Defined Contribution Plans Advisory Committee Meeting Minutes March 23, 2017 Page 1 of 5

Transcription

1 Page 1 of 5 The Defined Contribution Plans Advisory Committee met on March 23 rd with the following members present: CALL TO ORDER AND WELCOME Brett Hayes, Chair (by phone under from Orlando, Florida) The Honorable J. Brandon Bell, II Robert Carlson Shannon Irvin William Jackameit, Ed.D. Margaret Maslak Patricia Phillips David Winter Robert L. Greene, Chairman, VRS Board of Trustees Mitchell Nason, VRS Board of Trustees Also present were Kimberly A. Sarte and Joseph M. McMahon, JLARC; Sarah Herzog, Virginia Senate Finance Committee; and Patrick Abelon, ICMA-RC. Attending from VRS were Kelvin Allen, Rory Badura, Trish Bishop, Steve Cerreto, Josh Fox, Joyce Gray, Robert Irving, Kelly Hiers, KC Howell, Ciara Lawson, Rebecca Nicholas, Laura Pugliese, Michael Scott, Jillian Sherman, Jennifer Schreck, Peter Thompson, Rachel Webb, Cindy Wilkinson and Aaron Yarborough. Mr. Bell called the meeting to order at 10:28 a.m. and welcomed the Committee and attendees. ADOPTION OF THE MINUTES FROM THE DECEMBER 2, 2016 MEETING ADMINISTRATION On a motion by Dr. Jackameit and a second by Mr. Carlson, the December 2, 2016 meeting minutes were approved. Administrative Reports and Communication Update Kelly Hiers, VRS Defined Contribution Plans Administrator, provided the Committee with an administrative update of 4 th Quarter DC plans, including total assets under management across all plans; a new slide of unique participants that may have a balance in one or multiple plans; new plan adoptions for Q and Q1 2017, as well as upcoming plan adoptions in Q2 2017, to include a 1 of 5

2 Page 2 of 5 transition of assets into the plan; ICMA-RC annual statistics, including participant contact summary information highlighting field services staff activities throughout the Commonwealth, and call center and web usage statistics; an update on the Q and Q communication initiatives, including statement and account access messaging, targeting those participants with a single investment option; ICMA-RC Realize Retirement Tour coming to the Commonwealth in May 2017 that coincides with National Public Service Week, including tour stops in Richmond, Tidewater, and Northern Virginia; the DCP rebranding initiative planned for Summer 2017, and the intent to carry the DCP logo across various communication materials in the unbundled line-up, including websites, publications and forms; and the hybrid paycheck calculator that includes functionality and parameters for participants to determine estimated payroll deduction based on voluntary contribution variables. Auto-Escalation Ms. Hiers provided an update on auto-escalation and the impact on the Hybrid Retirement Plan as of January 1, 2017, including those participants who took active control and made a specific election as well as those members who opted out of auto-escalation. Ms. Hiers informed the Committee that DC Plans is exploring ways to use the principles behind active choice to encourage members to make participant-directed elections to increase contributions over a predetermined period of time, including the development of communication materials and account access messaging upon participants login to their account that would present the member with a splash screen and series of options to prompt an active election. ORPHE Transition Update 2 of 5 Ms. Hiers advised that VRS completed the necessary contract amendments with TIAA and Fidelity regarding updated pricing and other.contract provisions. Communications to affected ORPHE participants from Fidelity were sent mid-december 2016, and from TIAA in January Ms. Hiers informed the Committee that

3 Page 3 of 5 quarterly statements had not been distributed, but when they are Fidelity and TIAA participants would see a flat fee reflected as a credit, and then a debit. Ms. Hiers also indicated that none of the providers reported any participant complaints or issues as a result of the updated contract provisions and transition communication materials. NAGDCA 2016 Survey Results Perspectives in Practice Benchmarking Tool Ms. Hiers and Ms. Pugliese provided an overview of NAGDCA s 2016 Perspectives in Practice Survey Results. Ms. Hiers informed the Committee that the supplemental Commonwealth of Virginia (COV) 457 Plan was included in the survey. Ms. Hiers shared the following administration aspects of survey findings: The majority of other respondents also offer call center and on-site support services to participants. Between approximately 40% and 65% of respondents offer some kind of investment advice or financial planning service. VRS currently does not offer any of these services. The overall participation rate of the COV 457 Plan is 34%, which is lower than peer plans. However, the COV 457 participation rate varies greatly among employer types. For state employers, it is 62%, which is above the average across all peer groups. The average contribution rate for the COV 457 Plan is also lower than average, which is attributed to the low automatic enrollment contribution rate of $20 per pay period ($480/year). Most new enrollments between the years of 2008 and 2014 were automatically enrolled and many have stayed at that rate. Communications initiatives are planned to address this group. Ms. Pugliese shared the following investment aspects of survey findings: 3 of 5

4 Page 4 of 5 As a percentage of total plan assets (excluding the brokerage window) 81% of the VRS 457 plan assets are invested in collective trust funds, 19% in separate accounts and 0% in mutual funds. This compared to 23% collective trust funds, 25% separate accounts, 46% mutual funds and 6% other for all plan respondees. The VRS offered 12 investment options compared to 22 for all plans. She told the Committee that the VRS suite of target date portfolios are counted as one investment option whereas other plan respondees may not have counted their suite of target date fund offerings as one investment option. NAGDCA reported VRS average annual investment cost per participant for the 457 plan was $ This compared to a $ average annual investment cost per participant for all plan respondees. Ms. Pugliese noted this cost information is at the plan level not at the individual participant level. She also noted factors contributing to cost variability include use of passively and actively managed investment options and types of investment vehicle used. INVESTMENTS Laura Pugliese, Portfolio Manager, informed the Committee that the recommended updates to the investment policy statements were approved by the Board at the February 9, 2017 Board meeting. Ms. Pugliese reviewed the January performance with the Committee. She reported the unbundled DC plans investments were tracking as expected. Ms. Pugliese apprised the Committee of BlackRock s decision to change the target date portfolios underlying U.S. stock exposure from an allocation to the S&P 500 Index and the Dow Jones U.S. Completion Total Stock Market Index to an allocation to the Russell 1000 Index and Russell 2000 Index. She shared BlackRock s decision to make the change is in an effort to reduce transaction costs and tracking error. Ms. Pugliese also advised the change was taking place at the end of March and notice would be provided to participants via the website and in print through the newsletter. 4 of 5

5 Page 5 of 5 Ms. Pugliese indicated fund performance within the TIAA ORPHE has improved over the near term but is underperforming over the long-term. She provided a draft Fidelity ORPHE January 31, 2017 performance report because Fidelity did not link returns of Class K share returns to standard fund returns as instructed by VRS. She reminded the Committee that as part of administration staff s contract negotiations with Fidelity a request was made by Fidelity to invest in Class K shares (where available) because the embedded recordkeeping fee was lower by 15 bps compared to those contained in the standard funds expense ratios. Ms. Pugliese informed the Committee she continues to make a concerted effort and has escalated to Fidelity the need to link returns of the Class K shares to the standard shares for these funds. She stated once the situation is resolved she will provide the Committee with a Fidelity performance report. Ms. Pugliese also distributed a white paper from DST entitled, Collective Investment Trusts A Perfect Storm. LEGISLATIVE UPDATE NEXT MEETING Ms. Bishop, VRS Director, provided the Committee with an update on the Commission on Employee Retirement Security and Pension Reform, including the proposed changes to the Hybrid Retirement Plan and legislation regarding a stand-alone optional defined contribution retirement plan (HB 2251), which did not pass in the General Assembly. Ms. Bishop noted that HB 1768 did pass, and it requires VRS to adopt a formal policy to develop and regularly report sensitivity analyses and stress testing and to provide its investment policy online. HB 2245/SB 1371 (Virginia Research Investment Committee) amendments passed, which do not directly affect VRS but authorizes the Virginia Research Investment Committee to pay expenses charged to it by VRS. The next meeting of the DCPAC will take place May 17, of 5

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