Nevada System of Higher Education
Retirement Plans Advisory Committee Meeting
May 3, 2013
The Retirement Plan Advisory Committee (“Committee”), the fiduciary committee for the Nevada System of Higher Education Defined Contribution Savings Plans (“Plans”), met pursuant to notice on May 3, 2013 at the System Administration Office in Las Vegas, Nevada. Present were voting members Michelle Kelley, Kent Ervin, Mike Hardie, Pat La Putt, Carla Henson, Robb Bay, Patricia Hughes, Paul Thistle, and Spencer Stewart. Frank Daniels, Steven Streeper, and Alan Schlottmann were not in attendance.
Attending the meeting by invitation were Henry Stone and Cynthia Hunt of the Nevada System of Higher Education. Also in attendance were Daniel Pawlisch and Jan Raines of Hewitt EnnisKnupp, Inc. (“HEK”).
The meeting was called to order at 9:00 a.m. PST.
Stone informed that Committee that Schlottmann had submitted his resignation from the Committee. Stone indicated that he had accepted Schlottmann’s request and was working with the necessary individuals within the System to identify a successor for his position on the Committee. Following a brief discussion, the Committee had no further questions.
Chair Kelley advised the Committee that the approval of the minutes from the March 28th and 29th meetings would be postponed until the next regularly scheduled meeting as they were still being finalized.
Pawlisch distributed a presentation entitled “Tier III Investment Structure Discussion Index Fund Managers.” Pawlisch led a discussion in regards to the proposed investment manager candidates. For the U.S. large cap stock index fund mandate, Pawlisch profiled the investment offerings from Blackrock, Dreyfus (Mellon), Fidelity, Northern Trust, and Vanguard. He noted that TIAA-CREF did not offer an S&P 500 Index Fund. Pawlisch compared and contrasted the investment processes and styles of the candidates along with their applicable fee schedules. Following a brief discussion, the Committee requested that Pawlisch profile the small/mid cap investment offerings as the intent is for participants to combine the two funds in order to replicate the broad U.S. stock market. Pawlisch then led a discussion in regards to the proposed small/mid cap stock index fund offerings from Blackrock, Dreyfus (Mellon), Fidelity, Northern Trust, TIAA-CREF, and Vanguard. He compared and contrasted the candidates’ investment processes and styles along with their applicable fee schedules. After a thorough discussion, the Committee unanimously agreed that the Vanguard Institutional Index Fund and the Vanguard Extended Market Index Fund would be the most appropriate alternatives for participants.
Ervin made a motion to accept Vanguard Institutional Index Fund and the Vanguard Extended Market Index Fund as index fund managers. Seconded by Bay; Motion passed unanimously.
Pawlisch led a discussion in regards to the developed non-U.S. stock index fund offerings from Blackrock, Dreyfus (Mellon), Fidelity, Northern Trust, TIAA-CREF, and Vanguard. He compared and contrasted the candidates’ investment processes and styles along with their applicable fee schedules. Following a brief discussion, the Committee requested that Pawlisch profile the emerging non-U.S. stock index fund offerings as the intent is for participants to combine the two funds in order to replicate the broad non-U.S. stock market. Pawlisch then led a discussion in regards to the proposed emerging market stock index fund offerings from Fidelity, Northern Trust, TIAA-CREF, and Vanguard. It was noted that Blackrock and Dreyfus (Mellon) did not offer an emerging market stock index mutual fund. Mr. Pawlisch compared and contrasted the candidates’ investment processes and styles along with their applicable fee schedules. After a thorough discussion, the Committee agreed that the Vanguard Developed Market Index Fund and the Vanguard Emerging Market Stock Index Fund would be the most appropriate alternatives for participants.
Hardie made a motion to accept the Vanguard Developed Markets Index Fund and the Vanguard Emerging Markets Stock Index Fund managers; Seconded by Thistle; Motion passed unanimously.
Pawlisch summarized the Committee’s selections for the tiered investment manager line-up. He reviewed the historical correlations of the proposed managers along with how the line-up would be included as part of the administrative service provider RFP. Ervin commented that he thought the fixed annuity option should be included in tier three as opposed to tier two. Following a brief discussion, the Committee unanimously agreed to postpone making any changes to the proposed tiered structure or the investment manager line-up until the responses from the administrative service provider RFP have been reviewed.
Raines distributed a handout entitled “NSHE – Tentative Timeline.” She led a discussion in regards to the proposed timeline for the administrative service provider RFP. After a thorough discussion in which she received feedback from the Committee, Raines indicated that she would distribute an updated timeline for the Committee’s review and approval. Henson asked that a list of talking points be developed to help the Committee members respond to questions in regards the RFP process. She also asked for clarification regarding Committee members’ ability to meet with representatives from current or prospective respondents. Stone indicated that in order to maintain the integrity of the RFP process, Committee members should refrain from meetings or discussions with any retirement vendor, other than those regarding their own personal retirement accounts. Kelley asked that a formal communication be sent to representatives from the incumbent providers.
Raines distributed handouts entitled ““Minimum Qualifications”, “Custom Questions”, “Database Questions”, and “Request for Proposal Overview.” Raines led a discussion over the upcoming Request-for-Proposal (RFP) process. She reviewed the minimum qualifications criteria for respondents along with the custom and database questions that would be included as part of the RFP. The Committee thoroughly reviewed the proposed questions and provided feedback regarding potential modifications. Raines agreed to incorporate the requested edits and redistribute the documents for the Committee to review and approval prior to distribution.
Raines distributed a handout entitled “Consolidated Cash Flow and Retirement Plan Information.” Raines discussed the Plans’ demographics information that was obtained directly from each of the Plans’ existing vendors. Ervin distributed a supplemental document entitled “NSHE Retirement Plan Statistics.” He explained how these documents would be used to provide detailed information to the vendors in regards to participant counts, assets, and the various annuity contracts at TIAA-CREF and VALIC. After reviewing and providing feedback in regards to the data, Raines indicated that she would incorporate the information into the RFP before the RFP was distributed.
Raines distributed a handout entitled “Fees.” She led a discussion over the various types of pricing structures and provided an overview of the merits and drawbacks of each. In an effort to provide the Committee with additional insight into how the various pricing structures may impact participants, Ervin distributed a handout entitled “NSHE Retirement Program Administration Fee Analysis.” After a thorough discussion on how the various structures might impact various participant groups, the Committee agreed to request pricing proposals on three different pricing structures: 1.) A hard dollar per participant fee, 2.) A basis point fee, and 3.) A basis point fee with a hard dollar cap.
Raines distributed a presentation entitled “RFP Weightings and Evaluation Criteria.” Raines led a discussion over how the candidates would be scored in the RFP process, specifically focusing on how each section of the RFP will be weighed in the scoring process. After a thorough discussion, the following Overall RFP Score Weightings were suggested:
• 65% to Service Score (level of services offered)
• 25% to Fee Score (fee designated for the recordkeeping services)
• 10% to Investment Score (availability of NSHE’s desired investment options)
Hughes made a motion to accept these weightings. Thistle seconded. Motion passed 5-1.
It was noted that within the Services Score, a combination of pre-assigned questions from HEK’s database along with custom questions specific to NSHE will be included. After discussing which set of questions might be most important to the Plans, the following weights were suggested:
• 25% to HEK database questions
• 75% to custom questions specific to NSHE
Hardie made a motion to accept these weightings. La Putt seconded. Motion passed unanimously.
The HEK database questions address numerous capabilities that are weighed individually to derive a total score. After discussing which service areas are most important to the Plans, the following weights were suggested:
HEK Database Questions
• 10% to Organization
• 30% to Recordkeeping/Administrative Capabilities
• 10% to Regulatory/Compliance Capabilities
• 5% Trustee/Custodial Capabilities
• 25% to Communication/Education Capabilities
• 10% to Conversion/Implementation Capabilities
• 5% to Investment Structure Flexibility
• 10% to Fee/Expense Flexibility
La Putt made a motion to accept these weightings. Henson seconded. Motion passed unanimously.
La Putt requested additional clarification on how the vendors would be scored and evaluated. Raines indicated that HEK will perform a detailed analysis on the vendors’ responses to the RFP. This will include quantitative scoring that incorporates the weightings determined above as well as qualitative findings and observations. Hardie indicated that Kelley and La Putt should provide their input in regards to scoring of the custom questions. These initial scores for each vendor will then be used to narrow down the list of potential vendors with the goal to limit the list of finalist vendors to no more than five. These finalists would then be invited to present their capabilities during a finalist presentation. Pawlisch indicated that he would provide the Committee with a scoring matrix, which could be used by the Committee members to individually score each finalist after the interview presentations in order to determine the final recommendation relative to the appropriate vendor, for discussion and approval at the finalist selection meeting prior to the interviews. There were no additional questions.
There being no further imminent business before the Committee, the meeting was adjourned at 3:00 p.m. PST.