Presentation is loading. Please wait.

Presentation is loading. Please wait.

INVEST 403(b) Plan. Our Current Plan Hope Vanguard Individual Custodial Account TIAA-CREF Individual Custodial Account Fidelity Institutional Account.

Similar presentations


Presentation on theme: "INVEST 403(b) Plan. Our Current Plan Hope Vanguard Individual Custodial Account TIAA-CREF Individual Custodial Account Fidelity Institutional Account."— Presentation transcript:

1 INVEST 403(b) Plan

2 Our Current Plan Hope Vanguard Individual Custodial Account TIAA-CREF Individual Custodial Account Fidelity Institutional Account 10.5% +

3 $3,415,884 Annuity: $53,991,103 $33,737,699 Traditional $29,916,976 Accounts: Vanguard Individual Custodial Account Current Plan Assets TIAA-CREF Individual Custodial Account Fidelity Institutional Account TOTAL: $121,061,662 *600 Active Employees; 480 Retirees

4 How are you currently paying fees and expenses? Hope Vendor 10.5% + Hope contributes 10.5% Any voluntary contributions Vendor takes expenses from your account before reporting gains or losses. Expense ratios are calculated as a Basis Point (not on your statement) Record-keeping fees (on your statement)

5 Definition BASIS POINT (or Expense Ratio) A Basis Point is a measure used for describing interest rates, and is equal to one hundredth of a percentage point (.01%) Example: $100,000 balance with expense ratio charged at 40 basis points (.4%): $100,000 x.004 = $400 in expenses

6 Why make changes? New federal rules were issued in 2007 to bring 403(b) plans into compliance with 401(k) plans. ERISA -Employee Retirement Income Security Act Plan Documents Audit (2 years completed) Form 5500 Fee Disclosures Discrimination Testing -2 Tiers (1 year waiting period)

7 Final Requirements 1. Creation of the Investment Policy & Committee 2. Evaluation of the Employer Fiduciary Responsibility Hope must evaluate performance of the funds and open and close funds based on performance Most 401(k) or 403(b) plans have on average less than 15 funds Hope currently has over 300 funds

8 Process: Step 1 Evaluate Our Current Funds Hope College partnered with John Missad, a Retirement Plan Consultant from IBS Financial Group Each of our current funds was evaluated based on 10 criteria Funds were labeled with a Red, Yellow, or Green flag as a result of that evaluation

9 Process: Step 1 Funds receiving a Red Flag failed at least 7 of the 10 criteria Funds receiving a Yellow Flag failed 4-6 of the 10 criteria Funds that failed less that 4 of the criteria were given a Green Flag

10 Process: Step 2 Create an Investment Policy & Investment Committee Determine Investment Committee Create Investment Policy by selecting fund categories that the Plan will invest in (Small Cap, Large Blend, Real Estate, etc.) Set Plan goals: Get Institutional Shares for lower expenses Get a single Record-keeper

11 Process: Step 3 Select Record-keeper Requests for Proposal (essentially, an offer to bid for our business) was sent to 5 companies: our 3 current vendors (TIAA-CREF, Vanguard, Fidelity) and 2 outside record-keepers (Transamerica and ING). From these RFPs, 2 companies became finalists:

12 Process: Step 3 Select Record-keeper Both companies were interviewed and lists were compiled of some of the benefits and drawbacks of each company:

13 Process: Step 3 - Past Relationship - Could offer Vanguard - Would continue Traditional Annuity - Couldnt offer Fidelity - More limited in new fund families - 15 Basis Points fee -Conflict of Interest? -Questions about Annuity Positives Negatives

14 - Can offer all 3 current vendors plus unlimited - Fluctuating Basis Points (.19,.14,.10) - No Conflict of Interest - Rated #1 in 401(k) record-keeping by outside research group - We would need to transfer all current employee information - No previous relationship Positives Negatives

15 Process: Step 4 Campus Approval FRAC (Financial Resources Advisory Committee) PIC (Professional Interest Committee) SAG (Staff Advisory Group) Selection:

16 Our Current Plan Hope Vanguard Individual Custodial Account TIAA-CREF Individual Custodial Account Fidelity Institutional Account 10.5% +

17 New Plan Hope Transamerica Fund 10.5% +

18 1. Record-keeper Fees (in Basis Points) $0 – $70 million:19 basis points $ million:14 basis points $120 million +10 basis points 2. Plan Expense Fees (IBS expenses) Fees and Expenses going forward

19 FundTransamerica 3. Fund Expenses and Revenue Sharing Fees and Expenses going forward - Fund expenses and fees collected Revenue Sharing Example:

20 Fees and Expenses going forward Revenue Sharing Example: Fidelity sets a flat Basis Point Fund Expense for everyone. Lets use 8 Basis Points for this example: Transamerica Fidelity Fidelity takes out 8 Basis Points for Plan Expenses/Fees Discounts fees by 2 Basis Points for not being record-keeper Returns 2 Basis Points to Transamerica

21 TIAA-CREF Equity Index Fund Expense.07 Record-keeper Fee.14 Plan Fee.05 Total Fees.26 CREF Stock Fund Fund Expense.47 Record-keeper Fee.20 (included) Plan Fee 0 Total Fees.47 Examples + + = + + =

22 Vanguard Equity Income Admiral Fund Expense.22 Record-keeper Fee.14 Plan Fee.05 Total Fees.41 Vanguard Windsor Fund Expense.41 Record-keeper Fee $15 (.0002) Plan Fee 0 Total Fees.4102 Examples + + = + + =

23 Fidelity Contrafund Fund Expense.81 Record-keeper Fee.14 Plan Fee.05 Revenue Sharing.25 Total Fees.75 Fidelity Contrafund Fund Expense.81 Record-keeper Fee.31 (included) Plan Fee 0 Total Fees.81 Examples + + = + + = -

24 What about annuities? Standard Insurance Stable Value Fund -Guaranteed Income Fund Secure Path for Life (must be age 50 or older) -Invests in Vanguard Target Funds -Can begin withdrawals at age 55 -Guaranteed minimum withdrawals

25 Other Changes Local advisor fees are no longer allowed to be paid from Plan assets All voluntary contributions must be set as a percentage, not a fixed amount Default fund-Target Date funds Continued review of fund performance -Funds will move with changes

26 What do you need to do? 1. Select new funds by September 1, 2013 a) Meet with Transamerica one-on-one this summer b) Use a local financial planner c) Make the changes yourself 2. Between September 1 and October 1, move your existing funds

27 Why should I move funds? 1. Lower institutional shares 2. One-stop record-keeping 3. Lower record-keeping fees 4. Personal review by a financial consultant 5. One fully inclusive retirement web tool

28

29 Transferring Fund Balances Vanguard – all funds will be required to be moved to the new plan; will work directly with Transamerica Fidelity – requires all funds to be moved to the new plan; will work directly with Transamerica TIAA-CREF –will require working with the company; will depend on type of investment

30 What tools are available? FAQ on Hope HR Office website Communication will begin late spring/summer from Transamerica. Watch for mailings and/or s for information Information will be sent to you about setting up your one on one appointment with Transamerica

31 Questions?


Download ppt "INVEST 403(b) Plan. Our Current Plan Hope Vanguard Individual Custodial Account TIAA-CREF Individual Custodial Account Fidelity Institutional Account."

Similar presentations


Ads by Google