VRS COV 457 Plan Overview. Kelly L. Hiers, VRS DC Plans Administrator July 14, 2017

Transcription

1 VRS COV 457 Plan Overview Kelly L. Hiers, VRS DC Plans Administrator July 14, 2017

2 Agenda Agency and Plan Structure Assets, Accounts and Adoptions Plan Highlights Investment Options Employer Services Participant Services Appendix Highlights from 2016 Perspectives in Practice Survey (National Association of Government Defined Contribution Administrators - NAGDCA) 2

3 Agency and Plan Structure

4 VRS Agency Structure VRS Board of Trustees Defined Contribution Plans Advisory Committee (DCPAC) Director Trish Bishop Chief Investment Officer Ron Schmitz Internal Audit Director Jennifer Schreck DC Plans Administration DC Plans Investment Oversight 4

5 Defined Contribution Plans Administration Record keeper oversight Contract monitoring/performance standards Participant/employer education and support Plan analysis Compliance (plan corrections) Employee Plan Overviews and Regional Education Meetings In partnership with VRS Public Relations and third-party administrators: o Communications/campaign development o Employer websites o Participant websites o Focus newsletters o Various publications 5

6 VRS Investment Department Team Approach with Portfolio Manager and Senior Investment Analyst Oversight of DC investments Investment Department liaison for VRS administration staff, third-party administrator, ORPHE bundled provider companies and other interested parties 6

7 Plan Structure Unbundled vs. Bundled Unbundled Services: Investment management and record keeping/administrative services covered under separate contracts Investment A (investment fee) Plan Sponsor Investment B (investment fee) Investment C (investment fee) Third-Party Record Keeper Record keeping Communications Education Record-keeping fees 7

8 Plan Structure Unbundled vs. Bundled Bundled Services: Investment Management and record-keeping and administrative services covered under one contract Plan Sponsor Provider Record keeping Communications Investment Education Record-keeping and Investment Fees 8

9 Assets, Accounts, and Adoptions

10 Assets and Accounts All Plans Note: Unbundled plans only and includes forfeiture accounts Supplemental Retirement 401(a) Cash Match Beneficiary Plan 0.00% 0.00% 0.01% 0.01% ORP School Superintendents ORP Higher Education 457 Deferred Compensation Beneficiary Plan ORP Political Appointees Hybrid 457 Deferred Compensation Plan Hybrid 401(a) 80.45% 0.08% 0.48% 1.30% 3.74% 13.92% 401(a) Cash Match 457 Deferred Compensation* Plan Name Balances - 03/31/2017 % of Plan Assets Number of Accounts Supplemental Retirement $117, % 2 401(a) Cash Match Beneficiary Plan $142, % 26 ORP School Superintendents $357, % 3 ORP Higher Education $442, % Deferred Compensation Beneficiary Plan $2,280, % 39 ORP Political Appointees $14,287, % 333 Hybrid 457 Deferred Compensation Plan $38,370, % 54,794 Hybrid 401(a) $110,219, % 83, (a) Cash Match $410,589, % 70, Deferred Compensation* $2,373,666, % 77,508 Total All VRS Plans $2,950,473, % 285, * Includes reserve account. Reserve account balance may at times be $

11 COV 457 Employer Adoptions - Summary 57 political subdivisions 14 school divisions 8 special authorities 2 asset transitions upcoming transitions Employer Adoptions by Year COV COV 457 Assets Transitioned or in Process of Transitioning to

12 COV 457 Plan Assets by Employer Type State $2,355,544,068 (97%) 74,963 Accounts (97%) Political Subdivisions $33,178,129 (1%) 1,669 Accounts (2%) School Divisions $39,655,888 (2%) 870 Accounts (1%) Total Assets $2,428,546,241 Total Accounts 77, Data as of 6/30/2017

13 COV 457 Plan Participation Overall participation rate 34% Varies greatly among employers, particularly local employers and school divisions 70% 60% 50% 40% 30% 20% 457 Participation Rates 10% 0% Overall Participation Rate Higher Ed Only State Only Local Employers Only 13 NAGDCA 2016 Perspectives in Practice Survey Data as of 12/31/2015

14 COV 457 City of Virginia Beach Adopted in 2014, for Hybrid Retirement Plan members only Data as of 6/30/17 14 Accounts - 46 Assets - $424,527 Fund Name % of Assets Bond Fund 0.40% Global Real Estate Fund 0.70% High-Yield Bond Fund 1.30% International Stock Fund 1.60% Money Market Fund 0.50% Retirement Portfolio 0.00% Small/Mid-Cap Stock Fund 23.20% Stable Value Fund 0.50% Stock Fund 14.80% Target Date 2020 Portfolio 0.10% Target Date 2025 Portfolio 4.80% Target Date 2030 Portfolio 13.90% Target Date 2035 Portfolio 0.60% Target Date 2040 Portfolio 0.60% Target Date 2045 Portfolio 27.70% Target Date 2050 Portfolio 5.10% Target Date 2055 Portfolio 1.50% TD Ameritrade 2.70%

15 Plan Highlights

16 Plan Highlights Administrative and record-keeping fees are separate from investment fees Investment expense ratios include only fees related to the management of the fund Use of explicit flat dollar administrative/record-keeping fees Improves transparency Provides for fee leveling across participant base Roth 457 option available Unforeseen Emergency Withdrawals available (based on eligibility) Monthly investment performance reports and annual fee disclosure Consistent with ERISA standards White-labeled, passively managed, tiered investment menu Custom communications and websites provide plan-specific education Integration with myvrs Planner and Member Benefit Profile Provides holistic picture of retirement benefits 16

17 myvrs 17

18 myvrs Retirement Income Planner 18

19 DCP Account Access Custom communications and targeted messaging Retirement Income Projections Suggestions for increasing outcomes 19

20 Understanding Plan Fees Fees may be implicit or explicit, variable (asset-based) or fixed Investment Related Investment management and other investment-related expenses Implicit and variable Acquired fund fees and expenses Implicit and variable (Stable Value Fund only) Mortality and expense risk fees Liquidity guarantee fees 12-b-1 distribution fees Short-term Trading Redemption fees Recordkeeping/Administration Related Record-keeping/Administration fees Explicit and fixed at $30.50/year per unique participant in VRS DC Plans Value-added fees Indicates types of fees that may be present in investment options within the COV 457 Plan. 20

21 Why Fees Matter - Fee Example Investor A Contribute $6,000/year beginning at age 25 6% annual return on investment 0.50% annual fee Account value at age 65: $858,068 Investor B Contribute $6,000/year beginning at age 25 6% annual return on investment 1.50% annual fee Account value at age 65: $656, % increase in fees equals $201,873 less in account at age 65. Examples provided by Mercer for illustrative purposes only. 21

22 Publications & Resources - Samples Coming Soon: DCP Mobile App 22

23 Publications - Investments and Fees o Investment Guide Do-It-For-Me Path Target Date Portfolios (Default) Help-Me-Do-It Path Do-It-Myself Path o Fund Profiles and videos o Monthly Investment Option Performance Reports o Annual Fee Disclosure 23

24 Investment Options

25 DCP Investment Paths Investment options organized into three pathways Designed to make it easier for participants to implement investment decisions Mix and match investment options within each path Helps participants meet objectives, risk tolerance and overall investing style Do-It-For-Me Path Help-Me-Do-It Path Do-It-Myself Path 25

26 Do-It-For-Me Path Includes target-date portfolios for participants who would like a portfolio that's already diversified. Select funds based on your projected retirement date and individual needs. Fund Expense Ratio Fund Expense Ratio Retirement Portfolio 0.08% Target Date 2040 Portfolio 0.08% Target Date 2020 Portfolio 0.08% Target Date 2045 Portfolio 0.08% Target Date 2025 Portfolio 0.08% Target Date 2050 Portfolio 0.08% Target Date 2030 Portfolio 0.08% Target Date 2055 Portfolio 0.08% Target Date 2035 Portfolio 0.08% Target Date 2060 Portfolio 0.08% 26 Expense ratios as of 5/31/2017. May change periodically.

27 Help-Me-Do-It Path Offers a carefully selected menu of funds for those who prefer to take a slightly more active role in investing by assembling their own portfolio of funds. Fund Expense Ratio Fund Expense Ratio Money Market Fund 0.08% Stock Fund 0.02% Stable Value Fund 0.29% Small/Mid-Cap Stock Fund 0.04% Bond Fund 0.04% International Stock Fund 0.10% Inflation-Protected Bond Fund 0.03% Global Real Estate Fund 0.11% High-Yield Bond Fund 0.40% Virginia Retirement System Investment Portfolio (VRSIP) 0.58% 27 Expense ratios as of 5/31/2017. May change periodically.

28 Do-It-Myself Path Self-Directed Brokerage Account For knowledgeable investors who wish to manage their investments directly Thousands of publicly traded mutual funds, exchange traded funds (ETFs) and individual securities are available Additional fees may apply 28

29 All Plans - Plan Assets by Fund 1.25% 1.80% 1.64% 1.10% 1.19% 1.89% 0.21% 1.07% 1.62% 2.33% 2.89% 3.26% 27.59% 3.27% 4.05% 16.66% 4.21% 8.87% 4.67% 5.06% 5.38% Target Date 2060 Portfolio VRS Investment Portfolio High-Yield Bond Fund Inflation-Protected Bond Fund TD Ameritrade Target Date 2050 Portfolio Target Date 2055 Portfolio Money Market Fund Target Date 2045 Portfolio Target Date 2040 Portfolio Target Date 2035 Portfolio Target Date 2030 Portfolio Global Real Estate Fund Bond Fund Target Date 2025 Portfolio International Stock Fund Target Date 2020 Portfolio Retirement Portfolio Small/Mid-Cap Stock Fund Stable Value Fund Stock Fund Fund Name Fund Balance 03/31/2017 % of Plan Assets Target Date 2060 Portfolio $6,272, % VRS Investment Portfolio $31,459, % High-Yield Bond Fund $32,566, % Inflation-Protected Bond Fund $35,127, % TD Ameritrade $36,843, % Target Date 2050 Portfolio $47,760, % Target Date 2055 Portfolio $48,397, % Money Market Fund $53,134, % Target Date 2045 Portfolio $55,661, % Target Date 2040 Portfolio $68,748, % Target Date 2035 Portfolio $85,252, % Target Date 2030 Portfolio $96,122, % Global Real Estate Fund $96,404, % Bond Fund $119,375, % Target Date 2025 Portfolio $124,222, % International Stock Fund $137,729, % Target Date 2020 Portfolio $149,247, % Retirement Portfolio $158,879, % Small/Mid-Cap Stock Fund $261,720, % Stable Value Fund $491,603, % Stock Fund $813,944, % Total $2,950,473, % 29 29

30 Employer Services

31 Employer Services Dedicated ICMA-RC Employer Support Team Dedicated Employer Resource Website Reporting available in EZLink Indicative data updates streamlined through myvrs Navigator Distribution processing is automatic and based on employment status in myvrs Navigator Enrollment is electronic through website Non-VRS covered employees also eligible to participate Requires paper enrollment form 31

32 Employer Resources/Services EZLink Reports Available Deferral Changes Contribution Limits/Overage/Catch-up Provision Asset Allocation (plan assets allocated to investment funds or fund classes) Plan Activity Reports (Enrollments, Rollins/Rollouts, RMDs, etc.) Contribution Transactions (in aggregate and by participant) Participant Website Statistics Plan Usage: Average Account Balance, by age Average Contributions, by age Use of Default Fund Most Popular Investments Participation Rate circle graph 32

33 Participant Services

34 Participant Services Engage, Build and Realize Meetings, Seminars, and Oneon-One Counseling Phone & Support Participant Services Publications Investment Guide Questions Online Tools Interactive calculators Text Access 34

35 Meetings, Seminars and One-on-One Counseling 35

36 Meeting Topics Current Plan Overview Understanding Plan Investments Distribution Strategies Managing Your Money Coming Soon! Women and Money Save Like There Is A Tomorrow! (with workbook) Advanced Investments 36

37 Participant Education Highlights 2016 Service Review for Field Services Each DC Plans Specialist averaged more than 300 group meetings Each DC Plans Specialist met with more than 1,300 individuals Participant satisfaction survey following interaction with DC Plans Specialists May % Strongly Agree or Agree Presenter met my expectations, kept me actively engaged Seminar provided me with a clear understanding of the content, was of value to me 37

38 Participant Contact Quality Survey Through May After Call Electronic Responses Satisfaction Informative Helpful Knowledgeable Professional YTD 2017 (n= 369) 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 38.19% 11.26% Reason for Call 9.07% 11.26% 4.67% 4.40% 3.02% 18.13% 100.0% 0.0% Recommendation Rate 92.4% Yes YTD 2017 (n=236) YTD 2017 (n=364) Notes: (1) Scores are on a 4-point scale where 4 denotes the highest level of satisfaction and 1 denotes the lowest level of satisfaction. (2) n = Number of Survey Responses. 38

39 Questions!

40 40 Appendix

41 NAGDCA 2016 Perspectives in Practice Total respondents 62 All public sector plans Total plan assets $116B 2.4M individual participants Plan Designation 23% Primary 77% Supplemental Asset Size 24% Greater than $2.5 Billion Plan Participants 24% Greater than 60,000 Plan Structure 403(b) 3% 401(k) 14% 401(a) 18% Plan Type 457(b) 65% 66% Unbundled (administrative and investment providers are separately chosen) 34% Bundled (single provider of services and investment products) 41 Responses based on 12/31/2015 data.

42 NAGDCA 2016 Perspectives in Practice - Investments Percentage of total plan assets (Excludes Brokerage Window) 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% Number of investment options plan currently offers (Excludes brokerage window) 30.0% % 10.0% % Mutual funds Collective trust funds Separate accounts Other (ETF, etc.) COV 457 0% 80.8% 18.2% 1.0% All Plans 46.2% 22.7% 25.5% 5.7% Assets > $500M < $2.5B 47.1% 20.4% 24.2% 8.3% Plan Participants > 60K 20.2% 32.0% 46.7% 1.1% 0 Number of Investments COV 457* All Plans Assets > $500 and $2.5B Plan Participants > 60,000 *Suite of target date portfolios are counted as one investment option Responses based on 12/31/2015 data. 42

43 NAGDCA 2016 Perspectives in Practice - Fees $ $ $ $ $ Average Annual Cost Per Participant $ $80.00 $60.00 $40.00 $20.00 $0.00 $ $ $84.40 $28.40 $30.50 $76.50 $59.20 $39.20 $69.50 $ $ $ Investment Fees* Administrative Fees* Total Annual Cost 43 COV 457** All Plans Assets > $500M < $2.5B Plan Participants > 60K *Investment fees: Factors contributing to fee variability include the plan sponsors use of passively and actively managed investment options and type of investment vehicle used. Administrative fees: Only direct participant costs are reflected in this comparison. **COVA 457 investment fees are based on the average investment costs at the plan level and are not reflective of actual individual participant costs. COV 457 plan participants pay only the annual recordkeeping fee for ICMA-RC, which is $30.50 per unique participant. Responses based on 12/31/2015 data.

44 NAGDCA 2016 Perspectives in Practice - Services COV 457 All Plans (% that provide) Assets > $500M and < $2.5B (% that provide) Call Center Yes 97% 90% 93% Plan Participants > 60,000 (% that provide) On-Site Services (enrollment, account reviews, education) Yes 98% 100% 100% Managed Accounts No 66% 55% 60% Hardship/Emergency Withdrawals Yes 82% 75% 100% Loans No 61% 55% 71% Financial Planning Services No 57% 65% 57% Investment Advice inperson No 43% *8% Investment Advice online No 61% *24% Investment Advice - telephone No 54% *18.8% 45% *0% 60% *16.7% 50% *0% 43% *0% 60% *11.1% 53% *12.5% * Plans that charge participants separately for use of service. Responses based on 12/31/2015 data. 44

45 NAGDCA 2016 Perspectives in Practice COV % 60% 50% 40% 30% 20% 10% 0% 457 Participation Rates Overall Participation Rate Higher Ed Only State Only Local Employers Only $4, $3, $3, $2, $2, $1, $1, $ $0.00 Annual Contributions Average Median COV 457 Multi-Employer Supplemental All Plans Assets > $500M < $2.5B Plan Participants > 60K Responses based on 12/31/2015 data. 45