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INVEST 403(b) Plan

INVEST 403(b) Plan. Our Current Plan. 10.5% +. 10.5% +. 10.5% +. Current Plan Assets. Vanguard Individual Custodial Account. TIAA-CREF Individual Custodial Account. $29,916,976. Fidelity Institutional Account. Accounts:. $53,991,103. Traditional. $33,737,699. Annuity:. $3,415,884.

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INVEST 403(b) Plan

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  1. INVEST 403(b) Plan

  2. Our Current Plan 10.5% + 10.5% + 10.5% +

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

  4. How are you currently paying fees and expenses? • 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) 10.5% +

  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 • Creation of the Investment Policy & Committee • 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

  9. Process: Step 1 26 39 259

  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

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

  15. Our Current Plan 10.5% + 10.5% + 10.5% +

  16. New Plan 10.5% +

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

  18. Fees and Expenses going forward Example: • Fund Expenses and Revenue Sharing - Fund expenses and fees collected Revenue Sharing

  19. Fees and Expenses going forward Example: Revenue Sharing Fidelity sets a flat Basis Point Fund Expense for everyone. Let’s use 8 Basis Points for this example: 2 Basis Points

  20. Examples + + = = + +

  21. Examples + + = = + +

  22. Examples + + = - = + +

  23. 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

  24. 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

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

  26. Why should I move funds? • Lower institutional shares • One-stop record-keeping • Lower record-keeping fees • Personal review by a financial consultant • One fully inclusive retirement web tool

  27. 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

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

  29. Questions?

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