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Finally . . . the Right Solution for Retirement Plan Loans

Finally . . . the Right Solution for Retirement Plan Loans. Sean K. Arnold, Product Manager Phone: 315.292.6941 E-mail : sarnold@bpas.com. Retirement Plan Loan Concerns. Should loans be offered? Do loans contribute to increased participation and savings rates?

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Finally . . . the Right Solution for Retirement Plan Loans

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  1. Finally . . . the Right Solution for Retirement Plan Loans Sean K. Arnold, Product Manager Phone: 315.292.6941 E-mail: sarnold@bpas.com

  2. Retirement Plan Loan Concerns • Should loans be offered? • Do loans contribute to increased participation and savings rates? • If loans are offered, is the 72(p) limit a prudent loan limit? • Can the payroll department effectively administer the plan’s loan provision? • Do loans promote leakage of terminated participant plan assets? SOURCE: United States Government Accountability Office, GAO-09-715

  3. MyPlanLoan - A Better Solution The solution to help stem the tide of Plan Leakage • Loans not repaid • Offer MyPlanLoan Continuation, which provides a terminated participant with the option to continue to repay outstanding loans • Withdrawals during active employment • Offer MyPlanLoan with a maximum loan limit less than 72(p) for active participants and ensure that loans are exhausted before in-service withdrawals (hardship and non-hardship) can be requested • Cash outs upon termination of employment • Offer MyPlanLoan Non-Revolving Loan program to terminated participants to encourage keeping their retirement savings intact, with the potential availability to borrow from their account in the event of need

  4. The MyPlanLoan Difference Traditional Loans • HR department handles much of the process • Loan payments deducted each payroll cycle • Issues with payroll deducted loan payments are common • Upon termination, participant must either repay within 90 days or be forced to default MyPlanLoan • HR “gets out of the loan business” • BPAS assumes entire process for loan administration • Participants make payments directly to BPAS each month • Participant can pay additional amount of principal at any time • Solution for terminated participants to help prevent default

  5. MyPlanLoan vs. Traditional Loans

  6. Benefits of the Program Solves the immediate “payoff or default” dilemma at termination Terminated participants with an outstanding traditional (payroll deduct) loan can elect to transfer repayment to MyPlanLoan How the Participant is notified Eligible participant receives letter from BPAS Terminated participant signs and returns Agreement to BPAS Traditional loan(s) transferred to MyPlanLoan Participant Fees/Costs MyPlanLoan Maintenance Fee - $4/month Transactions Fees $2/check or money order received $2/monthly paper statement $20/returned payment MyPlanLoan Continuation

  7. Benefits of the Program Solves the loan administration dilemma for HR departments All eligible loans for both active and terminated participants are transferred to MPL for invoicing and repayment How the Program is set up • Plan selects option during MyPlanLoan setup process. Coordinated by MyPlanLoan Account Representative to determine effective date of transfer, timing of last payroll deduct loan payment, and participant notification • Plan level decision to transfer all existing traditional loans to MPL; no participant action required MyPlanLoan Administration • Participant Fees/Costs • MyPlanLoan Maintenance Fee - $4/month • Transactions Fees • $2/check or money order received • $2/monthly paper statement • $20/returned payment

  8. MyPlanLoan Non-Revolving Loan Benefits of the Program Provides option for both active and terminated participants in the plan to request a new non-revolving loan; one loan outstanding at a time Encourages participant to retain their retirement account as an investment How the Program is set up • Online application process completed by participant eligible to request a loan • Approved loan proceeds are sent to the participant through an ACH to their banking account • Participant Fees/Costs • MyPlanLoan Maintenance Fee - $4/month • Transactions Fees • $2/check or money order received • $2/monthly paper statement • $20/returned payment

  9. MyPlanLoan Revolving Loan Benefits of the Program Multiple loans for participants. All loan administration is handled by MyPlanLoan Approved loan amount is transferred to a Money Market fund within the plan. Funds are withdrawn from the plan when the participant uses their MyPlanLoan access card. The balance of the funds remains in the plan continuing to earn tax-deferred dividends for the participant How the Program is set up • Online application process completed by participant eligible to request a loan • Participant receives a MyPlanLoan access card. Each time the participant uses the card a loan is created in the MyPlanLoan system • Participant Fees/Costs • MyPlanLoan Service Fee for each card usage – 2.7% • MyPlanLoan Maintenance Fee - $3/month • Transactions Fees • $2/check or money order received • $2/monthly paper statement • $20/returned payment

  10. MyPlanLoan Services Services under MPL Maintenance Fee • Monitor 72(p) limit rules for each loan • Payment clearing, processing and remittance to appropriate custodian • Participant call center • Participant notifications • Defaulted loan processing • Office of Foreign Assets Control (OFAC) and audit support Services under 2.7% Service Charge (Revolving Loans ONLY) • Card fulfillment • Recordkeeping of daily transactions • Monetary settlement with card provider • Fraud monitoring and research • Card re-issue if lost or stolen

  11. Participant Experience New MyPlanLoan Request (Revolving and Non-Revolving) • Participant logs into recordkeeper’s Participant website • Eligibility determined and available options displayed • Participant requests a MyPlanLoan account • Participant completes 6 step application process Online Maintenance of MPL Account • View loan details, amortization schedules, account balances, and payment history • View statements and make payments • Enroll in E-Delivery and recurring monthly ACH payments

  12. MyPlanLoan Customer Service Team • Dedicated Participant Call Center • Monday – Friday • 9am – 5pm ET • Inbound/Outbound calls • Missed Payment Notification • Letter - 30, 60, 90 days • Phone call and letter - Prior to default date • Bilingual • English and Spanish

  13. MyPlanLoan Participant Benefits • Allows terminated participants to continue making loan payments without the “pay off or default” dilemma seen in payroll-deducted loans • Non-Revolving and Revolving programs provide loan availability for terminated participants • Revolving program provides for loan access when traditional loan administration systems are not responsive • Natural disasters (i.e., Katrina) • Unforeseen emergencies (i.e., car repair) • Loan availability in workplace environments where plan loans might otherwise not be available • Flexibility in the ability to make additional, off-cycle loan payments

  14. MyPlanLoan Sponsor Benefits • Allows Sponsor and HR department to “get out of the loan business” • Flexible program options allow sponsors to provide the loan option that is best for their participants, both active and terminated • Ability to offer loans without payroll support requirements • Control to set loan availability and limits by employment status • A compassionate HR benefit for participants, many of whom are involuntarily terminated or terminate for good reason • Layoffs • Disability • Retirement • Family care • No cost for Plan Sponsor to add or maintain the program • There is a $250 de-conversion fee charged if the plan decides to stop offering the program (functional costs associated with final reconciliation and to provide recordkeeper /sponsor with data files for outstanding loans)

  15. Adding MyPlanLoan to Your Plan • Contact your representative at BPAS • Decide which MPL program(s) are best for your participants • Loan Continuation – recommended for all plans • Loan Administration – transfer of existing plan loans • Non-Revolving Loans – active and/or terminated participants • Revolving Loans – access cards for active and/or terminated participants • Amend Plan’s Loan Policy to include MyPlanLoan • Communicate MyPlanLoan availability to plan participants • Spend less time and resources on loan administration!

  16. About BPAS Benefit Plans Administrative Services, Inc. is a subsidiary of Community Bank System, Inc. (NYSE listed: CBU) • Offices in: • NY: New York City, Syracuse, Utica • IL: Chicago • NJ: East Hanover • PA: Philadelphia, Pittsburgh • TX: Houston • 250 employees providing: • TPA services – MyPlanLoan/AutoRollovers (EGTRRA distributions) • Actuarial Services (dedicated staff of 26 actuaries) • Institutional Trust (CIF administration) • VEBA/HRA, Flex services • MyPlanLoan contact: Sean K. Arnold, Sales • (315) 292-6941 / sarnold@bpas.com

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