Retirement Plan Advisory Committee
February 23, 2012
A meeting of the Retirement Plan Advisory Committee (RPAC) was held on February 23, 2012 via video conference between the Reno and Las Vegas System Administration Offices.
Present: Michelle Kelley, Interim Chair, Benefits Manager BCN; Kent Ervin, UNR Faculty Representative; Pat LaPutt, Benefits Manager BCS; Judy Stewart, Faculty Senate Representative; Carla Henson, Retiree Representative; Robb Bay, CSN Representative; and Jim Labuda, NSC Representative.
Also Present: George Dombroski (NSHE); Dan Pawlisch and Ruth Schau (Hewitt EnnisKnupp).
The meeting was called to order at 2:00 pm.
Michelle Kelley introduced Dan Pawlisch and Ruth Schau as the Committee’s new investment consultant team from Hewitt EnnisKnupp. Pawlisch and Schau gave the Committee information about their firm and their personal backgrounds in retirement plan consulting.
Kent Ervin reported to the Committee on the previous 1 ½ days of meetings of the Investment Management Subcommittee with the vendors. He explained that the February meetings will be the last in the traditional format. Going forward Hewitt EnnisKnupp will monitor the performance of all funds and vendors will focus on service reviews. The Subcommitte continues to press for full transparency on fees. The vendors will be asked to provide fee disclosures as mandated by DOL for ERISA plans. He reported on the overall satisfaction of the Subcommittee with the vendors.
Mr. Ervin discussed the performance review by HEK. Although a number of funds have triggered criteria for heighten scrutiny, the Subcommittee is hesitant to make major changes now prior to a plan redesign decision. However, the Fidelity Fund met both quantitative and qualitative criteria for concern. Mr. Ervin explained that although the Fidelity Magellan fund has been on the Subcommittee’s watch for some time, there has been a reluctance to take any action regarding the fund because the Subcommittee lacked the expertise to critically evaluate the fund’s performance and prospects. However, Hewitt EnnisKnupp has independently concluded that the fund has lost its way, consistently underperforming relative to peers and benchmarks and with no real prospects for improvement based on Hewitt EnnisKnupp’s quantitative and qualitative evaluation process. He explained that the Subcommittee is recommending that an advisory letter be sent from NSHE to investors in the Magellan Fund. There was a discussion about whether or not a decision to execute such an advisory letter is in the purview of the Subcommittee or would require Committee approval. There was agreement that the Subcommittee could initiate recommendations on investment decisions to the delegated authority but should inform the Committee and obtain feedback about such actions. It was also agreed that RPAC members be informed before significant communications are sent out to participants so institutional representatives will be able to answer questions from constituents.
Kent Ervin shared with the Committee that the Subcommittee passed a motion to recommend suspension of offerings of new enrollments into VALIC’s Guided Portfolio Services (GPS) to participants in the Medical Resident/Postdoctoral Scholar Plan. Michelle Kelley explained that participation in GPS makes no sense for these participants as they are relatively low paid and generally are only employed for a short period (averaging 2-3 years of service with NSHE); further, a review of the VALIC scorecard indicated that these participants paid an additional $3000 of fees in 2011 for GPS, on top of regular fund expenses.
MOTION: Kent Ervin moved to suspend future enrollments of Medical Resident/Postdoctoral Scholar participants into GPS. Robb Bay seconded. The motion passed unanimously.
Dan Pawlisch led a discussion about a proposed investment policy statement (IPS, copy attached) that the Investment Management Subcommittee had drafted with the assistance of Hewitt EnnisKnupp . Mr. Pawlisch explained that the investment policy statement provides a procedural roadmap for Committee actions, ensures a level of continuity of process as Committee membership changes, and creates role clarity by identifying who is responsible for what. Mr. Pawlisch led the committee through the sections of the IPS and committee members suggested minor revisions and clarifications.
MOTION: Kent Ervin moved to adopt the proposed investment policy statement with the following specific editorial changes recommended during the discussion:
1) insert the words “or delegated authority” on page 5, second bullet, first sentence between the words “Sponsor” and “on.”
2) insert the words replace the words “Plan’s assets” on page 6, paragraph 5, first sentence with “participants’ assets in the Plan.”
Carla Henson seconded. The motion was approved unanimously.
Mr. Pawlisch presented Hewitt EnnnisKnupp’s proposed guidelines and methodology for monitoring the performance of funds in the plans. The Committee was provided with a Q4, 2011 Fund Performance List that was coded utilizing the methodology in the proposed guidelines. Given the preliminary nature of the guidelines and methodology there was discussion about what information to make available to participants following Hewitt EnnisKnupp’s reports. Michelle Kelley proposed posting the full report but without the fund watch list at this time since the guidelines have not been finalized. The Committee agreed with the recommendation. Mr. Pawlisch was asked to provide that version to Mr. Dombroski and also the final version of the Q4 report, including corrections discussed by the Investment Management Subcommittee, to the RPAC membership. The committee discussed the need to announce to participants that we have a new Investment Consultant and an Investment Policy Statement, along with the performance review. Mr. Dombroski was asked to draft such a communication.
George Dombroski presented a report on RPAC accomplishments during 2011. Two key accomplishments were the successful execution of an RFQ for an investment management consultant and the achievement of significant cost savings for plan participants through reduced plan expenses.
A participant satisfaction survey will be conducted later in Spring 2012. Mr. Ervin asked the HEK consultants to review the questions used in the previous survey from 2010.
Ms. Kelley presented a proposed RPAC Mission Statement to the Committee. The Committee was asked to think about the statement and be ready to discuss at the next quarterly meeting.
The Agenda item concerning rebates of fees as a dividend to TIAA-CREF participants was postponed because of the absence of Henry Stone. Ms. Kelley stated that the committee would be informed before a dividend is implemented. Mr. Pawlisch noted that the current per-participant recordkeeper fees for administration are $93 for Fidelity, $285 for TIAA-CREF, and $325 for VALIC. Negotiations continue to reduce fees.
Ruth Schau made a presentation to the Committee on changes that are occurring in the higher education retirement plan marketplace and why changes make sense for NSHE and its employees.
Michelle Kelley shared with the Committee her experiences and learnings during recent visits with retirement plan officials at Purdue University and Michigan State University, both of whom recently implemented significant plan redesigns.
The meeting was adjourned at 5:05.
Prepared by: George Dombroski, Retirement Plan Alternative Manager