Magazine article University Business

403(b): From Sales Pitch to Service: Narrowing the Retirement Plan Option Pool for a Better Employee Experience

Magazine article University Business

403(b): From Sales Pitch to Service: Narrowing the Retirement Plan Option Pool for a Better Employee Experience

Article excerpt

The prospect of employees with more money to invest, easier-to-understand investment options, more personalized customer service, and lower fees has colleges and universities rethinking their retirement plans and moving toward a single retirement services vendor.

When mutual funds became popular in the 1980s and '90s, many colleges and universities expanded retirement investment plan options for participants. But a different trend has emerged in the last few years, as increasing numbers of institutions are moving to a single-record-keeper model--which means employees have a single point of contact and one platform for investing.

A major catalyst in moving to that model has been regulations that make tax-exempt 403(b) retirement plans more like 401(k) plans by requiring greater fiduciary oversight by the IRS, says Deborah Pont, a spokesperson for Fidelity.

"Reducing the number of investment options in the plan enables sponsors to simplify decision-making for their participants," she says. "Institutions are consolidating to streamline their investment offering, simplify their plan administration, and improve savings outcomes for participants."

David Ray, managing director and national sales manager for TIAA-CREF's higher education division, notes that historically, sole recordkeeping was unable to offer multiple options from different providers. Now, the prevalence of open architecture software eliminates this shortcoming.

Here's what having a single retirement recordkeeper looks like at a number of higher ed institutions.

Singles experience

The Pennsylvania State University made the transition to a single retirement-plan recordkeeper in 2011. Susan McGarry Basso, vice president for human resources, says the move has met a number of objectives, including greater institutional compliance with retirement plan requirements, lower fees, and an improved enrollment process for faculty and staff.

"We've experienced significant reductions in fees for many funds on the plan's investment lineup due to increased volume of investment dollars," Basso says. "Many are at the lowest-fee, institutional share class available. Less fees translates into faculty and staff having more money to invest for retirement."

Penn State has also seen greater plan participation. "There has been an increase in the number of faculty and staff taking advantage of supplemental savings," Basso notes. "This can be attributed to on-site group meetings, one-on-one counseling, and dedicated advisors who help our employees understand the importance of saving for retirement."

After years of working with multiple vendors, Johns Hopkins University is also making a change. The university will move from the current five to three vendors by July 2014, and then to a single one by 2017, says Heidi Conway, senior director for benefits and HR shared services.

Although not dissatisfied with the services provided previously, officials see advantages to reducing the number of providers.

"We know that too much choice can be debilitating," she says. "Having a streamlined menu that is monitored makes it a lot easier for participants to narrow in on their selection. We think this is a good solution that will benefit our employees."

The end result will be the JHU Core Menu, which will be monitored by a consulting firm. While there will only be one recordkeeper, employees will still be able to choose from three of the existing vendors. They also can use a "brokerage window," which gives investors the ability to trade stocks, mutual funds, and other exchange-traded funds that aren't part of their retirement plan, Conway adds.

At Gettysburg College (Pa.), HR leaders have found they can have it both ways by dealing with a single provider while also adding alternative investment options.

Earlier this year, Gettysburg implemented a new investment platform that has five options from TIAA-CREF along with funds from Vanguard, T. …

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