addition to overall administrative expenses, there may be individual service
fees associated with optional features offered under an individual account plan. Individual service fees may
be charged separately to the accounts of those who choose to take advantage of a particular plan feature.
For example, fees may be charged to a participant for taking a loan from the plan or for executing
participant investment directions.
What fees are associated with the investment choices in a retirement plan?
Apart from fees charged for administering the plan itself, there are two basic types of fees that may be
charged in connection with plan investments or investment options made available to participants and
beneficiaries. These fees, which can be referred to by different terms, include:
• Sales charges (also known as loads or commissions). These are basically transaction costs for buying and
selling shares. They may be computed in different ways, depending on the particular investment product.
• Management fees (also known as investment advisory fees or account maintenance fees). These are
ongoing charges for managing the assets of the investment fund. They are generally stated as a percentage
of the amount of assets invested in the fund. Sometimes management fees may be used to cover
administrative expenses. You should know that the level of management fees can vary widely, depending on
the investment manager and the nature of the investment product. Investment products that require
significant management, research, and monitoring services generally will have higher fees. Be aware that
higher investment management fees do not necessarily mean better performance.
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Index of Terms
401(k) Plan: A defined contribution plan that permits employees to deduct a portion of their salary from
their paycheck and contribute to an account before taxation. Employers may also make contributions to a
participant’s account, called a company match. Federal (and sometimes state) taxes on contributions and
investment earnings are "deferred" (i.e., postponed) until the participant takes money out of the plan in a
distribution (typically at retirement).
403(b) Plan: Also known as a tax sheltered annuity (TSA), a 403(b) provides a tax shelter for 501(c)(3) tax
exempt employers (which include public schools). Employers qualifying for a 403(b) plan may defer taxes on
contributions to certain annuity contracts or custodial accounts.
Actual Deferral Percentage (ADP): An anti-discrimination test that compares the amount deferred by
highly compensated employees to the deferrals of non-highly compensated employees.
Administration/Recordkeeping Fee: Fee for providing recordkeeping and other plan participant
administrative type services. For start-up or takeover plans, these fees typically include charges for
contacting and processing information from the prior service provider and “matching up” or mapping
participant information.
Annual Audit: Federal law requires that all ERISA-covered plans with more than 100 participants be
audited by an independent auditor. It is also common to refer to a DOL or IRS examination of a plan as a
plan audit.
Annual Report: A report that public companies are required to file annually which describes the preceding
year’s financial results and plans for the upcoming year. Annual reports include information about a
company’s assets, liabilities, earnings, profits, and other year-end statistics.
Annuity: A contract by which an insurance company agrees to make regular payments to someone for life or
for a fixed period in exchange for a lump sum or periodic deposits.
Asset Allocation: The process of dividing your money between different types of assets—such as stocks,
bonds, cash, and real estate—in a combination intended to generate the overall return you need, while
minimizing your overall risk.
Asset Class: A group of assets with similar risk and reward characteristics. Cash, debt instruments, real
estate, and equities are all examples of asset classes. Within a general asset class, such as equities, there are
more specific asset classes such as large and small companies, and domestic and international companies.
Asset Allocation Fund: Mutual fund that holds varying percentages of stock, bonds, and cash within its
portfolio.
Asset Allocation Model: Combining various asset classes in quantities intended to generate a risk-
adjusted return based on a specified risk and time horizon.
Automatic Deferral Default Percentage: The percentage of pay that is taken pre-tax and put into a plan
when an employee is enrolled via an automatic enrollment feature. The typical automatic deferral default
percentage is 3 percent of pay. Participants can generally choose to defer an amount other than the default
percentage.
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Index of Terms
Automatic Enrollment: The practice of enrolling all eligible employees in a plan and beginning participant
deferrals without requiring the employees to submit a request to participate. Plan design specifies how these
automatic deferrals will be invested. Employees who do not want to make contributions must actively file a
request to be excluded from the plan. Participants can generally change the amount of pay that is deferred and
how it is invested.
Balanced Fund: Mutual fund that holds bonds and/or preferred stock in a certain proportion to common stock
in order to obtain both current income and long-term growth of principal.
Bear Market: Term used to describe a prolonged period of declining stock prices.
Before (Pre)-Tax Dollars: Money contributed to a tax-deferred savings plan that you do not have to pay income
tax on until withdrawal at a future date.
Beneficiary: A person, persons, or trust designated to receive the plan benefits of a participant in the event of
the participant’s death.
Beta: A measure of a stock’s volatility; the average beta for all stocks is +1.
Blackout Period: Also called a lockdown, transitional period, or quiet period. This refers to the time when plan
participants cannot access their accounts. These periods can be caused by a number of events, including a change
in plan record keepers, a change in plan trustees, a change to daily valuation from monthly valuation, or a
company merger or acquisition.
Blue-Chip Stock: Term, derived from the most expensive chips in a poker game, used to indicate the stock of
companies with long records of growth and profitability.
Bond: A debt instrument or IOU issued by corporations or units of government.
Bond Fund: Mutual fund that holds mainly municipal, corporate, and/or government bonds.
Broker: A professional who transfers investors’ orders to buy and sell securities to the market and generally
provides some financial advice.
Bull Market: Term used to describe a prolonged period of rising stock prices.
Bundled Services: Arrangements whereby plan service providers offer 401(k) plan establishment, investment
services, and administration for an all-inclusive fee. Bundled services by their nature are priced as a package and
cannot be priced on a per service basis.
Buy and Hold: A strategy of purchasing an investment and keeping it for a number of years.
Capital Appreciation: An increase in market value of an investment (e.g., stock).
Cash investment: A very short-term loan to a borrower with a very high credit rating. Examples of cash
investments are bank certificates of deposit (CDs), Treasury Bills (T-Bills) and money market funds. A cash
investment typically offers investors great principal stability, but little long-term growth.
Certificate of Deposit (CD): An insured bank product that pays a fixed rate of interest (e.g., 5 percent) for a
specified period of time.
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Index of Terms
Class A Shares: Mutual fund shares that incur a front-end sales charge upon purchase.
Class B Shares: Mutual fund shares that incur a back-end sales charge (also known as a contingent
deferred sales charge or CDSC) if sold within five to six years of purchase.
Class C Shares: Mutual fund shares that incur higher management and marketing fees than Classes A and
B, but no sales or redemption charges upon purchase or sale.
Cliff Vesting: A vesting schedule that gives an employee 100 percent ownership of company contributions
after a specified number of years of service. (See also vesting.)
Closed-End Fund: An investment company that issues a limited number of shares that can be bought and
sold on market exchanges.
Collective Investment Fund: A tax-exempt pooled fund operated by a bank or trust company that
commingles the assets of trust accounts for which the bank provides fiduciary services.
Common Stock: Securities that represent a unit of ownership in a corporation.
Composite Indices: Stock market indices comprised of stocks traded on major stock exchanges: * New
York Stock Exchange Composite (index of stocks traded on New York Stock Exchange), * American Stock
Exchange Composite (index of stocks traded on American Stock Exchange), * NASDAQ Composite (index
of stocks traded over the counter in the quotation system of the Financial Industry Regulatory Authority
(FINRA)).
Compound Interest: Interest credited daily, monthly, quarterly, semi-annually, or annually on both
principal and previously credited interest.
Contract Administration Charge: An omnibus charge for costs of administering the insurance/annuity
contract, including costs associated with the maintenance of participant accounts and all investment-related
transactions initiated by participants.
Contract Termination Charge: A charge to the plan for “surrendering” or “terminating” its insurance/
annuity contract prior to the end of a stated time period. The charge typically decreases over time.
Conversion: The process of changing from one service provider to another.
Corporate Bonds: Debt instruments issued by for-profit corporations.
Defined Benefit Plan: An employer-sponsored retirement plan for which retirement benefits are based on a
formula indicating the exact benefit that one can expect upon retiring. Investment risk and portfolio
management are entirely under the control of the company. There are restrictions on when and how you can
withdraw these funds without penalties.
Defined Contribution Plan: A retirement plan wherein a certain amount or percentage of money is set
aside each year for the benefit of the employee. There are restrictions as to when and how you can withdraw
these funds without penalties.
Determination Letter: Document issued by the IRS formally recognizing that the plan meets the
qualifications for tax-advantaged treatment.
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Index of Terms
Disclosure: Plan sponsors must provide access to certain types of information for participants,
including summary plan descriptions, summary of material modifications, and summary annual
reports.
Discrimination Testing: Tax qualified retirement plans must be administered in compliance with
several regulations requiring numerical measurements. Typically, the process of determining
whether the plan is in compliance is collectively called discrimination testing.
Distribution Expense: The costs typically associated with processing paperwork and issuing a
check for a distribution of plan assets to a participant. May include the generation of IRS Form
1099R. This fee may apply to hardship and other in-service withdrawals as well as to separation-
from-service or retirement distributions.
Diversification: The policy of spreading assets among different investments to reduce the risk of a
decline in the overall portfolio from a decline in any one investment.
Dividend: A distribution of income from investments to shareholders.
Dividend Reinvestment Plans (DRIPs): Plans that allow investors to automatically reinvest any
dividends a stock pays into additional shares.
Dollar Cost Averaging: Investing equal amounts of money (e.g., $50) at a regular time interval
(e.g., quarterly) regardless of whether securities markets are moving up or down. This practice
reduces average share costs to investors, who acquire more shares in periods of lower securities
prices and fewer shares in periods of higher prices.
Dow Jones Industrial Average: The most widely used gauge of stock market performance. Also
know as "The Dow," it tracks 30 stocks in large well-established U.S. companies.
Eligible Employee: Any employee who is eligible to participate in and receive benefits from a plan.
Expense Ratio: The cost of investing and administering assets, including management fees, in a
mutual fund or other collective fund expressed as a percentage of total assets.
Employee stock ownership plan (ESOP): A qualified, defined contribution plan in which plan
assets are invested primarily or exclusively in the securities of the sponsoring employer.
Excludable Employees: The employees that may be excluded from the group being tested during
401(k) nondiscrimination testing. The following are excludable employees: certain ex-employees;
certain airline pilots; non-resident aliens with no U.S. source of income; employees who do not
meet minimum age and length of service requirements; and, employees whose retirement benefits
are covered by collective bargaining agreements.
Exclusive Benefit Rule: A rule under ERISA that says the assets in an employee account may be
used for the exclusive benefit of the employee and his/her beneficiaries.
ERISA: The Employee Retirement Income Security Act is a 1974 law governing the operation of
most private pension and benefit plans. The law eased pension eligibility rules, set up the Pension
Benefit Guaranty Corporation, and established guidelines for the management of pension funds.
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Index of Terms
Equity Investing: Becoming an owner or partial owner of a company or a piece of property through the
purchase of investments such as stock, growth mutual funds, and real estate.
Federal Deposit Insurance Corporation (FDIC): Federal agency that insures bank deposits up to $100,000.
Investments purchased at banks are not FDIC-insured.
FICA: The Federal law that taxes employee wages for Social Security and other programs.
Fidelity Bond: Protects participants in the event a fiduciary or other responsible person steals or mishandles
plan assets.
Fiduciary: A fiduciary is a person who occupies a position of trust in relation to someone else such that he is
required to act for the latter's benefit within the scope of that relationship. In business or law, it generally
means someone with specific duties, such as those that attend a particular profession or role, e.g., investment
advisor or trustee. A fiduciary relationship must also have a dramatic difference in power between the two
parties. This differential is often brought about by one party having a great deal more expertise. A fiduciary
owes a duty of "utmost good faith."
Fiduciary Insurance: Insurance that protects plan fiduciaries in the event that they are found liable for a
breach of fiduciary responsibility.
Fixed Annuity: An investment vehicle, often used for retirement accounts, that guarantees principal and a
specified interest rate. Fixed annuity earnings grow tax-deferred until withdrawal.
Forfeiture: Plan assets surrendered by participants upon termination of employment before being fully vested
in the plan. Forfeitures may be distributed to the other participants in the plan or used to offset employer
contributions.
Full-Service Broker: A broker that charges commissions based on the type and amount of securities traded.
Full-service brokers typically charge more than discount brokers but also provide more extensive services (e.g.,
research and personalized advice).
Front-End Load: Sales charges incurred when an investment in a mutual fund is made.
GNMAs or Ginnie Maes: An investment in a pool of mortgage securities backed by Government National
Mortgage Association (GNMA).
Growth Fund: Mutual fund that invests in stocks exhibiting potential for capital appreciation.
Growth Stocks: Stock of companies that are expected to increase in value.
Graduated or Graded Vesting: A vesting schedule in which the employee earns the right to employer
contributions gradually over a period of years, for example 25 percent ownership each year for four years. (See
also vesting.)
Guaranteed Investment Contract (GIC): Fixed-income investments, offered in many tax-deferred employer
retirement plans, that guarantee a specific rate of return for a specific time period.
Hardship or In-Service Distribution: When a participant withdraws plan funds prior to retirement, at the
employer’s option. Eligibility for such distributions exists when financial hardship is present. These
distributions are taxable as early distributions and are subject to a ten percent early withdrawal federal income
tax penalty if the participant is under age 59½.
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Index of Terms
Highly Compensated Employee (HCE): An employee who received more than $100,000 in compensation
in 2007 ($105,000 in 2008; this amount is indexed annually) or is a 5 percent owner in the company.
Individually Managed Account: An investment account managed for a single plan.
Index: An unmanaged collection of securities whose overall performance is used as an indication of stock
market trends. An example of an index is the widely quoted Dow Jones Industrial Average, which tracks the
performance of 30 large company U.S. stocks.
Index Fund: Mutual fund that attempts to match the performance of a specified stock or bond market index
by purchasing some or all of the securities that comprise the index.
Income Fund: Mutual fund that invests in stocks or bonds with a high potential for current income, either
interest or dividends.
Income Stocks: Stock of companies that expect to pay regular and relatively high (compared to growth
stocks) dividends.
Individual Retirement Account (IRA): A retirement savings plan that allows individuals to save for
retirement on a tax-deferred basis. The amount that is tax deductible varies according to an individual’s
access to pension coverage, income tax filing status, and adjusted gross income.
Installation Fee: One-time fee for initiating a new plan or initiating new services.
Interest Rate Risk: The risk that, as interest rates rise, the value of previously issued bonds will fall,
resulting in a loss if they are sold prior to maturity.
Investment Objective: The goal (e.g., current income) of an investor or a mutual fund. Mutual fund
objectives must be clearly stated in their prospectus.
Investment Transfer Expense: Fee associated with a participant changing his or her investment allocation,
or making transfers among funding accounts under the plan.
Leased Employee: An individual employed by a leasing organization that provides contract services for the
company for the period of more than one year.
Liquidity: The quality of an asset that permits it to be converted quickly into cash without a significant loss
of value.
Load: A commission charged by the sponsor of a mutual fund upon the purchase or sale of shares.
Loan Maintenance and Repayment Tracking Fee: Fee charged to monitor outstanding loans and
repayment schedule.
Loan Origination Fee: Fee charged when a plan loan is originally taken.
Loan Processing Fee: Fee charged to process a plan loan application.
Lump-Sum Distribution: The distribution at retirement of a participant’s entire account balance within one
calendar year due to retirement, death, or disability.
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Index of Terms
MPERS: Uniform Management of Public Employee Retirement Systems Act.
Management Fee: The amount paid by mutual funds to their investment advisers.
Marginal Tax Rate: The rate you pay on the last (highest) dollar of personal or household (if married) earnings.
Market Value: The current price of an asset, as indicated by the most recent price at which it traded on the open
market. If the most recent trade in ABC stock was at $25 for example, the market value of the stock is $25.
Matching Contribution: A contribution made by the company to the account of the participant in ratio to
contributions made by the participant.
Material Modification: A change in the terms of the plan that may affect plan participants, or other changes in a
summary plan document (SPD).
Maturity: The date on which the principal amount of a bond, investment contract, or loan must be repaid.
Median Market Cap: An indicator of the size of companies in which a fund invests.
Money Market Fund: A mutual fund seeking to generate income for participants through investments in short-
term securities.
Moody’s Investors Service: A rating agency that analyzes the credit quality of bonds and other securities.
Mortality Risk and Administrative Expense (M&E Fee): Fee charged by an insurance company to cover the cost
of the insurance features of an annuity contract, including the guarantee of a lifetime income payment, interest and
expense guarantees, and any death benefit provided during the accumulation period.
Mutual Fund: An investment company that pools money from shareholders and invests in a variety of securities,
including stocks, bonds and money market securities.
Net Asset Value: The market value of a mutual fund’s total assets, after deducting liabilities, divided by the
number of shares outstanding.
Net Worth: The dollar value remaining when liabilities (what you owe) are subtracted from assets (what you
own). Example: $200,000 of assets - $125,000 of debt = a $75,000 net worth.
Nondiscrimination Testing Expense: Tax qualified retirement plans must be administered in compliance with
several regulations requiring numerical measurements. The fee charged for the process of determining
whether the plan is in compliance is collectively called nondiscrimination testing expense.
Named Fiduciary: The plan document must name one or more fiduciaries, giving them the authority to control
and manage the operation of the plan. The named fiduciary must also be identified as a fiduciary by a procedure
specified in the plan document.
Nondiscrimination Rules: IRS rules that prohibit the plan or plan sponsor from giving disproportionately larger
benefits to highly compensated employees (HCEs). Specific nondiscrimination testing must be done to determine
if plans have broken this rule and are top-heavy.
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Index of Terms
Non-elective Contribution: An employer contribution that cannot be withdrawn or paid to the employee in cash.
This contribution is neither a matching contribution nor an elective contribution.
Online Investing: The purchase of securities from brokerage firms via the Internet using a computer and modem.
Open-End Fund: An investment company that continually buys and sells shares to meet investor demand. It can
have an unlimited number of investors or money in the fund.
Participant: Person who has an account in the plan and any beneficiaries who may be eligible to receive an account
balance.
Participant Directed Account: A plan that allows participants to select their own investment options.
Participant Education Materials/Distribution Expenses: All costs (including travel expenses) associated with
providing print, video, software and/or live instruction to educate employees about how the plan works, the plan
investment funds, and asset allocation strategies. There may be a one-time cost associated with
implementing a new plan, as well as ongoing costs for an existing program.
Party-In-Interest: Those who are a party-in-interest to a plan include: the employer; the directors, officers,
employees, or owners of the employer; any employee organization whose members are plan participants; plan
fiduciaries; and plan service providers.
Penny Stocks: Stocks that sell for $5 per share or less.
Pension and Welfare Benefits Administration (PWBA): This branch of the Department of Labor protects the
pensions, health plans, and other employee benefits of American workers. The PWBA enforces Title I of ERISA,
which contains rules for reporting and disclosure, vesting, participation, funding, and fiduciary conduct.
Pension Benefit Guaranty Corporation (PBGC): A federal agency established by Title IV of ERISA for the
insurance of defined benefit pension plans. The PBGC provides payment of pension benefits if a plan terminates and
is unable to cover all required benefits.
Plan Administrator: The individual, group, or corporation named in the plan document as responsible for day-to-
day operations. The plan sponsor is generally the plan administrator if no other entity is named.
Plan Document: The parameters under which a retirement plan will be operated must be outlined in the plan
document. This document must be given to employees upon request.
Plan Document/Determination Letter Fee (Filing Fee): Fee charged for a written plan document. Fee can also
include the costs associated with preparing and filing IRS required documentation, including the request for a
determination letter (document issued by the IRS stating whether the plan meets the qualifications for tax advantaged
treatment).
Plan Loan: The law allows participants to borrow from their accounts up to prescribed limits. This is an
optional plan feature.
Plan Sponsor: The entity responsible for establishing and maintaining the plan.
Plan Year: The calendar, policy, or fiscal year for which plan records are maintained.
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Index of Terms
Portability: This occurs when, upon termination of employment, an employee transfers pension funds from
one employer's plan to another without penalty
Portfolio: The combined holding of stocks, bonds, cash equivalents, or other assets by an individual or
household, investment club, or institutional investor (e.g., mutual fund).
Preferred Stock: A type of stock that offers no ownership or voting rights and generally pays a fixed
dividend to investors.
Price/Earnings (P/E) Ratio: The price of a stock divided by its earnings per share (e.g., $40 stock price
divided by $2 of earnings per share = a P/E ratio of 20).
Principal: The original amount of money invested or borrowed, excluding any interest or dividends.
Product Termination Fee: Investment-product charges associated with terminating one or all of a service
provider’s investment products.
Prohibited Transaction: Activities regarding treatment of plan assets by fiduciaries that are prohibited by
ERISA. This includes transactions with a party-in-interest, including sale, exchange, lease, or loan of plan
securities or other properties.
Profit Sharing Plan: Company-sponsored plan funded only by company contributions. Company
contributions may be determined by a fixed formula related to the employer’s profits, or may be at the
discretion of the board of directors.
Prospectus: An official booklet that describes a mutual fund. It contains information as required by the
U.S. Securities and Exchange Commission on topics such as the fund’s investment objectives, investment
restrictions, purchase and redemption policies, fees, and performance history.
Prudent Man Rule: ERISA fiduciary law that requires all fiduciaries to conduct the business of the plan with
prudence and care. Any fiduciary violating this law is liable to the plan and its participants for all losses.
Qualified Plan: Any plan that qualifies for favorable tax treatment by meeting the requirements of section
401(a) of the Internal Revenue Code and by following applicable regulations. Includes 401(k) and deferred
profit sharing plans.
Qualified Domestic Relations Order (QDRO): A judgment, decree or order that creates or recognizes an
alternate payee’s (such as a former spouse, child, etc.) right to receive all or a portion of a participant’s
retirement plan benefits.
Real Estate: Land, permanent structures on land, and accompanying rights and privileges, such as crop or
mineral rights.
Real Estate Investment Trust (REIT): A portfolio of real estate-related securities in which investors can
purchase shares that trade on major stock exchanges.
Risk: Exposure to loss of investment capital (i.e., amount of money invested).
Risk Management: Actions taken (e.g., purchase of insurance) to provide protection against catastrophic
financial losses (e.g., disability and liability). Risk management is an important investing prerequisite.
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Index of Terms
Rollover: The action of moving plan assets from one qualified plan to another or to an IRA within 60 days of
distributions, while retaining the tax benefits of a qualified plan.
Safe Harbor Rules: Provisions that exempt certain individuals or kinds of companies from one or more
regulations.
Salary Deduction: Also known as payroll deduction. When a plan participant arranges to have pre-tax
contributions made directly from their paycheck, it is arranged through salary deduction.
Savings Incentive Match Plan for Employees (SIMPLE): A type of defined contribution plan for employers
with 100 or fewer employees in which the employer matches employee deferrals up to 3 percent of compensation
or provides non-elective contributions up to 2 percent of compensation. These contributions are immediately and
100 percent vested, and they are the only employer contribution to the plan. SIMPLE plans may be structured as
individual retirement accounts (IRAs) or as 401(k) plans.
Securities: A term used to refer to stocks and bonds in general.
Securities and Exchange Commission (SEC): Federal agency created to administer the Securities Act of 1933.
Statutes administered by the SEC are designed to promote full public disclosure about investments and protect
the investing public against fraudulent and manipulative practices in the securities markets.
Securities Investor Protection Corporation (SIPC): A nonprofit corporation that insures investors against the
failure of brokerage firms, similar to the way that the Federal Deposit Insurance Corporation (FDIC) insures bank
deposits. Coverage is limited to a maximum of $500,000 per account, but only up to $100,000 in cash. SIPC
does not insure against market risk, however.
Separate Account: An asset account established by a life insurance company, separate from other funds of the
life insurance company, offering investment funding options for pension plans.
Service Provider: Defined contribution plan in which employers make contributions to individual employee
accounts (similar to IRAs). Employees may also make pre-tax contributions to these accounts. As of January 1997,
no new SEP plans may be formed.
Service Provider Termination Charge: Plan administrative costs associated with terminating a relationship
with a service provider, with the permanent termination of a plan, or with the termination of specific plan
services. These may be termed “surrender” or “transfer” charges.
Signature Ready Form 5500: Fee to prepare Form 5500, a form which all qualified retirement plans (excluding
SEPs and SIMPLE IRAs) must file annually with the IRS.
Standard & Poor’s Corporation: A rating agency that analyzes the credit quality of bonds and other securities.
Standard & Poor’s 500 Index: An index that is widely replicated by stock index mutual funds. Also known as
the S&P 500, it consists of 500 large U.S. companies.
Start-up/Enrollment Expense: Costs associated with providing materials to educate employees about the plan,
and enrolling employees in the plan. This may be part of, or included in, the education programs. There may
be a one-time cost associated with implementing a new plan, as well as ongoing enrollment costs.
Stock: Security that represents a unit of ownership in a corporation.
57
RESOURCES
Index of Terms
Stock Bonus Plan: A defined contribution plan in which company contributions are distributable in the
form of company stock.
Summary Annual Report: A report that companies must file annually on the financial status of the plan.
The summary annual report must be automatically provided to participants every year.
Summary Plan Description (SPD): A document describing the features of an employer-sponsored plan.
The primary purpose of the SPD is to disclose the features of the plan to current and potential plan
participants. ERISA requires that certain information be contained in the SPD, including participant rights
under ERISA, claims procedures and funding arrangements.
Summary of Material Modifications: A document that must be distributed to plan participants

summarizing any material modifications made to a plan in which 60 percent of account balances (both
vested and non-vested) are held by certain highly compensated employees.
Tax Deferral: Investments where taxes due on the amount invested and/or its earnings are postponed until
funds are withdrawn, usually at retirement.
Tax-Exempt: Investments (e.g., municipal bonds) where earnings are free from tax liability.
Total Return: The return on an investment including all current income (interest and dividends), plus any
change (gain or loss) in the value of the asset.
Trustee: The individual, bank, or trust company having fiduciary responsibility for holding plan assets.
Trustee Services: Fees charged by the individual, bank, or trust company with fiduciary responsibility for
holding plan assets.
Turnover Rate (of a fund): A measure of the trading activity in a mutual fund.
12b-1 Fee: A charge to shareholders to cover a mutual fund’s shareholder servicing, distribution, and
marketing costs, or used to offset employer contribution.
UPIA: Uniform Prudent Investor Act.
Unit Investment Trust (UIT): An unmanaged portfolio of professionally selected securities that are held
for a specified period of time.
U.S. Treasury Securities: Debt instruments issued by the federal government with varying maturities (bills,
notes, and bonds).
VRU: Voice Response Unit.
Value Stock: A stock with a relatively low price compared to its historical earnings and the value of the
issuing company’s assets.
Vesting: The participants’ ownership right to company contributions.
58
RESOURCES
Index of Terms
Vesting Schedule: The structure for determining participants’ ownership right to company contributions (see
matching contributions). In a plan with immediate vesting, participants own all company contributions as soon as
they are deposited into individual accounts. In cliff vesting, company contributions will be fully owned (i.e.,
vested) only after a specific amount of time, and employees leaving before the allotted time are not entitled to any
company contributions (with certain exceptions for retirees). In plans with graduated or graded vesting, vesting
occurs in specified increments.
Volatility: The degree of price fluctuation associated with a given investment, interest rate, or market index. The
more price fluctuation that is experienced, the greater the volatility.
Wrap Fee: An inclusive fee generally based on the percentage of assets in an investment program, which
typically provides asset allocation, execution of transactions, and other administrative services.
Zero-Coupon Bonds: Debt instruments issued by government or corporations at a steep discount from face
value. Interest accrues each year but is not paid out until maturity.
59
RESOURCES
Tools and Resources
RECOMMENDATIONS FROM F INANCIAL SERVICE STANDARDS, LLC

With all that is required from plan sponsors and fiduciaries in the setup, management, and review
of a qualified plan, these are a few of the resources we have found to be helpful:
BOOKS :
Prudent Investment Practices—A Handbook for Investment Fiduciaries, 2003
by the Foundation for Fiduciary Studies. www.fi360.com
Helping Employees Achieve Retirement Security, 1997 by Theodore Benna,

Investor Press, Inc.
How to Write an Investment Policy Statement by Jack Gardner
The Management of Investment Decisions by Don Trone
The New Fiduciary Standard: The 27 Prudent Investment Practices for

Financial Advisers, Trustees, and Plan Sponsors by Tim Hatton
PUBLICATIONS :
The Department of Labor (www.dol.gov) offers the following (highly recommended)
publications:
Meeting Your Fiduciary Responsibilities - To meet their responsibilities as plan

sponsors, employers need to understand some basic rules, specifically the
Employee Retirement Income Security Act (ERISA). ERISA sets standards of
conduct for those who manage an employee benefit plan and its assets (called
fiduciaries). This publication provides an overview of the basic fiduciary
responsibilities applicable to retirement plans under the law.
Understanding Retirement Plan Fees And Expenses - This booklet will help
retirement plan sponsors better understand and evaluate their plan's fees and
expenses. While the focus is on fees and expenses involved with 401(k) plans,
many of the principles discussed in the booklet also will have application to all
types of retirement plans.
401(k) Plan Fee Disclosure Tool - A form that provides employers with a handy way
to make cost-effective decisions and compare the investment fees and
administrative costs of competing providers of plan services.
Selecting An Auditor For Your Employee Benefit Plan - Federal law requires
employee benefit plans with 100 or more participants to have an audit as part of
their obligation to file the Form 5500. This booklet will assist plan administrators
in selecting an auditor and reviewing the audit work and report.
Reporting and Disclosure Guide for Employee Benefit Plans - This guide is
intended to be used as a quick reference tool for certain basic reporting and
disclosure requirements under ERISA.
60
RESOURCES
Tools and Resources Continued...
O THER H ELPFUL RESOURCES:
Useful Reports from The Department of Labor Website—www.dol.gov
401(k) Plans for Small Businesses
Reporting and Disclosure Guide for Employee Benefit Plans
Troubleshooters Guide to Filing the ERISA Annual Report (Form 5500)
Pension Plans and ERISA - FAQs that describe the provisions of the federal pension law.
Frequently Asked Questions on the Small Pension Plan Audit Waiver Regulation - FAQs on how to determine
whether a small plan has met the conditions for the audit waiver requirements under the amended regulation.
Exemption Procedures Under Federal Pension Law
EXPRO Exemptions Under Prohibited Transaction Exemption 96-62
Individual Exemptions Under Title I of ERISA
DFVC Fact Sheet
VFCP Fact Sheet
DOL Report of the Working Group on Optional Professional Management In Defined Contribution Plans
The Profit Sharing Council of America - www.psca.org
PSCA's Profit Sharing and 401(k) Plan Cost Disclosure Worksheet - Worksheet to help you disclose costs
associated with starting, maintaining, and terminating a profit sharing or 401(k) plan.
Reish, Luftman, Reicher & Cohen - www.reish.com
Article on The Fiduciary Duty to Ask for Help
N EWSLETTERS:
Employee Plans News - A publication of the Employee Plans office of the Tax Exempt and Government Entities
Operating Division of the IRS. This quarterly newsletter provides information about current developments and
upcoming events within the retirement plans arena. (www.dol.gov)
Department of Labor: DOL offers additional updates through its website at www.dol.gov. By voluntarily subscribing to
E-mail Updates, OCA will send you an email when significant Compliance Assistance activities occur or when DOL adds
new, valuable information to the Compliance Assistance Web pages. You can subscribe to all OCA mailings or narrow
the mailings by selecting from individual web pages. It’s DOL’s way of keeping you informed of new developments in
Compliance Assistance programs and employment law resources.
Internal Revenue Service - The IRS also offers a newsletter for sponsors that includes regulatory updates at www.irs.gov.
They offer two different newsletters:
Employee Plans News
Geared toward retirement plan practitioners - attorneys, accountants, actuaries, and others - this newsletter
presents information about retirement plans. View their current edition, browse the newsletter archive, or
subscribe to future editions.
Retirement News for Employers
Designed for employers and business owners, this newsletter provides practical retirement plan information.
View their current edition, browse the newsletter archive, or subscribe to future editions.
Plan Sponsor Magazine - They offer an email program called News Dash—‟the latest news for plan sponsors delivered
to your inbox everyday.” (www.plansponsor.com)
Profit Sharing Council of America offers Legislative & Regulatory Updates. PSCA’s Executive Report, a monthly
legislative newsletter and compliance bulletin provides members with concise information on Washington’s most recent
events. (www.psca.org)
61
RESOURCES
ADDITIONAL TOOLS AVAILABLE:

Investment Policy Statement Software:
Rowe Decision Analytics (www.myinvestmentpolicy.com)
Fiduciary360 and The Center for Fiduciary Studies (www.Fi360.com)
Plan Tools (www.plantools.com)
Investment Review Software:

Fiduciary360 and The Center for Fiduciary Studies (www.Fi360.com)
Plan Tools (www.plantools.com)
The Center for Due Diligence (www.401kduediligence.com)
Morningstar (www.morningstar.com)
Fitch Ratings (www.fitchratings.com)
The 401k Exchange (www.401kexchange.com)
Fact Set for Investment Managers (www.factset.com)
PUBLICATIONS :
Pensions & Investments Magazine (www.pionline.com)
Employee Benefit News (www.benefitnews.com)
Plan Sponsor Magazine (www.plansponsor.com)
Employee Benefits Journal (www.ifebp.org)
O RGANIZATIONS:
National Association of Government Defined Contribution Administrators
(NAGDCA)
Employee Benefit Research Institute (EBRI)
Public Retirement Institute (PRI)
Pension Research Council (PRC)
International Foundation of Employee Benefit Plans (IFEBP)
International Association for Financial Planning
Profit Sharing 401(k) Council of America (PSCA)
American Savings Education Council (ASEC)
National Pre-Retirement Education Association (NPEA)
O THER :
BenefitsLink
401kHelpCenter
Mention of a trademark, product, or commercial firm in text or figures does not constitute
an endorsement by Financial Service Standards, LLC and does not imply approval to the
exclusion of other suitable products or firms. Neither does it imply an endorsement or
approval on their behalf of the services provided by Financial Service Standards, LLC.
62
RESOURCES
The 401k Service Solution™ was formalized by Financial Service Standards, LLC based on the
processes Donald J. Settina had been using in his existing retirement plan practice. These
processes were a result of his experience and education, incorporating input from his existing plan
clients, and in accordance with applicable legislative guidance.
While the development of these courses did not include specific guidance from The Foundation for
Fiduciary Studies, after completing the Accredited Investment Fiduciary™ course, it was discovered
that Mr. Settina’s existing process could provide the documented solution to the practical
application of the Practices, as defined by the Prudent Investment Practices Handbook for
Investment Fiduciaries 2003 (written by the Foundation for Fiduciary Studies).
Because the work that The Foundation for Fiduciary Studies is doing to advance the understanding
of the practice standards of care is so critical to running a compliant retirement plan, we felt it was
important to provide more information on this foundation and how it can help plan sponsors and
fiduciaries.
“The Foundation for Fiduciary Studies (Foundation) is a nonprofit organization that was established
to develop and advance practice standards of care (practices) for investment fiduciaries, which
includes trustees and investment committee members, as well as brokers, bankers, and investment
advisors. It is independent of any ties to the investment community and, therefore, positioned to be
a crucible for advancing the practice standards of care.
“There are an estimated five million people who have the legal responsibility for managing
someone else’s money, yet there is a surprising lack of detailed information that defines the
investment management process they should follow. Legislation, case law and regulatory opinion
letters provide the skeleton – the role of the Foundation is to put muscle, skin and hair on that
skeleton and to help bring the body to life. For example, fiduciary legislation clearly requires that a
due diligence process be followed in selecting an investment option, yet the industry has not
defined what constitutes a minimum due diligence process.” (fi360.com)
For more information on The Foundation for Fiduciary Studies, The Center or Fiduciary Studies, or
the services and tools they have available, go to www.fi360.com.
We recommend all sponsors and fiduciaries use the Prudent Investment Practices Handbook as a
working reference tool during the management of your employer-sponsored plan. You can get a
copy of this handbook by going to www.fi360.com.
63
SOURCE CREDITS
The information in this handbook was compiled from a variety of sources, including:
The 401k Service Solution™ set of processes, courtesy of Don Settina, Inc.
The Department of Labor online guidance
ERISA legislation: The Employee Retirement Income Security Act of 1974
Wikipedia
Investopia.com
Rutgers Cooperative Extension
The Prudent Investment Practices Handbook by The Foundation for Fiduciary Studies
As the law and regulations continue to change, it is important to be aware of those changes and
how they affect you and your plan. The information contained in this handbook is provided for
research and educational purposes. It is believed to be reliable at the time of printing, but
Financial Service Standards, LLC makes no claim to the accuracy of the information collected from
outside sources. This handbook is not intended to be legal or tax advice. Rather, it is intended
only as a general summary, in non-technical terms, of certain basic concepts applicable to 401(k)
plans and, in some cases, certain other types of tax-qualified retirement plans. Although this
material concentrates on 401(k) plans, it is not intended to provide a comprehensive discussion of
401(k) plans or other types of tax-qualified retirement plans. Plan sponsors should consult their
attorneys about the application of any law to their retirement plans.
64

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A HANDBOOK FOR RETIREMENT PLAN SPONSORS AND FIDUCIARIES

Written by Financial Service Standards, LLC

Foreword by J. Richard Lynch, Executive Director, Foundation for

the 401k Service SOLUTION™

The duty to act prudently is one of a fiduciary’s central responsibilities

The goal of this Handbook is to:

Copies of this Handbook may be obtained from:

Financial Service Standards, LLC

Printed in the United States of America

Published in 2007 by Financial Service Standards, LLC.

F OREWORD BY J. R ICHARD LYNCH ......................................................................................4

WHAT TO LOOK FOR IN A SERVICE PROVIDER

In an industry where the retirement plan participants have become

The most widely accepted reference guide that explains the

The Prudent Investment Practices Handbook states that “by

The 401k Service Solution™ was developed to provide that

The remaining steps are intended to:

Education Summary &

Prudent Investment Practices Handbook

The Vision Session is a process to assist fiduciaries in determining

As you review an existing plan or look to set up a new one, it is critical to

The following steps make up the process in The Vision Session:

1. R EVIEW WHAT MAKES A PLAN SUCCESSFUL

“The preparation and maintenance of the Investment Policy Statement

Prudent Investment Practices Handbook

The foundation of every employer-sponsored plan should be a written

‘USE’ is emphasized because while most plans will admit to having an

1. R EVIEW THE DUTIES OF A F IDUCIARY UNDER ERISA

“Critical Concept: Liability is not determined by investment performance,

Prudent Investment Practices Handbook

How well are you fulfilling your F IDUCIARY obligations?

With the responsibility of overseeing participants’ retirement plan assets

Being a fiduciary is a matter of complying with the requirements outlined in

This Lead Fiduciary Practice is designed to educate you on the basic

1. UNDERSTAND T HE R OLE OF A F IDUCIARY

“Custodial selection is a very important fiduciary function. Most fiduciaries

Prudent Investment Practices Handbook

As a retirement plan sponsor and fiduciary, you are responsible for

Most companies do not have a system in place to compare their existing

1. R EVIEW THE KEY F EATURES OF R ETIREMENT PLANS

Whether you intend to meet ERISA Section 404(c) requirements or retain

A retirement plan cannot be considered successful if employees do not

Most employees do not fully understand the benefit provided to them in

1. DEVELOP A SUCCESSFUL PARTICIPANT EDUCATION PROGRAM

The vast amount of information necessary to effectively manage a qualified

All of those involved in the management of a qualified plan must

This is perhaps one of the most important processes a fiduciary can

1. UNDERSTAND R ETIREMENT PLAN A DMINISTRATIVE ISSUES

The 401k Service Solution™ provides structured processes to follow to

The education guides take you through each process step-by-step,

Corporate officers who appoint

Investors can sometimes become confused by the many designations used by

• Accredited Investment Fiduciary (AIF)

Other Terms Used by Investment Professionals

Financial Analyst, Financial Adviser (Advisor), Financial Consultant,

The information in this handbook was compiled by Financial Service

The Professional Plan Consultant™ designation is awarded to those that

This designation signifies a commitment to education and service excellence

Those awarded the designation of Professional Plan Consultant™ have

Monitoring A Service Provider

• Reviewing the service providers’ performance;

1. Know standards, laws, and trust provisions.

These standards make up the foundation that guides a fiduciary as the