Compass Institute’s
Plan Diagnostic Report
The Plan Diagnostic
Report (PDR) is an analytical report prepared by the Compass
Institute for a Plan Sponsor. The PDR demonstrates for an existing Plan
(or any contemplated Plan), the expected long-term average annual return
(AAR) and Plan values over selected Market Cycles of:
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Applying the HORIZON™ Adaptive Asset Allocation™ strategy to the funds available in the Plan.
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The Formulaic Asset
Allocation (FAA) funds available in the Plan (Lifecycle, Target Date,
Balanced and/or Strategic fund).
-
The Hybrid FAA funds
(if any) available in the Plan.
-
The Plan Index (the internal benchmark for the plan)
based on an ongoing equal allocation of the total investment into each
of the Plan’s available funds.
Rationale
The passage of the Pension Protection Act of 2006 (PPA) contains provisions
establishing Qualified Default Investment Accounts (QDIA) and has increased
the momentum for plan sponsors to make Advice Providers available to Participants.
However, the Plan Sponsor has a fiduciary duty to monitor the quality of
the advice provided.
The Department of Labor has stated in its Field Assistance Bulletin 2007-01,
Section 601, February 2, 2007 that the Plan Sponsor is required to address
a complaint by a Participant about the quality of the advice made available
to them. The Participant is allowed to bring this complaint to a court of
law that will decide whether the monitoring is appropriate. Plan fiduciaries
should periodically sample the quality of the actual advice provided to
Participants.
Note: Quality has typically meant processes but may now mean performance
because that is what an individual would be most concerned about.
Combined with the recent Supreme Court ruling that allows an individual
to sue the Plan Sponsor, it is imperative that the Plan Sponsor know what
an Unrestricted Objective Adaptive Asset Allocation™ Approach such as
HORIZON™ AAA can be expected to yield for their existing (and/or
contemplated) sponsored Retirement Plan.
Benefits to Plan Sponsors
Results are presented for
the in-depth analysis of two scenarios:
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A lump sum (no contributions) traditional AAR calculation,
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A QDIA ’real-world’ ongoing contribution to an initial
Plan balance (which could be zero) for a typical 25- 35- and 45-year-old
Participant in the Sponsor’s Plan.
The CSPD is available either audited by a third party,
Ashland Partners & Company LLP,
a leading global auditor of reported investment Plan return results, or
non-audited; it can be used as:
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A decision tool for making an advice program such
as HORIZON™ AAA solely available to Plan Participants, or in
addition to a currently available FAA advice provider program, and/or
-
A decision tool for making a QDIA program such as
HORIZON™ AAA available solely to Plan Participants or in addition
to an FAA QDIA program currently available, and/or
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A formal fiduciary record document for a Plan Sponsor’s
files showing due diligence has been followed regarding the application
of appropriate asset allocation fund management models and strategies
for their Plan.
In-depth Consultation
On site, in-depth consultation to review the CSPD results and implications
with the Plan Sponsor’s management team is also available.
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