Re: Changes coming soon to TIAA Accounts in the Harvard University Retirement Programs

Transcription

1 November 28, 2017 Re: Changes coming soon to TIAA Accounts in the Harvard University Retirement Programs Dear Colleague: We are writing to let you know of several important changes coming to TIAA accounts in the Harvard retirement programs effective January 1, We hope you will take the time to review the enclosed material from TIAA as well as additional resources available on HARVie (hr.harvard.edu/retirement), and at Plans Affected Please note that when we refer to the Harvard retirement programs the following plans are included: Retirement Income Plan for Teaching Faculty of Harvard University Harvard University Defined Contribution Retirement Plan Harvard University Retirement Plan Harvard University Tax-Deferred Annuity Plan Harvard University 457(b) Deferred Compensation Plan for Certain Faculty and Staff Revised TIAA Fee Structure Effective January 1, 2018, Harvard University and TIAA are making changes affecting the administrative and fund management fees and expenses associated with your retirement programs. These changes will make plan expenses more transparent to Harvard plan participants as well as equalizing these expenses across the investment options. The impact of these changes will depend on your specific investments and the balance in each of your retirement plan accounts. A Plan Servicing Fee of 0.038% per year, ($0.38 per $1,000 invested), will be deducted from each of your TIAA retirement plan accounts. Effective January 1, 2018, certain TIAA investment options in the plans lineup (see chart on page 2) will refund a portion of their expense ratio to participants with investments in those options. Please see the enclosed material from TIAA for an explanation of expense ratios, the expense ratios of each available fund in the TIAA lineup, and the amounts to be refunded for each. Although the refund of a portion of the expense ratio of certain TIAA investment options in the plans lineup could reduce the cost of investing in those funds, it is important to understand that the new Plan Servicing Fee of 0.038% could increase the amount you pay overall. The net impact of these changes on the fees you pay will depend on your specific investment portfolio and the amount you have in your account(s). If you have questions about the TIAA fees, please contact the Harvard University Retirement Center at Consultants are available to help you from Monday to Friday, 8 a.m. to 5 p.m. (ET). Sincerely, Harvard University Benefits Office

2 Upcoming changes to your retirement programs recordkeeping and fund management fees at TIAA Effective January 1, 2018, Harvard University and TIAA are making changes affecting the administrative and fund management fees and expenses associated with your retirement programs. The impact of these changes will depend on your specific investments and the balance in each of your retirement plan accounts. When we refer to the Harvard retirement programs the following plans are included: Retirement Income Plan for Teaching Faculty of Harvard University Harvard University Defined Contribution Retirement Plan Harvard University Retirement Plan Harvard University Tax-Deferred Annuity Plan Harvard University 457(b) Deferred Compensation Plan for Certain Faculty and Staff You are not required to take any action, but please read this important communication carefully for information on how these changes will affect you. The following topics are included in this communication: The new TIAA fee structure Why we are making this change TIAA Fund Lineup and Fee Structure Understanding Plan Fees and Expenses Fee Calculation Examples The New TIAA Fee Structure 1. Plan Servicing Fee There are costs related to the administration of your retirement program, including recordkeeping, legal, accounting, trustee, and participant services. Some of these fees are paid by participants through the Plan Servicing Fee, and others are paid by the University. Effective January 1, 2018, a Plan Servicing Fee of 0.038% per year, ($0.38 per $1,000 invested), will be deducted from each of your TIAA retirement plan accounts. This will occur either through a direct fee assessment or indirectly through investments that revenue share. (Please see page 3 for an explanation of revenue sharing.) This fee will be deducted each quarter on a proportional basis (based on your average daily balance), and you will begin to see it in your first quarter 2018 plan statement. Why we are making this change At present, costs differ among the TIAA investment options and are charged against the investment returns. As such, they are not visible to participants in their statements, although they are listed on HARVie and TIAA web sites and in the annual fee disclosure documents. Effective January 1, 2018, Harvard and TIAA will make changes to how plan administrative fees are assessed in order to make them more transparent to Harvard plan participants as well as to equalize these costs across the investment options. As a result, certain investments will refund a portion of their revenue share to participants, and a Plan Servicing Fee will be deducted from participant accounts. 2. Plan Servicing Credit Effective January 1, 2018, certain TIAA investment options in the plans lineup (see chart on page 2) will refund a portion of their revenue share to participants in those options. This is the net difference and the refund will show as a Plan Servicing Credit on your quarterly statement. See the chart on page 2 to see the expenses, fees, and credits applicable to each investment option.

3 TIAA Fund Lineup and Fee Structure The following table details each TIAA investment option in the plans and any associated TIAA Plan Servicing Fee and/or Credit. (Investment options in bold are closed to new investments.) The Net Expense Ratio shown (below) is the expense ratio that the fund and plan participants paid during the fund s most recent fiscal year. The Net Plan Servicing (Fee)/Credit (column C) equals the Revenue Sharing (column A) minus the Administration Fee (column B). Account or Fund/Share Class Ticker Investment Expenses Gross Expense Ratio 3 Net Expense Ratio 3 Plan Servicing (Fee)/Credit Calculations (A - B = C) A. Revenue Sharing 4 B. Administration Fee C. Net Plan Servicing (Fee)/Credit 5 TIAA Traditional Annuity 1,2 (Guaranteed Annuity) N/A N/A N/A Money Market CREF Money Market Account R3 (Variable Annuity) QCMMIX TIAA-CREF Money Market Institutional 6 TCIXX (0.038) Fixed Income (Bonds) CREF Bond Market Account R3 (Variable Annuity) QCBMIX CREF Inflation-Linked Bond Account R3 (Variable Annuity) QCILIX TIAA-CREF Bond Index Institutional 6 TBIIX (0.038) Multi-Asset CREF Social Choice Account R3 (Variable Annuity) QCSCIX TIAA-CREF Equity Index Institutional 6 TIEIX (0.038) TIAA-CREF Lifecycle Index 2010 Institutional 6 TLTIX (0.038) TIAA-CREF Lifecycle Index 2015 Institutional 6 TLFIX (0.038) TIAA-CREF Lifecycle Index 2020 Institutional 6 TLWIX (0.038) TIAA-CREF Lifecycle Index 2025 Institutional 6 TLQIX (0.038) TIAA-CREF Lifecycle Index 2030 Institutional 6 TLHIX (0.038) TIAA-CREF Lifecycle Index 2035 Institutional 6 TLYIX (0.038) TIAA-CREF Lifecycle Index 2040 Institutional 6 TLZIX (0.038) TIAA-CREF Lifecycle Index 2045 Institutional 6 TLXIX (0.038) TIAA-CREF Lifecycle Index 2050 Institutional 6 TLLIX (0.038) TIAA-CREF Lifecycle Index 2055 Institutional 6 TTIIX (0.038) TIAA-CREF Lifecycle Index 2060 Institutional 6 TVIIX (0.038) TIAA-CREF Lifecycle Index Retirement Inc. Institutional 6 TRILX (0.038) Real Estate TIAA Real Estate Account (Variable Annuity) QREARX Equities (Stocks) CREF Equity Index Account R3 (Variable Annuity) QCEQIX CREF Global Equities Account R3 (Variable Annuity) QCGLIX CREF Growth Account R3 (Variable Annuity) QCGRIX CREF Stock Account R3 (Variable Annuity) QCSTIX TIAA-CREF International Equity Index Institutional TCIEX (0.038) 2

4 Understanding Plan Fees and Expenses Plan Servicing Fees There are costs related to the administration of your retirement program, including recordkeeping, legal, accounting, trustee, and participant services. Some of these fees are paid by participants through the Plan Servicing Fee described on page 1, while other administrative fees are paid by the University and not charged to participants. Fund Management Expenses (Expense Ratio) Each of your plan s investment options has a charge for investment management and associated services. Harvard plan participants generally pay for these costs through what is called an expense ratio. Expense ratios are charged by a plan s fund manager to cover the operating costs of those investments and are displayed as a percentage of assets on an annual basis. For example, an expense ratio of 0.25% means a plan participant pays $2.50 annually for every $1,000 in assets, assessed in quarterly installments. Taking the expense ratio into consideration helps you to compare the costs of the investment options available to you. Revenue Sharing An investment company may pay a portion of an investment fund s expense ratio to the plan s recordkeeper to help offset the cost of plan administration. This is called Revenue Sharing. Not all funds have revenue sharing arrangements; see the table on page 2 for a list of funds and revenue sharing arrangements, if any. Fee Calculation Examples Example of Annual Fee and Expense Calculation on Funds without Revenue Sharing A. Fund Balance $1,000 $50,000 $150,000 B. Annual Net Fund Expense Ratio 0.25% 0.25% 0.25% C. Annual Fund Revenue Sharing (0.00%) (0.00%) (0.00%) D. Annual Plan Servicing Fee 0.038% 0.038% 0.038% Annual Expense Ratio Paid by Participant (A x B) $2.50 $ $ Annual Plan Servicing Fee Paid by Participant (A x D) $0.38 $19.00 $57.00 Plan Servicing Credit (A x C) $0.00 $0.00 $0.00 TOTAL NET Investment and Plan Service Fee $2.88 $ $ (as a % of Balance) 0.288% 0.288% 0.288% Example of Annual Fee and Expense Calculation on Funds with Revenue Sharing A. Fund Balance $1,000 $50,000 $150,000 B. Annual Net Fund Expense Ratio 0.25% 0.25% 0.25% C. Annual Fund Revenue Sharing (0.10%) (0.10%) (0.10%) D. Annual Plan Servicing Fee 0.038% 0.038% 0.038% Annual Expense Ratio Paid by Participant (A x B) $2.50 $ $ Annual Plan Servicing Fee Paid by Participant (A x D) $0.38 $19.00 $57.00 Plan Servicing Credit (A x C) ($1.00) ($50.00) ($150.00) TOTAL NET Investment and Plan Service Fee $1.88 $94.00 $ (as a % of Balance) 0.188% 0.188% 0.188% 3

5 Fees are important and help ensure that regardless of the investments selected, all plan participants share in the cost of retirement plan administration. However, fees and expenses are only one of many factors to consider when you choose your investment options. You may also want to think about whether an investment in a particular option, along with your other investments, will help you achieve your financial goals. The cumulative effect of fees and expenses can substantially reduce the growth of your retirement savings. Visit the Department of Labor s website for an example showing the long-term effect of fees and expenses at Have questions? 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 the HHR website (hr.harvard.edu) under Total Rewards>Retirement> Investment Options or in the prospectuses at TIAA.org/performance. If you have questions about any of the fees associated with your retirement plan, please visit the HHR website (hr.harvard.edu) or contact the Harvard University Retirement Center at Consultants are available weekdays, 8 a.m. to 5 p.m. (ET). Disclaimer and End Notes 1 This guaranteed option is a fixed annuity that pays you interest at competitive crediting rates that are announced in advance. There is no expense ratio because these are fixed annuities. Any guarantees under annuities issued by TIAA are subject to TIAA s claims-paying ability. ² TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes. 3 Gross expense ratio includes all of an investment s expenses. Net expense ratio takes into account any investment fee waivers and expense reductions, giving an indication of what is currently being charged. The net expense ratio is the expense ratio that the plan participants paid during the fund s most recent prospectus. 4 Revenue sharing is a term that describes the practice when investment providers share in the cost of plan administration. Please note that TIAA Traditional, TIAA Real Estate, and all CREF Annuity accounts do not revenue share, rather they have a plan servicing fee that is applied to your plan s administrative and recordkeeping costs. 5 The Net Plan Servicing (Fee)/Credit is determined by subtracting the amount of revenue sharing provided by each investment option you choose from 0.038%, the plan s cost for administrative services. If you choose an investment with revenue sharing of more than 0.038%, you ll receive a credit for the difference. 6 A contractual fee waiver may apply. See fund prospectus for details 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. 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. Investment products may be subject to market and other risk factors. See the applicable product literature, or visit HHR website (hr.harvard.edu) for details. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or go to TIAA.org/harvard 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 MT (11/17)