Retirement Plan Advisory Committee
August 24, 2012
A meeting of the Retirement Plan Advisory Committee (RPAC) was held on August 24, 2012 via video conference between the Las Vegas System Administration Office and Western Nevada College.
Present: Michelle Kelley, Chair, Benefits Manager BCN; Kent Ervin, UNR Faculty Representative; Pat La Putt, Benefits Manager BCS; Carla Henson, Retiree Representative; Robb Bay, CSN Representative; Spencer Stewart, NSC Faculty Representative; Steven Streeper, TMCC Faculty Representative; Mike Hardie, WNC Faculty Representative
Also Present: George Dombroski and Henry Stone (NSHE); Dan Pawlisch and Ruth Schau (Hewitt EnnisKnupp)
The meeting was called to order at 1:00 pm.
Henry Stone provided an update on negotiations with Fidelity and TIAA-CREF regarding excess revenue reimbursement agreements. He reported that negotiations are near closure on agreements on fixed basis point pricing at 11 basis points with Fidelity and 12 basis points with TIAA-CREF. He reported that there is agreement in principle with TIAA-CREF for the agreement to survive the RFP for 2 ½ years but with a right to a different revenue sharing formula if TIAA-CREF is not the master recordkeeper. The agreements are expected to generate about $1 million in additional revenue, most of which will be allocated back to participants. There was discussion about the allocation process. Stone reported that it’s a multi-dimensional issue. He said he will put together a small group to review the alternatives before he makes a decision on how to allocate.
Michelle Kelley reported on the meetings that were held with the DRI and Great Basin College Faculty Senates. She reported that the meetings were well attended and the messaging was well received, although there continue to be concerns about legacy assets, especially among those closing in on retirement.
Henry Stone reported that there has been a second meeting with the UNLV Chief Business Officer in which there was an opportunity to address questions that had come up in the first meeting. Stone said there hasn’t been any significant negative pushback at any of the meetings.
Kent Ervin reported on the Investment Management Subcommittee (IMS) meeting with the vendors in the two days preceding the RPAC meeting. He reported that the IMS grilled the vendors on the IMS’ wish list of recordkeeping services. He said that the vendors are at different places in technology development.
He reported that 133 funds are not performing well and that 11 required a higher level of scrutiny as they had been rated as “Sell” by HEK. The IMS has considered what actions to take at this time. They decided it would not be prudent to start replacing funds one at a time but to start populating a new fund lineup but that this process should involve the entire RPAC. The IMS recommends disbanding the IMS and turning its duties over to the full RPAC. Getting the process in place is the key to fiduciary compliance.
Michelle Kelley pointed out that the RPAC is primarily a policy advising body, but at this point in the evolution of the plan review most every decision is a policy matter. She emphasized the need for a commitment from the RPAC to proceed further. She said the next time to meet with the vendors will be during the RFP. In the meantime, the RPAC will meet quarterly to do performance reviews and address policy matters. She suggested that some meetings should be in person but that generally meetings are via video conference. She pointed out that the RPA does have an administration budget now and can cover the cost of RPAC member travel and accommodations.
There was discussion about the next scheduled meetings. It was agreed that investment performance reviews would take place on the scheduled dates of November 20, 2012 and February 26, 2013 but that separate face-to-face meetings should be scheduled for other plan enhancement business. The RPA Manager was asked to schedule full day meetings on one Friday in November and one in February.
There was discussion about starting to communicate with employees regarding the performance review process that is in place and the fund performance issues that this process has brought to light.
Robb Bay suggested that target date funds might not be appropriate as default funds as they have not been performing well. Dan Pawlisch responded that the use of target date funds follows the Department of Labor’s safe harbor rules for default funds. There was agreement that target date index funds might be more appropriate than actively managed target date funds.
Michelle Kelley made a follow up report from the May meeting on the subject of a compassionate release clause for the RPA. She reported that the vendors declined to administer a compassionate release process. Instead, Kelley proposed a process that would be administered by NSHE. The process requires certification by two physicians that the applicant for compassionate release has 2 years or less to live. The process would require legal review and the plan would have to be amended.
MOTION: Carla Henson moved to recommend approval of the proposed compassionate release process to the delegated authority subject to legal review and review by Ice Miller for any required language changes to the plan document. Pat La Putt seconded. The motion passed by a vote of 5 to 2.
The Committee asked for a broader review of the RPA’s preservation clause next year.
Michelle Kelley reviewed the schedule for the upcoming Faculty Senate meetings. Members were asked to attend the meetings on their home campuses. She said the format for the meetings would be conversations rather than presentations. She said town hall meetings would be planned for October and asked the RPA Manager to begin scheduling meetings.
Michelle Kelley led a conversation about the plan enhancement process. She said that the need for a new investment lineup, concerns about our default funds, unnecessary complexity, and evidence that our plan expenses are higher than need be all point to a need for an RFP. She pointed out that an RFP had not been done since the 1990s. Ruth Schau described how an RFP process would proceed and gave examples of how other universities and university systems have done it.
Michelle Kelley and Pat La Putt reviewed the campus events that they have done and have future plans for to drive plan participation. RPA funds that are allocated to the campuses as approved by the RPAC are used to support these events. The RPA Manager was asked to do a budget review with the RPAC annually coinciding with the fiscal year.
Dan Pawlisch updated the Committee on the vendor preparedness for the plan sponsor disclosure requirements of 408(b)(2) and the plan participant disclosures of 404 (a). He reported that the vendors have provided the plan sponsor disclosures. HEK will review the disclosures and comment on them in November. He also reported that all the vendors have delayed the plan participant disclosures while awaiting a clarification from the SEC as to the required data “as of” date. Non-ERISA plans at present are not allowed to use year end 2011 data but the vendors are not equipped to use any other date. An exemption has been requested from the SEC to allow the use of year end data.
Kent Ervin reported on a plan administration problem that arose when it was discovered that two new Fidelity funds had been added to the TSA lineup without the knowledge of the Committee. Investigation into the recordkeeping services agreement revealed that automatic addition of the funds by Fidelity was consistent with plan language. Ervin expressed that while this may have been appropriate for a different time, now that the RPAC has adopted an Investment Policy Statement and a process for monitoring investment results, the addition of funds without the express consent of the Committee should not continue.
MOTION: Carla Henson moved to recommend to the Delegated Authority that the service agreement with Fidelity for the TSA and MedRes/PostDoc 403b plans be changed to prevent any new additions of funds without explicit approval and instruction by NSHE. Kent Ervin seconded. The motion passed unanimously.
George Dombroski updated the Committee on a modified GPS enrollment process that had been requested from VALIC. He reminded the Committee that the first draft of the process was reviewed by the Committee in May 2012 and was found to be confusing and not clearly achieving the goal of transforming the process from “opt out” to an “opt in.” The Committee agreed that the second iteration of the process met the Committee’s objective. The Committee was informed that VALIC had been authorized to implement the revised enrollment process effective September 1, 2012.
The meeting was adjourned at 3:40 pm.
Prepared by: George Dombroski, Retirement Plan Alternative Manager