Transcript Slide 1
Changes to Union College Retirement Plan AGENDA: • • • • Retirement Plan Committee Presentation (25 minutes) TIAA-CREF Presentation (25 minutes) Fidelity Investments Presentation (25 minutes) Wrap Up and Reminder about Help Desks * Each presentation will be followed by a 10-15 minute Q&A session Changes to Union College Retirement Plan • • • • • Why the change? Answer: New 403(b) regulations How has Union responded to these regulations? What principles guided the changes? Description of the new plan Description of the transition to the new plan 2 Why the change? Answer: New 403(b) regulations • New regulations place a “fiduciary” obligation on plan sponsors • Plan sponsor must have a process for regularly reviewing all aspects of the plan including investments, fees and service providers • Greatly heightened audit risk • Key words: ‘prudent’ and ‘fees’ 3 Union’s response to the new regulations • Formed a Retirement Plan Committee • Hired a third party consultant to help Union fulfill the new obligations • Conducted a RFP to several providers who specialize in the nonprofit/higher education sectors • Evaluated current and alternative providers and investment options • Conducted two focus group meetings with participants 4 Principles guiding the committee • • • • • Minimize disruption to participants Offer exposure to key asset classes Minimize cost Minimize the frequency of changes in the menu of investment options Provide reliable record-keeping, customer service and participant education 5 Description of the new plan • • • • • TIAA-CREF and Fidelity remain record-keepers Key asset classes available from both TIAA-CREF and Fidelity Investment options largely limited to low-cost index funds The number of options reduced from 170 to 31 Self-directed brokerage account available 6 The new investment menu of Union College Retirement Plan Asset Class Category Stable Value Money Market Short-Term Bond Intermediate-Term Bond Long-Term Bond Inflation-Linked Bond Moderate Allocation Large Cap Growth Large Cap Blend Large Cap Value Mid Cap Blend Small Cap Blend Foreign Large Blend Emerging Markets Real Estate Lifecycle TIAA-CREF Fidelity TIAA Traditional CREF Money Market (annuity) Fidelity Money Market Vanguard Short-Term Bond Index Signal Fidelity Spartan Short-Term Treasury Bond Index Adv TIAA-CREF Bond Index Ret Fidelity Spartan Intermediate Treasury Bond Index Adv Fidelity Spartan US Bond Index Adv Vanguard Long-Term Bond Index Investor Fidelity Spartan Long-Term Treasury Bond Index Adv CREF Inflation-Linked Bond Fidelity Inflation Protected Bond CREF Social Choice (annuity) CREF Growth (annuity) TIAA-CREF Equity Index Ret CREF Stock (annuity) Fidelity Spartan Total Market Index Adv TIAA-CREF Large-Cap Value Index Ret Vanguard Mid Cap Index Signal Fidelity Spartan Extended Market Index Adv TIAA-CREF Small-Cap Blend Index Ret Fidelity Spartan Small Cap Index Adv TIAA-CREF International Equity Index Ret Fidelity Spartan International Index Adv TIAA-CREF Emerging Markets Equity Index Ret Fidelity Spartan Emerging Markets Index Adv Vanguard REIT Index Signal TIAA Real Estate (annuity) Fidelity Spartan Real Estate Index Adv TIAA-CREF Lifecycle Index Funds Premier Fidelity Freedom Index Funds Comparison of fees in the new and old plans Average expense ratios of investment options in the new and old plans Old Plan New Plan TIAA-CREF ($187 mil. in assets) 0.62% 0.41% Fidelity* ($20 mil. in assets) 0.79% 0.17% *Under the old arrangements $12 annual fee was applied to each participant account. Under the new arrangement this fee is covered by Fidelity’s revenue from the record-keeping portion of the expense ratio of Fidelity funds. As long as this revenue is at least $136 per participant (it is currently over $200), no per participant fee will be applied. 8 The transition to the new plan • After March 1st contributions can only be directed to investment options included in the new investment menu • Existing balances in all Fidelity funds and TIAA-CREF annuities that are not included in the new menu will remain in participant accounts • Existing balances in TIAA-CREF mutual funds that are not included in the new menu will be transferred to appropriate alternatives in the new menu 9 Example of the personalized transition information WHAT CHANGES WILL OCCUR TO MY ACCOUNT IF I TAKE NO ACTION BEFORE MARCH 1 ? Current Investment Options of Joe Smith Money Type Moved TIAA-CREF Social Choice Existing balances will be Equity moved to, and future contributions will be redirected to CREF Global Equities* Future contributions will be redirected to Fidelity Contrafund* Future contributions will be redirected to Fidelity Freedom 2040* Future contributions will be redirected to TIAA Traditional None CREF Stock None New Investment Options CREF Social Choice TIAA-CREF International Equity Index Fidelity Spartan Total Market Index Fidelity Freedom 2040 Index No Change; investment exists in new line-up No Change; investment exists in new line-up *The existing balances in these investments can only be moved by your direction. 10 Self-directed brokerage account • • • • • • • • access to any mutual fund greatly minimizes disruption to current Fidelity participants no set-up or maintenance fees no transaction fees for 5,000 mutual funds (brokerage and possibly load charges for other mutual funds) employees will sign a waiver before opening an account potential liability is uncertain (has not yet been contested in courts) our committee will monitor the provider but not the investments limited utilization is expected 11 QUESTIONS? 12