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Defined Benefit: Plan Services

Overview

A Defined Benefit (DB) plan provides a solid foundation for retirement, rounding out a total retirement program. It can be used on its own or with 401(k), 403(b), profit sharing, money purchase and nonqualified plans.

Delivering a broad range of services
Your retirement program has to reflect the unique needs of your organization and employee base, a competitive environment and cost constraints. As an industry leader of DB plans [1], we take a consultative approach, carefully considering a wide range of factors to help design a retirement program for you. This approach integrates your retirement program with services that help reduce your administrative work. Services include:

Through our experienced actuaries and consultants, we can help make certain your Defined Benefit plan meets your needs.Consulting Services – expertise drives solutions

By providing proactive support and a broad array of resources, we seek to develop strong working relationships that foster trust and confidence – resulting in a willingness to explore new approaches, adapt to evolving needs, and take action to implement time-tested processes and practices. Our consulting services give you access to the breadth and depth of knowledge that The Principal has accumulated in working with a broad range of retirement plans, representing expertise that stretches across the full scope of our capabilities

If your third-party administrator already provides these services, we can tailor your retirement plan services to meet the needs you do have.

Actuarial Consulting Services

At The Principal, we perform all the in-depth consulting and actuarial services that major actuarial consulting firms do. Our plan consulting team includes 25 independent enrolled actuaries with an average of more than 21 years experience, as well as trust specialists, plan document specialists and other specialists. Our actuaries are known for prompt services, open communication and business sense. They work independently for an objective perspective, adhere to well-established peer review program and have no sales or revenue targets.

Challenges/Solutions for Plan Sponsors

Plan sponsors face many issues, including the Pension Protection Act (PPA), accounting changes and volatile market conditions. We can offer various solutions, including forecasting, plan design, and an asset-liability modeling (ALM) study.

  • Forecasting and projections help determine the likelihood of future costs and potential liabilities, helping you measure the affordability of your DB plan and budget for both the short- and long-term. Our consulting actuaries use sophisticated tools to measure the potential financial outcomes, including projected contribution amounts and their volatility from year to year, and your projected accounting expenses.
  • We help you determine which plan design options to investigate by asking questions about your particular situation. Plan design studies can help analyze difference options, including a change in plan provisions, soft plan freeze and hard plan freeze.
  • Through a customized asset-liability modeling study, we can work with you to help you measure the risk in your DB plan, manage and monitor the risk over time.

Develop a Termination Strategy

We've developed a four-step process to help plan sponsors and their financial professionals identify a strategy to terminate the DB plan in a way that fits their organization, timeline and budget.

  1. Evaluate costs to terminate: To help the plan sponsor budget for short- and long-term plan costs, and determine a timeframe.
  2. Evaluate funding strategies: To help the plan sponsor select the desired option.
  3. Evaluate asset allocation strategies: To identify risk, including the advantages of changing the asset allocation strategy over time.
  4. Monitor progress: To help ensure the termination is on track.

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Combine your plan services together to obtain relevant information and offer suggestions quickly.Plan Sponsor Services – An extension of your plan resources

Consolidating Plan Services

If you are working with multiple service providers – such as a separate actuary, investment provider, administrative services provide and plan recordkeeper – you're likely managing additional work and missing out on efficiencies. It takes extra time and effort to coordinate multiple service providers and can increase your fiduciary risk and the chance for errors, delays and unnecessary expenses.

With a single point of contact for administrative services, investment options, data management, employee education and more, you can streamline these components of your DB plan, saving time and resources. Benefits can include:

  • Potential for more timely services due to less back and forth with providers.
  • Greater likelihood of data accuracy because of fewer handoffs and a single data source, and potentially lower fiduciary risk due to the greater accuracy.
  • Increased participant appreciation and awareness with access to a dedicated website, call center and planning tools.
  • Potential hard-cost savings because you no longer pay for services separately, including profit margins and overhead from multiple providers.
  • Soft-cost savings from the time and resources you no longer spend managing separate providers.

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Offer employees an array of solutions to meet their changing priorities.Participant Services

Defined Benefit plans can be one of the most valuable benefits you offer. However, many participants may not fully understand or appreciate the benefit.

Increase awareness and appreciation

Together with your financial professional, we offer a compelling array of education solutions, from statements to targeted campaigns, designed to increase participants' awareness and appreciation of your defined benefit plan.

Our easy-to-understand education tools and materials:

  • Provide an introduction to the basics of a defined plan and how it differs from other plans.
  • Reinforce the idea that defined benefit plans are a valuable benefit paid for solely by the employer. Most defined benefit plans require no participant contribution.
  • Show how defined benefit plans can provide a solid foundation of financial security for eligible employees by providing an anticipated retirement benefit.
  • Explain how a defined benefit plan fits into participants' overall strategy for retirement security by showing how the benefit works with other sources of income such as Social Security, personal savings and other employer-sponsored plans.
  • Emphasize the ease of the benefit – little action is required on the part of the participant to manage or monitor the plan.

Comprehensive education resources

We make it easy for your participants to understand the value of your defined benefit program by offering comprehensive resources. These tools include:

  • Our award-winning benefit statements,[2] which are also available online, feature earned monthly benefits, vesting percentage and estimated monthly benefits, as well as information about the plan and its assumptions.
  • Our secure website at principal.com is a very important resource. Participants can access personalized information as well as historical data such as compensation history, hours history, service data and more. The Retirement Planning Center link contains educational tools and resources, including our Estimated Benefit Calculator. Unique in the industry, this tool uses participants' personal data, rather than industry averages, to model retirement plan benefits under a variety of scenarios.
  • We provide World Class Service[3] through our client contact center. Participants can call and speak directly to multilingual retirement specialists who can answer detailed questions. These retirement specialists are registered with the Financial Industry Regulatory Authority (FINRA) with a Series 6.

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Investment Services

Our legacy of retirement and investment expertise allows us to help you find what you need to create a professionally-managed, diversified portfolio for your defined benefit retirement plan.

Providing you choice

  • Select from an attractive mix of more than 70 Sub-Advised Investment Options[4],[5] which are:
    • Managed by more than 30 investment managers (selected through our due diligence process) from the industry's leading investment firms
    • Designed to be appropriate for retirement savings under employer-sponsored plans and cover a wide range of asset classes
  • For even more choice and flexibility, the Mutual Fund Network is available, featuring a vast menu of investment choices with more than 3,000 mutual funds from more than 170 fund families.[5]

Helping you meet your fiduciary needs

Our analysts use sophisticated analytics to monitor the available investment options along with independent third party metrics and market indices. This provides a consistent process to evaluate and monitor the investment options on our investment platform.

  • Due diligence forms the foundation
    The Principal® understands the fiduciary responsibilities plan sponsors face in developing and monitoring an investment lineup appropriate to help meet the diverse needs of retirement plan participants. We undertake a rigorous due diligence process as a direct response to this challenge, resulting in a key differentiator -- our Sub-Advised Investment Options [4]:
    • We perform quantitative and qualitative reviews of our Sub-Advised Investment Options allowing Principal Life Insurance Company to have fiduciary oversight and the ability to oversee the investment manager selection and monitoring process. Our team uses sophisticated analytics and independent third party metrics and market indices, providing a consistent process to evaluate and monitor the investment options we make available on our investment platform.
    • Through the due diligence process we identify, hire and monitor a select group of investment managers that are typically only available to large, institutional retirement plans. Through this defined and proven process, the member companies of The Principal are able to make available to you and your financial professionals a level of indemnification and fiduciary support.
  • Investment fiduciary support & services
    With education from your financial professional and third party administrator, you have a choice to receive a level of indemnification protection against three key areas of fiduciary concern:
    • Broad Range Requirement under ERISA 404(c
    • Qualified Default Investment Alternative (QDIA)
    • Prudent selection and monitoring
    While our due diligence process forms the foundation of the prudent selection and monitoring coverage provided by The Principal, we make available additional investment fiduciary support & services to choose from. Let the range of Investment Fiduciary Support & Services we make available help you feel more confident and in control when selecting investment options for your retirement plan's lineup.
  • Investment advisory services
    You will also have access to investment advisory services through Principal Financial Advisors, Inc.,[7],[8],[9] a registered investment adviser and member company of the Principal Financial Group. When appointed as the plan's ERISA Section 3(38) investment manager, Principal Financial Advisors will:
    • Develop and implement a customized asset allocation strategy based on your plan's unique situation
    • Take fiduciary responsibility for investment decisions[10]
    • Provide ongoing monitoring, communication and consultation
[1]
No. 1 for number of total DB clients, PLANSPONSOR DB Administration survey, April 2012
[2]
2010 DALBAR Seal of Excellence
[3]
c wenger group, Second quarter 2010
[4]
Sub-Advised Investment Options include the Principal Stable Value Fund, Principal Funds, the Principal TrustSM Target Date Collective Investment Funds, and the Principal Life Separate Accounts available through a group annuity contract with Principal Life Insurance Company, Des Moines, IA 50392.
[5]
As of June 30, 2012
[6]
This is for informational purposes only and does not affect those terms and provisions of the investment fiduciary support and services document(s) for comprehensive details on the investment fiduciary support and services, see a sample Investment Fiduciary Support and Services Terms and Conditions document.
[7]
Principal Financial Advisors, Inc. is a registered investment adviser and member company of the Principal Financial Group®.
[8]
Asset Allocation strategies are developed using Separate Accounts available through a group annuity contract of Principal Life Insurance Company.
[9]
Insurance products, plan administrative services, and separate accounts which are available through a group annuity contract, are provided by Principal Life Insurance Company, a member of the Principal Financial Group®(The Principal®), Des Moines, IA 50392. Certain Separate Accounts may not be available in all states or U.S. Commonwealths. contract with Principal Life, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.
[10]
The plan sponsor remains the "named fiduciary" of the plan, but you select Principal Financial Advisors, Inc. as your plan's investment adviser.

Sub-Advised Investment Options include Separate Accounts available through a group annuity contract with Principal Life Insurance Company and mutual funds available through the Principal Funds, Inc. Separate Accounts are made available through a group annuity contract with the Principal Life Insurance Company, Des Moines, IA 50392. Securities are offered through Princor Financial Services Corporation, 800.547.7754, Member SIPC and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor®. Principal Funds Distributor, Princor, and Principal Life are members of the Principal Financial Group, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.

Investors should carefully consider a mutual fund's investment objectives, risks, charges, and expenses prior to investing. A prospectus, or summary prospectus if available, containing this and other information can be obtained by contacting a financial professional, visiting principal.com, or calling 1.800.547.7754. Read the prospectus carefully before investing.

Before directing retirement funds to a separate account, investors should carefully consider the investment objectives, risks, charges and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information contact us at 1.800.547.7754 or by visiting principal.com.

The investment fiduciary support and services apply to covered plan investment options that are part of a Qualified Retirement Plan recordkept by Principal Life. 404(c) and QDIA coverage applies only to plans subject to ERISA. No member company of The Principal assumes any additional fiduciary responsibility for any nonqualified deferred compensation plan. No part of the investment fiduciary support and services applies to nonqualified deferred compensation plans subject to 409(A), 457(f) or 457(b) plans for employers under §457(e)(1)(B). For purposes of plans not subject to ERISA, Principal Life indemnifies, where applicable, the Plan Representative who signs the Service Agreement.

Investment options are subject to investment risk. Shares or unit values will fluctuate and investments, when redeemed, may be worth more or less than their original cost.

Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options.

Principal Life is not a fiduciary in the broader context of operating any plan. The selection of any investment options on behalf of a plan is the fiduciary responsibility of the appropriate plan fiduciary, which is not Principal Life, nor any affiliate. Principal Life does not guarantee performance of any investment option [other than the portion of a group annuity contract that constitutes a guaranteed benefit policy as described in ERISA §401(b)(2)]. Principal Life does not guarantee that any investment option will meet the criteria of any particular plan's investment policy statement, include reasonable fees, or otherwise be suitable for use by any specific plan. The fiduciary tasks undertaken by Principal Life do not eliminate all responsibilities of the relevant plan fiduciaries for the prudent selection of any investment option for a retirement plan. Plan fiduciaries remain subject to a varying amount of ongoing responsibility, depending on the structure of the plan the fiduciary serves and the nature of the plan fiduciary's position. Please consult with your counsel or other adviser as to the responsibility of a plan fiduciary with regard to the selection or retention of any plan investment option by a plan fiduciary.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal Funds, Inc., is distributed by Principal Funds Distributor, Inc. Securities are offered through Princor Financial Services Corporation, 800.547.7754, Member SIPC and/or independent broker/dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Principal Funds Distributor, Princor and Principal Life are members of the Principal Financial Group®, Des Moines, IA 50392. Separate Accounts are made available through a group annuity contract with Principal Life, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.

 

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