Matthew M' Green, AIFJohn R' McClary, CPA

1
The Seven Biggest Mistakes Medical Groups Make
With Their Retirement Plan

• Matthew M. Green, AIF John R. McClary, CPA
• Director - Investments Partner
• Cooke Financial Group Murphy, McClary, Stover
  and Burnett, LLC

2
Mistake 1
Ignoring proper fiduciary responsibility.
3
In a Post-PPA World, the New Fiduciary Standard
Old Paradigm
New Paradigm
3
4
Mistake 2

• Relying solely on traditional employee/participant
  education to boost participation rates and guide
  investment decisions.

5
Employee/Participant Education Case Study 1

• Mega Plan
• Multi- Million Dollar Investment in New
  Educational Material
• Customized Illustrations Mailed to Participant
  Homes from Well-Known On-Line Advice Provider
• Prominent Professional Services Firm Conducted
  On-Site Meetings
• Success Measured Through 15 Question Yes/No
  Quiz Covering Basic Investment Principles

Correct Answers
6
Employee/Participant Education Case Study 2
Non-Attendees
Seminar Attendees
ActualChange
PlannedChange
ActualChange
Non Participants Enroll in 401(k)
Plan 100 14 7 Participants Increase
contribution rate 28 8 5 Change fund
selection 47 15 10 Change asset
allocation 36 10 6
Source Medrian and Shea, 2001
7
Employee/Participant Education Case Study 2
Non-Attendees
Seminar Attendees
ActualChange
PlannedChange
ActualChange
Non Participants Enroll in 401(k)
Plan 100 14 7 Participants Increase
contribution rate 28 8 5 Change fund
selection 47 15 10 Change asset
allocation 36 10 6
Source Medrian and Shea, 2001
8
Employee/Participant Education Case Study 2
Non-Attendees
Seminar Attendees
ActualChange
ActualChange
PlannedChange
Non Participants Enroll in 401(k)
Plan 100 14 7 Participants Increase
contribution rate 28 8 5 Change fund
selection 47 15 10 Change asset
allocation 36 10 6
Source Medrian and Shea, 2001
9
Mistake 3

• Too many investment options.

10
As Choices Increase, Participation Falls
()
401(k) Participation Rate
75
Choices Increase
Participation Declines 6.6
65
Number of Funds
Source Sheena Iyengar, Wei Jang and Gur
Huberman. 2003. How Much Choice is Too Much?
Determinants of Individual Contributions in
401(k) Retirement Plans Pension Research council
Working Paper, Wharton
11
Too Much Choice Leads to Short Cuts
of Participants
Contributions for Plans with No Threshold Near 5
or 10 (Excluding Match Threshold and Pretax
Limit)
Contribution Level
Source Benartzi and Thaler, 2005
12
Mistake 4

• Not using Lifecycle Target Date portfolios.

13
Target-Date Portfolios The Solution To Improving
Returns
Legacy Structure
Age-Based Glide Path
Value
Blend
Growth
AccidentalInvestors
ActiveInvestors
Advantages of Target-Date Portfolios

• Simplifies decision making for vast majority
• Likely to improve participant investment
  elections
• Addresses a fiduciary concern

Source AllianceBernstein
13
14
Lifecycle Target-Date Funds Are Now the Preferred
QDIA
of Large DC Plan Respondents
Expected Default Option
Current Default Option
Lifecycle Funds
Target-Risk Funds
Other
Lifecycle Funds
Target-Risk Funds
Other
Money Market or Stable Value
Money Market or Stable Value
As of September, 2007. Results reflect over 200
defined contribution plans with more than 250MM
in plan assets. Source Greenwich Custom Research
and AllianceBernstein
14
15
Target-Date Fund Most Important Decision for
401k Sponsors
Expected Assets in Defined Contribution Savings
Plans Indexed to Total Assets in 2005
All Other
100
60
Asset Allocation Strategies
10
Includes company stock, stable value or money
markets and core standalone options Assumes all
new employees are defaulted into an
asset-allocation default option such as a
target-date retirement portfolio, and that 80 of
these employees stay with it, 10 annual turnover
in employees, and 10 annual shift of other
employees assets into the asset allocation
portfolio. Source Data from Cerulli Associates
and Hewitt Associates, modeled by
AllianceBernstein
15
16
Target-Date Participants Get A Better Allocation
. . .
Source Mottola and Utkus (2005)
16
17
Mistake 5

• Lack of an auto-enrollment program.

18
Auto-Enrollment Is Becoming Standard Practice In
The U.S.
Percent of Plans with Auto-Enrollment Programs
(New Employees)
71
Likely or Very Likelyto Offer
34
19
14
Source Greenwich Associates, Hewitt Associates
and AllianceBernstein 2007
18
19
Mistake 6

• Lack of an auto-escalation program.

20
Auto-Escalation at work The SMarT Plan
Average Savings Rates by Participant Type
()
Source Benartzi and Thaler, 2004
21
Mistake 7

• Not adding a Cash Balance plan to the existing
  retirement plan.

22
Cash Balance Plan Popularity is Exploding
Traditional defined benefit plans 1985
112,208 2005 29,000 2007 4,000 Cash
Balance Plans 2000 4 2005 10 (120) 2007
295 (475) Source Employee Benefit Research
Institute, 2007
23
Cash Balance Plans Offer A Dramatically Higher
Retirement Saving Opportunity
24
while Significantly Lowering Taxes
25
Contact Information
Matthew M. Green, AIF Cooke Financial Group
8888 Keystone Crossing, Suite 200 Indianapolis,
IN 46240 [phone] matthew.green_at_wellsf
argoadvisors.com John R. McClary, CPA Murphy,
McClary, Stover and Burnett, LLC10401 N.
Meridian St., Suite 280 Indianapolis, IN 46290
[phone] jmcclary_at_mmsbcpas.com