Asset allocation models - Empower

[Pages:3]Asset allocation models

OVERVIEW

Clients or advisors (or other plan fiduciary) select the plan's investment options into which participants may invest retirement contributions. In addition to selecting the plan's investment lineup, Clients or advisors can create asset allocation models to assist participants who have limited investing experience. Asset allocation models:

? A single election results in the allocation of a participant' account in a diversified mix of the plan's underlying investment options.

? Provide participants with simple options for diversification according to individual goals, risk tolerance, and investment time horizon.

? Can be further customized to automatically periodically rebalance the portfolio and shift investment allocations over time.

? NOTE: Before making investment changes, participants should refer to investment prospectuses and/or disclosure documents.

Type of Models

Types of Models

Description

Risk-Based Target Date

? Investment portfolios tailored toward an investor's risk tolerance. ? Risk tolerance strategies include: Conservative, Moderately Conservative, Moderate,

Moderately Aggressive, and Aggressive. ? Investment portfolios tailored toward an investor's target retirement date range. ? Target Date models follow a glide path and can be customized in five or 10-year

increments. ? Target retirement date ranges can be further customized. ? NOTE: A glide path refers to a formula that defines the asset allocation mix of the asset

allocation model's underlying investments that becomes more conservative the closer a fund gets to a target date of retirement.

Designing asset allocation models

Clients or advisors can setup models on the Plan Service Center (PSC).

? Clients or advisors may choose to include both Target Date and Risk Based models within the plan.

? Clients or advisors can create up to 100 total models and a maximum of 10 Risk Based models.

? Models may generally include all available investment options in the investment lineup participants can invest in directly.

? Models are restricted to only include available investment options within the plan's investment lineup.

? Once a Client or advisor has created models on the PSC, the models are active immediately.

Asset allocation model features

Asset allocation models can be set up to automatically rebalance the underlying investments. ? Models automatically rebalance according to the frequency elected. ? Clients or advisors can select the rebalancing frequency as: Quarterly, Semi-annually, or Annually. ? Any changes made to existing models takes up to five business days to be applied.

Ongoing responsibilities When creating models, Clients or advisors enter into agreement with Empower. Clients or advisors:

? Are the authorized fiduciary to instruct Empower to construct and maintain asset allocation models. ? Agree to review models at least annually to determine if changes to existing models are required due

to changes in the plan's: investment policy, investment options, objectives, status, or restrictions. ? Are responsible for updating the model's investment option allocation when changes to the plan's

investment options occurs. For example, when an underlying investment option is reclassified into a different asset category, it leaves a gap in asset category that must be filled. ? NOTE: If Clients or advisors fail to update the investment allocation after a change to the plan's investment options has occurred, Empower may not be able to: apply updates to the models, advance the glide path, or rebalance existing models accordingly. ? Agree to provide an active email address for Empower to contact for inquiries related to models.

Participant experience ? By electing to invest via a model, participants also acknowledge that their account balance and future contributions invest based on the model's underlying funds and asset allocation percentages. ? Participants must choose to invest 100% of their account and all future contributions in a single model or not at all. ? Participants may opt out of the model at any time by changing their allocations or requesting an investment option transfer.

Fee change notification ? Advisors must provide their own initial fee change notice to clients and participants for models. ? Clients and advisors are responsible for providing a participant fee change notice and it must be sent at least 30 days in advance of the fee change effective date. ? Advisor fees charged for providing models, if applicable, are incorporated into participant fee disclosure one month in arrears once models are established.

Statements and reporting Additional reporting and notifications provided by Empower displaying model information are listed below.

Reporting

Description

Rebalance Letter

Participant Fee Disclosure

Participants in asset allocation models receive a rebalancing letter notifying them of the transaction each time the model is rebalanced.

? Displays fee and investment information as of the prior month. ? Historical fee disclosures are stored and can be accessed on the PSC.

Statements

Display's the participant account information and reflects the elected model and its underlying funds.

Participant Website

? Participant interface that displays account information. ? When models are active, model fund information is displayed.

Investment Options at a ? After the models have been live for a month, model performance is available.

Glance (IOAG) Report

? Model performance is displayed by default.

? Model performance can be turned off at the plan level.

PSC user guides

The following PSC user guides are available to assist Clients and advisors navigate the PSC website to setup, review, and edit asset allocation models.

Risk-Based Model Guide Advisor Risk Template

Risk-Based Model Guide Morningstar Risk Template

Target Dated Model Guide Advisor Glide Path

Target Dated Model Guide Morningstar Glide Path

The non-discretionary recordkeeping and administrative services described in this Service Overview are general in nature and reflect the standard service offering. Service descriptions are not specific to any plan provision or administration practice. The recordkeeper may agree to provide an alternate service arrangement, as applicable, if separately requested by the Plan Sponsor.

FOR ADVISOR/PLAN SPONSOR OR TPA USE ONLY. Not for use with Plan Participants

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