Eastern Kentucky University

Announcing Enhancements

for Optional Retirement Plans (ORP)

Ben Woodruff,

Assistant Professor Accounting and Finance

Sarah Pitt, CHRO

WHY ENHANCE OUR PLANS?

• Benefit to Employees

• Reduction in Fees

• EKU Fiduciary Duty

HISTORY

• President and Board of Regents appointed committee to oversee EKU’s Optional Retirement Plans (ORP)

– Committee consists of two faculty members from the College of Business along with Finance, HR, and Risk Management administrators

PROGRESS

– Committee has fiduciary responsibility for the defined contribution retirement plans

• Committee hired Cammack Retirement Group for consulting and investment advisory services

• Committee issued a Request for Proposal (RFP) for retirement plan administration “recordkeeping services”

o The KY ORP statute requires a minimum of two retirement plan administrators

o Current providers are Fidelity, TIAA, VALIC, Voya

Cammack Retirement Group | © 2019 All Rights Reserved | For Plan Sponsor Use Only

PARTICIPANT FEE EXAMPLE Eastern Kentucky University

Total fees paid over lifetime by typical worker

Salary when worker starts saving at age 25 and retires at age 67: $30,502 (median)

Fee Percentage Total Fees

0.25% $42,309

1.00% $138,336

1.30% $166,420

Total fees paid over lifetime by high-income worker

Salary when worker starts saving at age 25 and retires at age 67: $75,000

Fee Percentage Total Fees

0.25% $104,033

1.00% $340,147

1.30% 409,202

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Source (“Fixing the Drain on Retirement Savings, How Retirement Fees Are Straining the Middle Class and What We Can Do about Them,” Jennifer Erickson and David Madland, Center for American Progress, April 11, 2014)

RESULTS

- EKU employees will pay lower fees going forward

- Plan Administration fees will be lower with fewer vendors

Cammack Retirement Group | © 2019 All Rights Reserved | For Plan Sponsor Use Only

- Fidelity did not provide a bid, citing a low amount of current business in the EKU plan (less than 9% of plan assets)

- TIAA offered the lowest cost for recordkeeping services

- VALIC and Voya offers were very close; ultimately VALIC was chosen as the second vendor

- TIAA’s recordkeeping fees have been reduced by 38%

- VALIC’s cost will be reduced significantly

- Move from “annuity” to “mutual fund” investment platform

- Elimination of “mortality and expense” charge ranging from 1.0-1.25%

RFP FOR RETIREMENT PLAN RECORDKEEPING RESULTS

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NEW INVESTMENTS

– TIAA investment platform will have a wide range of funds and choices for employees, consisting of indexed target date funds, indexed mutual funds from Vanguard and actively managed funds from multiple fund managers

– VALIC’s investment platform will consist of indexed target date funds, indexed mutual funds from Fidelity and actively managed funds from Fidelity and other fund managers

BENEFITS

Effective 1/1/2020, TIAA and VALIC will be the retirement plan administrators going forward. A number of enhancements will be included in the new program.

The benefits to EKU employees and plan participants:

- Transitioning from an annuity platform to open architecture mutual fund platform

- Create greater scale and related lower cost structure

- Independent third party investment platform expertise

- Lower cost investment options

- Enhanced employee communication & education program

WHAT IS NOT CHANGING

• The general plan design of the EKU ORP Retirement Plans will not change

- Employee contribution rates

- Eligibility requirements (immediate for eligible employees)

- Employer contributions (remain at 8.74%)

• Retirement contributions from earnings prior to the January 1, 2020 implementation date, will remain in the retirement plan provider investment funds you have selected

WHAT IS CHANGING

• Employees with Fidelity and Voya will need to re-enroll as noted below.

• All existing VALIC plan participants will be required to establish new accounts through VALIC

• Employees with TIAA will need to review their investments

WHAT IS CHANGING - DETAILS New plan enrollment process & participant actions: • Employees with Fidelity and Voya will need to re-enroll as noted below.

- Complete an enrollment form

- All existing VALIC plan participants will be required to establish new accounts through VALIC

• Affirm investment allocation

• Affirm beneficiary elections

• Default allocation will be directed to the Target Date Fund Suite in accordance with the participant’s age *

- Employees with TIAA will need to review their investments

• New fund options; some funds going away

• Funds going away will be frozen if “CREF annuities” or “mapped” if mutual funds

* This default investment option will remain in place until employees choose a new investment asset allocation.

NEXT STEPS Transition dates to be announced On January 1, 2020: • A new investment menu will be introduced • TIAA and VALIC participants will need to reaffirm investments • All future contributions default to a target date fund if no other chosen Contributions after January 1, 2020: • You can leave your “frozen” investments in your Fidelity, TIAA, Voya, or VALIC

accounts; or you can transfer investments into the new TIAA and VALIC mutual fund options -- subject to any fund restrictions (e.g., fixed annuities) or transfer rules

• You will be able to redirect your balances and all future contributions will be directed to investment options on the new menu

www.eku.edu

Questions?