Retirement Plan Improvements Presentation to UCFA January 14, 2014 Mark P. Haas Vice President for Finance and Treasurer Daniel A. Mackey Retirement Manager.

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Presentation transcript:

Retirement Plan Improvements Presentation to UCFA January 14, 2014 Mark P. Haas Vice President for Finance and Treasurer Daniel A. Mackey Retirement Manager Human Resources

Retirement Fund Changes Recap 2004Preliminary IRS 403(b) Regulation Changes 2007 MSU RIAC Formed 2009 IRS Final 403(b) Regulations are Effective 2010Began Discussions with UCFA 2012MSU Simplified 403(b) and 457(b) Plans Required additional plan sponsor oversight Discussed changes with UCFA Two vendors from six 27 investment choices from approximately 550 Lower cost administrative fees for “new” investments 2

New Developments in Fees discussed with outside consultants Hewitt Ennis Krupp and Straightline as well as Big Ten peers 2.MSU negotiated lower individual administrative fees for “legacy” investments with TIAA-CREF and Fidelity (e.g., fund fees lowered from 20 bps (.2%) to 10 bps (0.1%) for one fund and lowering another fund from 30 bps to 11 bps) 3.Negotiated lower cost institutional share classes for legacy investments for 2012, 2013, and into the future 4.Report back to UCFA 3

2014 MSU 403(b) Plan Changes 1.Implement lower administrative fees for legacy investments and issue revenue credits to plan participants for 2012 and Move some mutual funds to lower cost share classes with identical investment strategy and managers 4

Impact of 2014 Changes 1.Revenue credits to participants’ accounts in legacy funds $4.6M (est.) for 2012 and 2013 in 2014 $2.4M (est.) for 2014 in 2015 Revenue credits based on balance at end of period and give $4.6M across all funds based on how much in account. Revenue credits will continue into future because of structure of annuities and some mutual funds. 2.Plan participants will have legacy fund investments transferred from individual share classes to lower cost institutional share classes with identical investment strategy and managers. Which results in higher returns to participants. 5

6 Revenue Credit Determination New Funds (Lower Fees) No Change (No Need for Revenue Credit) Legacy Funds Higher Fees Same Funds Same Fees -Revenue Credit Same Funds New Share Class Lower Fees No revenue credit as lower fees going forward Option to move money from legacy to new investments already exists.

Timetable for Implementation January 2014 June 2014 Discuss with Faculty Groups Finalize Agreements with TIAA- CREF and Fidelity Communicate Changes to Faculty, Staff, and Retirees Implement Share Class Changes Distribute Revenue Credits to Plan Participant Accounts 7

Example Communication 8

Questions? Mark P. Haas Vice President for Finance and Treasurer Daniel A. Mackey Manager, Human Resources