Pennsylvania s State System (State System) of Higher Education Changes to the Alternative Retirement Plan (ARP)

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1 May 1, 2018 Pennsylvania s State System (State System) of Higher Education Changes to the Alternative Retirement Plan (ARP) Dear TIAA Participant: The State System routinely reviews the ARP group retirement plan to make sure it continues to help you meet your retirement goals. Although no action is required from you, you may want to consider reviewing your investments to make sure they align with your objectives. You are also encouraged to review your beneficiaries to make sure they are up to date. WHAT YOU NEED TO KNOW New investment options with TIAA. The TIAA Stable Value fixed annuity will be added to the investment lineup. In addition, the current target-date funds will be replaced by a broader range of target-date funds in 5-year increments. The new targetdate funds are index funds that attempt to match the risk/returns of a specific index and may have lower investment management fees than the current actively managed target-date funds. New Retirement Choice (RC) contracts will be issued to TIAA participants. To allow for more fee transparency, new contracts will be issued to TIAA participants. The new fee structure will make it easier to see the costs of each investment option. All future contributions and any mutual fund balances will be transferred to your new accounts. Any balance in existing TIAA and CREF annuity contracts will remain there, although no new contributions, rollovers or transfers may be made to them. Retirement plan fees. While the current costs to participate in the ARP have been bundled within the expense ratios of the investments, this change to a new, more transparent fee structure will now allow you to see a fee, or a credit, for each of the investments options you choose. ARP CHANGES AT TIAA START JUNE 6, 2018 Key dates Week of May 7, 2018 and May 14, 2018 June 6, 2018 June 8, 2018 Week ending June 15, 2018 June 22, 2018 Event On-campus informational meetings held at your State System university campus. New TIAA Retirement Choice (RC) contract issued and a confirmation will be sent to your address of record. Last payroll retirement contribution to your current TIAA contract. All existing mutual fund balances will be transferred to your new account and the new investment lineup as shown in this letter. First payroll retirement contribution directed to the new TIAA RC contract and new investment lineup. No longer employed by the State System? You are receiving this notice because you have investments in the ARP with TIAA. Even though you are not actively contributing, you should review this information to learn how your account could be affected. 1

2 YOUR NEW TIAA ARP INVESTMENT OPTIONS Below is the complete TIAA investment lineup with the new investment options highlighted in bold in the chart. To learn more about the new investment options, go to TIAA.org and enter the ticker symbol in the site s search feature. You will be able to view this information on the State System s website for employees at the Group Retirement Plans ARP tab at TIAA.org/passhe. Click on Investment Options and select the plan and then Show Investments to view individual investment info. GUARANTEED TIAA Stable Value 1,2 N/A TIAA Traditional Annuity 1 N/A MONEY MARKET CREF Money Market Account R3 (Variable Annuity) QCMMIX FIXED INCOME CREF Bond Market Account R3 (Variable Annuity) QCBMIX CREF Inflation-Linked Bond Account R3 (Variable Annuity) QCILIX TIAA-CREF Short-Term Bond Institutional TISIX MULTI-ASSET CREF Social Choice Account R3 (Variable Annuity) QCSCIX TIAA-CREF Lifecycle Index 2010 Institutional TLTIX TIAA-CREF Lifecycle Index 2020 Institutional TLWIX TIAA-CREF Lifecycle Index 2025 Institutional TLQIX TIAA-CREF Lifecycle Index 2030 Institutional TLHIX TIAA-CREF Lifecycle Index 2035 Institutional TLYIX TIAA-CREF Lifecycle Index 2040 Institutional TLZIX TIAA-CREF Lifecycle Index 2045 Institutional TLXIX TIAA-CREF Lifecycle Index 2050 Institutional TLLIX TIAA-CREF Lifecycle Index 2055 Institutional TTIIX TIAA-CREF Lifecycle Index 2060 Institutional TVIIX TIAA-CREF Lifecycle Index Retirement Income Institutional TRILX EQUITIES Cohen & Steers Institutional Realty Shares CSRIX CREF Global Equities Account R3 (Variable Annuity) QCGLIX CREF Growth Account R3 (Variable Annuity) QCGRIX CREF Stock Account R3 (Variable Annuity) QCSTIX DFA International Small-Cap Value I DISVX Oppenheimer Developing Markets I ODVIX T. Rowe Price Institutional Large-Cap Growth TRLGX T. Rowe Price New Horizons I PRJIX TIAA-CREF Equity Index Institutional TIEIX TIAA-CREF International Equity Institutional TIIEX TIAA-CREF Large-Cap Value Institutional TRLIX TIAA-CREF Mid-Cap Growth Institutional TRPWX TIAA-CREF S&P 500 Index Institutional TISPX TIAA-CREF Social Choice Equity Institutional TISCX Vanguard Mid-Cap Value Index Admiral VMVAX Vanguard S&P Small-Cap 600 Index I VSMSX 1 TIAA Traditional Annuity and TIAA Stable Value are guaranteed insurance contracts and not investments for federal securities law purposes. Any guarantees under annuities issued by Teachers Insurance and Annuity Association of America are subject to its claims-paying ability. Interest credited includes a guaranteed rate, plus additional amounts as may be established by the TIAA Board of Trustees. Such additional amounts, when declared, remain in effect for the declaration year which begins each March 1 for accumulating annuities and January 1 for payout annuities. Additional amounts are not guaranteed for periods other than the period for which they were declared. 2 TIAA Stable Value is subject to Equity Wash restrictions. In order to provide the performance, stability and liquidity attributes of a stable value option, participant transfers from stable value options are subject to an industry standard 90-day Equity Wash rule. This means participants are prohibited from transferring from TIAA Stable Value directly to Competing Funds. Competing Funds are plan investment options that exhibit a pattern of performance consistent with stability and include the Money Market Funds, Short-Term Bond Funds, and TIAA Real Estate Account. Participants wishing to transfer amounts from TIAA Stable Value to Competing Funds must first transfer to Non- Competing Funds, where the amount originally transferred must remain for 90 days before the participant can then transfer the amount to one or more Competing Funds. All investment options have expenses and other fees that can be found in the prospectuses at TIAA.org/passhe. Some investment options may also have redemption and other fees. 2

3 NEW RETIREMENT CHOICE (RC) CONTRACTS FOR TIAA PARTICIPANTS You will be enrolled in Retirement Choice (RC) contracts on June 6, 2018, and sent an enrollment confirmation from TIAA. Your future contributions will be directed to your new account and the allocation you have on file. Your current mutual fund balances are scheduled to be transferred to your new RC account during the week ending June 15, Any contribution to or balances in the current TIAA-CREF Lifecycle Funds will be directed to the new TIAA-CREF Lifecycle Index Funds as described below. All other mutual fund balances will transfer to the same investment option in the new contract. Once the transfer is complete, you can update your investment choices for your transferred balances. HOW YOUR CURRENT TIAA ARP TARGET-DATE FUND INVESTMENTS WILL TRANSFER TO THE NEW OPTIONS A lifecycle fund is a fund of funds primarily invested in shares of mutual funds. The fund's investments are adjusted from more aggressive to more conservative over time as the target retirement date approaches. The target-date is an approximate date when you may plan to begin withdrawing from your retirement plan, which is based on your projected retirement date (assuming a retirement age of 65). The principal value of the fund is not guaranteed at any time, including at the target date. If you actively selected a 10-year target-date fund, you will continue to be invested in the 10-year target-date option; however your current account balances and future contributions will be directed to the new corresponding TIAA-CREF Lifecycle Index Funds as shown in the chart below. Current option Ticker Replacement option Ticker TIAA-CREF Lifecycle Retirement Income Institutional TLRIX TIAA-CREF Lifecycle Index Retirement Income Institutional TRILX TIAA-CREF Lifecycle 2010 Institutional TCTIX TIAA-CREF Lifecycle Index 2010 Institutional TLTIX TIAA-CREF Lifecycle 2020 Institutional TCWIX TIAA-CREF Lifecycle Index 2020 Institutional TLWIX TIAA-CREF Lifecycle 2030 Institutional TCRIX TIAA-CREF Lifecycle Index 2030 Institutional TLHIX TIAA-CREF Lifecycle 2040 Institutional TCOIX TIAA-CREF Lifecycle Index 2040 Institutional TLZIX TIAA-CREF Lifecycle 2050 Institutional TFTIX TIAA-CREF Lifecycle Index 2050 Institutional TLLIX TIAA-CREF Lifecycle 2060 Institutional TLXNX TIAA-CREF Lifecycle Index 2060 Institutional TVIIX If you did not actively make an investment election when you initially enrolled with TIAA, your investment election was defaulted to a 10-year target-date fund. In this case, your existing mutual fund balances and future contributions will be transferred to the applicable five-year increment target-date fund based on your date of birth and an anticipated retirement at age 65. Birth year New investment option Ticker 1953 or earlier TIAA-CREF Lifecycle Index 2010 Institutional TLTIX TIAA-CREF Lifecycle Index 2020 Institutional TLWIX TIAA-CREF Lifecycle Index 2025 Institutional TLQIX TIAA-CREF Lifecycle Index 2030 Institutional TLHIX TIAA-CREF Lifecycle Index 2035 Institutional TLYIX TIAA-CREF Lifecycle Index 2040 Institutional TLZIX TIAA-CREF Lifecycle Index 2045 Institutional TLXIX TIAA-CREF Lifecycle Index 2050 Institutional TLLIX TIAA-CREF Lifecycle Index 2055 Institutional TTIIX 1994 present TIAA-CREF Lifecycle Index 2060 Institutional TVIIX Each lifecycle index fund provides a diversified mix of investments in a single fund. 3 3 Target-date Index funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the lifecycle index funds, there is exposure to the fees and expenses associated with the underlying mutual funds. 3

4 EXISTING BALANCES IN TIAA AND CREF ANNUITY ACCOUNTS Your TIAA and CREF annuity account balances will remain in your current contracts, although no new contributions, rollovers or transfers in may be made to them. If you re thinking about transferring some or all of your account balances to your new RC contract, there are some differences between your current contracts and the new RC contract that are highlighted below. Under the Retirement Choice (RC) contract, TIAA Traditional has a rate guarantee that is between 1% and 3%, determined annually, which may be lower than the guaranteed rate in your current contract.* The adjustable rate guarantee in the new contracts allows TIAA to be more responsive to the prevailing interest rate environment, and provides the potential for higher credited rates through the crediting of additional amounts.** When TIAA Traditional balances are transferred out of an existing contract, you risk giving up a favorable crediting rate(s) on older contributions. TIAA Traditional balances in the Retirement Choice (RC) contract can be liquidated within a shorter time frame than under the existing Retirement Annuity (RA) contract. Moving money from an existing contract to a new contract is a permanent decision. Money cannot be moved back into your previous contract. For details, see the Contract Comparison chart located at TIAA.org/contractcomparison. If you have questions, call TIAA at * Guarantees are subject to Teachers Insurance and Annuity Association of America's claims-paying ability. ** TIAA s Board of Trustees declares whether additional amounts will be paid in March of each year. Additional amounts are not guaranteed. Such additional amounts, when declared, remain in effect for the declaration year which begins each March 1 for accumulating annuities and January 1 for payout annuities. Additional amounts are not guaranteed for periods other than the period for which they were declared. 4

5 UNDERSTANDING RETIREMENT PLAN FEES A goal of the ARP plan is to ensure all participants are offered competitive fees for the retirement investments and the services provided. Under the new retirement choice contracts, your fees will be transparent. Plan Servicing Fee With the implementation of this plan change, a Plan Servicing Fee of 0.038%, or $3.80 annually per $10,000 invested, will be deducted on a quarterly basis. This fee covers recordkeeping, administrative, compliance and employee services that TIAA performs on behalf of the State System ARP. This amount will be realized by assessing a fee or credit to each investment you choose within the plan. Each fee or credit will be applied to your account on the last business day of each quarter and is identified as a TIAA Plan Servicing Fee or a Plan Servicing Credit on your quarterly statements (see the Investmentspecific services section for more details). Investment-specific services Each of the plan s investment options has a fee for investment management and associated services. Plan participants generally pay for these costs through what is called an expense ratio. Expense ratios are displayed as a percentage of assets. For example, an expense ratio of 0.50% means a plan participant pays $5 annually for every $1,000 in assets. Taking the expense ratio into consideration helps you to compare investment fees. In some cases, investment providers share in the cost of plan administration. This practice is called revenue sharing. An investment company may pay a portion of an investment option s expense ratio to TIAA, the recordkeeper, to help offset the cost of plan administration. The amount of any associated fee or credit is determined by comparing the Total Administration Cost to the Revenue Sharing amount. If the Revenue Sharing amount exceeds the Total Administration Cost, a credit is applied. If the Revenue Sharing amount is less than the Total Administration Cost, then a fee is applied. For information on investment-specific expenses and fees, please refer to the investment table(s) provided. You can also find the expense ratios and other fees and expenses at TIAA.org/passhe or in the prospectuses at TIAA.org/performance. TIAA loan issuance fee This one-time fee is deducted directly from your account at the time a loan is issued. A loan issuance fee would apply if you choose a general purpose loan and/or primary residence loan within the ARP. The costs of these loans are $75 per loan for a general purpose loan and $125 per loan for a residential loan. All things considered Fees are important, but they should be just one factor in your decision-making process. In addition to fees and expenses, you should be sure your investment choices reflect your personal risk tolerance, the time frame until your retirement, and the appropriate asset allocation to suit your investment needs. 5

6 TIAA IS HERE TO HELP Online To update your new account online, beginning June 15, 2018, you can go to TIAA.org/passhe and select Log In. If you re new to TIAA, click on Register for Access to set up online access to your account. You can also try our easy-to-use Retirement Advisor Tool. Just go to TIAA.org/retirementadvisor and log in to your account. By phone If you have any questions or would like help selecting your new investment options, call TIAA at , weekdays, 8 a.m. to 10 p.m. and Saturday, 9 a.m. to 6 p.m. (ET). In person Schedule a one-on-one advice session with TIAA. Visit TIAA.org/schedulenow or call , weekdays, 8 a.m. to 8 p.m. (ET). There is no additional cost to you for this service. Attend an employee meeting Consider attending an informational meeting held at your university campus to assist employees with any questions at the following dates and times: Event location Date Time Room Office of the Chancellor/ Dixon Center Monday, May 14, a.m. (ET) DUC Administration Building, Conference Room A Bloomsburg University Tuesday, May 15, a.m. (ET) California University Thursday, May 10, a.m. (ET) 1 p.m. (ET) 1 p.m. (ET) Vartan Way, Conference Room 1 Centennial Hall, Room 218 Auditorium Convocation Center, North Way Rooms 6 & 7 Cheyney University Friday, May 11, :30 a.m. (ET) Marcus Foster Building Room 211 Clarion University Thursday, May 17, :30 a.m. (ET) 1 p.m. (ET) East Stroudsburg University Wednesday, May 9, a.m. (ET) Edinboro University Tuesday, May 15, :30 a.m. (ET) Indiana University Friday, May 18, :30 a.m. (ET) Kutztown University Wednesday, May 16, a.m. (ET) Lock Haven University Wednesday, May 9, a.m. (ET) Mansfield University Monday, May 7, a.m. (ET) 1 p.m. (ET) Millersville University Monday, May 7, a.m. (ET) Shippensburg University Monday, May 14, a.m. (ET) 1:30 p.m. (ET) Slippery Rock University Thursday, May 17, a.m. (ET) West Chester University Wednesday, May 16, a.m. (ET) 1 p.m. (ET) Suites on Main South Abeloff Center for Performing Arts Lecture Hall Lecture Hall in Reeder Hall Susquehanna Room in the HUB Alumni Auditorium J206 East Campus Alumni Hall Building, Room 317 Student Memorial Center (SMC), Room 24 Room LL205 Conference Room Smith Student Center, Room 321 Sykes Student Union Theater TIAA consultants will be in attendance at the meetings and will also be staffing help desks between meetings to answer questions. 6

7 Investment products may be subject to market and other risk factors. See the applicable product literature, or visit TIAA.org and enter a ticker symbol in the site s search feature for details. Annuity account options are available through annuity contracts issued by TIAA or CREF. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts are not guaranteed and will rise or fall based on investment performance. This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor s personal advisor based on the investor s own objectives and circumstances. Distributions from 403(b) plans before age 59½, severance from employment, death or disability may be prohibited, limited and/or subject to substantial tax penalties. Different restrictions may apply to other types of plans. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not bank deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or go to TIAA.org/passhe for current product and fund prospectuses that contain this and other information. Please read the prospectuses carefully before investing. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own financial condition and contractual obligations Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY

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