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 portfolio values over selected Market Cycles of:

• Applying the HORIZON™ Adaptive Asset Allocation™ strategy to the funds available in the plan.
• The traditional, formulaic asset allocation (FAA) style funds available in the plan (Lifecycle, Target Date, Balanced and/or Strategic and/or Tactical).
• 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.
• A Down Period Recovery analysis showing the critical loss recovery element of any strategy paramount to its ability to provide sufficient portfolio ending values with reduced dependency on Market Cycle performance.

Sample Report

Click here to see a sample PDR.

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 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:

• A lump sum (no contributions) traditional AAR calculation,
• 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 PDR can be used as:

• A decision tool for making an advice program such as HORIZON™ AAA available to Plan Participants, or in addition to a currently available FAA advice provider program(s), and/or
• 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 PDR results and implications with the plan sponsor’s management team and/or investment committee is also available.

• Review diagnostic results and implications with senior management
• Discuss implementation opportunities Identify employee and company benefits