March 24, 2015

Plan Sponsors

Investment Options in the Makes Sense 401k

Participants in the Makes Sense 401k have the freedom to select their own choices of investments from the plan’s investment lineup. These self-directed participants make their choices through a simple online interface, available 24 x 7. Participants who do not choose to make their own investment selections will be automatically defaulted to an age-appropriate Risk Managed Portfolio (which can be changed at any time by the participant.)

Self-Directed Investments

Participants who choose to direct their own investments can select any combination of one or more choices from the menu of ETFs and professionally managed portfolios.

The ETF portion of the menu offers an unparalleled combination of broad asset class coverage and extremely low cost, and features ETFs from the industry’s leading suppliers: Vanguard, Charles Schwab, State Street SPDR, iShares and Power Shares.

The professionally managed portfolio choices include three “balanced” portfolios (the Risk Managed Portfolios) and four specialty portfolios, each with its own focus. Detailed Information about the professionally managed portfolios is available via the Makes Sense 401k online participant interface.

Unlike most 401k plans, there are no penalties or restrictions on trading activities such as minimum hold times or maximum allowable transaction counts.

Default Investments

Participants who do not choose to direct their own investments will be automatically assigned to one of the three “balanced” Risk Managed Portfolios. These portfolios are constructed from the very same low-cost ETFs contained in the Self-Directed investment lineup, and provide participants in the Makes Sense 401k easy access to expert professional portfolio management. Better yet, these Portfolios have been certified by Dalbar for use as Qualified Default Investment Alternatives (“QDIA”) and meet all ERISA requirements applicable to QDIA’s in 401k plans (more on Dalbar below).

Participant Age Default Risk Managed Portfolio Assignment*
Up to age 39 Risk Managed High Equity Portfolio
age 40-55 Risk Managed Medium Equity Portfolio
over 55 Risk Managed Low Equity Portfolio

See the Risk Managed Portfolio Investing Process page for further information on the operation of the Risk Managed Portfolios.

Self-Directed Investment Choices – ETFs

Unlike the vast majority of 401k plans, the Makes Sense 401k offers not only coverage of ALL U.S. equity styleboxes, but also real estate, materials & resources, both developed and emerging international funds, and broad coverage in bonds.

Asset Class Name Ticker Expense 1 Year 3 Year* 5 Year*
Large Value iShares S&P 500 Value Index ETF IVE 0.18% 3.3% 9.5% 11.0%
Large Blend SPDR Dow Jones Industrial Avg. ETF DIA 0.17% 4.4% 8.8% 10.2%
Large Blend Vanguard S&P 500 ETF VOO 0.05% 4.0% 11.5% 11.9%
Large Growth PowerShares QQQ ETF QQQ 0.20% 1.6% 16.1% 14.9%
Large Growth iShares S&P 500 Growth Index ETF IVW 0.18% 4.1% 13.3% 12.7%
Mid Value Vanguard Mid-Cap Value ETF VOE 0.09% 1.2% 11.3% 11.8%
Mid Blend iShares Core S&P Mid-Cap ETF IJH 0.14% 1.3% 10.6% 10.5%
Mid Growth Vanguard Mid-Cap Growth ETF VOT 0.09% -3.3% 10.2% 9.2%
Small Value Vanguard Small-Cap Value ETF VBR 0.09% 0.2% 10.2% 10.9%
Small Blend Schwab U.S. Small-Cap ETF SCHA 0.08% -5.0% 8.5% 9.6%
Small Growth Vanguard Small Cap Growth ETF VBK 0.09% -6.4% 7.5% 8.6%
Real Estate Schwab U.S. REIT ETF SCHH 0.07% 22.7% 13.4% 12.2%
Foreign Large Blend Schwab International Equity ETF SCHF 0.09% -9.0% 2.3% 1.1%
Diversified Emerg. Mkts. Schwab Emerging Markets ETF SCHE 0.14% -11.2% -0.4% -3.4%
Materials & Resources Select Sector Materials ETF XLB 0.15% -2.2% 8.7% 5.6%
Utilities Select Sector Utilities ETF XLU 0.18% 31.1% 15.8% 13.6%
High-Grade Corporate Bond Vanguard Intermediate-Term Corporate Bond Index VCIT 0.12% 8.0% 6.0% 5.8%
Intermediate-Term Bond iShares Core Total U.S. Bond ETF AGG 0.08% 6.2% 4.1% 3.7%
Intermediate-Term Bond PIMCO Total Bond Return ETF BOND 0.56% 4.0% 4.1%
Inflation-Protected Bond Schwab U.S. TIPS ETF SCHP 0.07% 4.5% 2.3% 2.5%
Stable Value Fund MetLife Stable Value – Class J 971803143 0.57% 2.3% 2.2% 2.4%
  • Annualized. Returns through June 30, 2016.

Professionally Managed Portfolio Choices

Risk Managed Portfolios

Three Risk Managed Portfolios serve as the default investment choices for plan participants, and are also available to self-directed participants. Each contains a mixture of equities and bonds. The distinguishing feature among them is the maximum level of equity exposure.

Maximum Equities Exposure Risk Managed Portfolio Choices
90% Risk Managed High Equity Portfolio
60% Risk Managed Medium Equity Portfolio
30% Risk Managed Low Equity Portfolio

Each portfolio reduces its equity exposure to just 10% when the objective portfolio rules indicate a high risk exists in the markets. See the Risk Managed Portfolio Investment Process page for a diagram of the investment process. The goal of the Risk managed Portfolios is to reduce the potential for damage in high-risk periods, while taking advantage of low-risk periods.

Manager Portfolio Name Model Expense % 1 Year 3 Year* 5 Year*
CMS Advisors Risk Managed Low Equity Portfolio .50% 6.46% 5.63% 5.20%
CMS Advisors Risk Managed Medium Equity Portfolio .50% 8.25% 5.27% 6.65%
CMS Advisors Risk Managed High Equity Portfolio .50% 9.82% 6.13% 9.11%

About Dalbar Validation

The Risk Managed Portfolios have been awarded the DALBAR QDIA Validation for 2016, certifying that they are suitable for use as a Qualified Default Investment Alternative and meet all ERISA (Employee Retirement Income Security Act) requirements applicable to QDIAs in 401k plans. In addition, the Risk Managed Portfolios were awarded all A(highest) rankings in the separate DALBAR Asset Allocator analysis.

dalbar2016The DALBAR QDIA validation is recognized as a primary means for for plan sponsors and advisors to satisfy the ERISA requirements, including the requirement of due diligence and analysis of QDIAs used in their 401k plans. Since the Department of Labor has also stated its intention to require that advisors who provide advice on RIA investment must meet the same investment advice standards as the QDIA standards, this validation provides an important level of security and compliance to both the advisor and the IRA investor.

Specialty Portfolios

Seven Specialty Portfolios are available to self-directed participants in the Makes Sense 401k. Additional information about these portfolios is available via the Makes Sense 401k online participant interface.

Manager Portfolio Name Model Expense % 1 Year 3 Year* 5 Year*
CMS Advisors Bull/Bear Portfolio .50% 4.82% 5.33% 8.39%
CMS Advisors Bull/Calendar Portfolio .50% 0.12% 3.05% 8.76%
CMS Advisors Calendar Effects Portfolio .50% 7.95% 3.36% 5.49%
CMS Advisors Long/Cash Portfolio .50% 17.74% 8.68% 13.84%
CMS Advisors Long/Short Portfolio .50% 19.58% 7.05% 11.93%
CMS Advisors Multi-Sector Bond Portfolio .50% 10.57% 5.17% 4.30%
CMS Advisors Sector Rotation Portfolio .50% 3.02% 7.99% 10.26%
*annualized.

Blended Specialty Portfolios

Five Blended Specialty Portfolios are also available to self-directed participants in the Makes Sense 401k. These portfolios seek to reduce risk by deploying funds across multiple Specialty Portfolio strategies, and blends are offered for a variety of investor profiles. Additional information about these blended portfolios is available via the Makes Sense 401k online participant interface.

Manager Portfolio Name Model Expense % 1 Year 3 Year* 5 Year*
CMS Advisors Conservative Blend .50% 5.91% 3.73% 5.79%
CMS Advisors Conservative-Moderate Blend .50% 8.38% 4.70% 7.68%
CMS Advisors Moderate-Aggressive Blend .50% 7.82% 4.62% 7.46%
CMS Advisors Moderate-Aggressive All-Equity Blend .50% 4.9% 11.7% 12.4%
CMS Advisors Aggressive Blend .50% 9.53% 6.55% 11.46%
*annualized.
Note: Returns through September 30, 2016. Returns are based upon a systematic, rules based strategy that has been back-tested to produce hypothetical results. Returns include deduction for management fees (shown in Model Expense % column) but do not include plan expenses.
**Performance Disclosures
The performance presented is net of a 0.50% annual management fee, but does not include transaction costs, if any, or other fees which may be imposed on a specific account. Model results do not represent actual trading in client accounts nor do they reflect client-specific activities such as contributions, withdrawals or restrictions. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, such results may not reflect the impact that material economic and market factors might have had if accounts had actually been managed by CMS during the entire period portrayed. Neither past actual nor hypothetical performance guarantees future results. Clients should not rely solely on this performance or any other performance illustrations when making investment decisions. Past performance does not guarantee future results. Client account values will fluctuate, and may be worth more or less than the amount invested.  Clients should not rely solely on this performance or any other performance illustrations when making investment decisions.