Important update on recordkeeping and investment management fees for The Pennsylvania State University retirement program May 18, 2018 The Pennsylvania State University is always looking for ways to improve our top-tier retirement program. Over the last several years, based on changing regulations and retirement plan economics, the University, with the guidance of an independent investment consultant, negotiated lower retirement plan recordkeeping fees with TIAA. As part of this evolution, the University has approved the transition to a structure that affords you greater transparency around the fees associated with administering the retirement program. The changes will apply to the following retirement plans: The Pennsylvania State University Alternate Retirement Plan The Pennsylvania State University 403(b) Tax-deferred Annuity Plan The Pennsylvania State University 457(b) Deferred Compensation Plan While you do not need to take any action as a result of these changes, please read this communication in its entirety so that you understand what will be taking place.
Changes in the structure of fees Retirement plan fees cover administrative activities including, but not limited to resources and services such as on-site investment counseling, website and call center maintenance, plan audit support, fiduciary and legal advisory services, account statements and other plan communications. The University has reduced fees over time as part of their fiduciary responsibilities to make the cost of administering the plans fair and balanced. Plan administration fees are allocated or collected through one or a combination of fee methods. Up to this point, revenue sharing has been the most common approach for fee collection in the industry. Revenue sharing is a term that describes the practice when investment providers share in the cost of plan administration by returning to the plan sponsor specific fees associated with some investments. All investment funds carry expense ratios, meaning the associated cost to invest in a particular fund. For many funds, a portion of that cost-to-invest is credited back to the plan to help offset some of the expenses mentioned above. In plans which the investment lineups contain funds that pay revenue sharing, the revenue sharing percentages often vary by fund. And, of course, each plan participant can hold a unique mix of investments, and not all mutual funds contain revenue sharing. As a result, participant accounts will generate varying amounts of revenue that can be subsequently used to pay plan administration expenses a case of some participants paying different amounts than others. Therefore, beginning July 1, 2018, Penn State will be adopting a fee leveling approach to cover costs associated with administering the retirement plans as described below. In 2018, your plans annual Administration Fee is 0.052%, $0.52 per $1,000 invested, which will be deducted from your account(s) on a quarterly basis. Any revenue sharing within an investment option greater than the administrative fee will be credited back to your account. Any investment option with revenue sharing less than the administrative fee will be assessed a fee. This results in all participants paying an equal percentage of their account for the administration of the plans. Each fee or credit will be applied to your account on the last business day of the quarter and will be identified as a TIAA Plan Servicing Fee or a TIAA Plan Servicing Credit on your quarterly statements. The new fee structure will be reported starting with your September 30, 2018 statement. 2018 Administrative Costs Example Employee Revenue Sharing Plan Fees/(Credits) Total Administration Cost Robert 0.00% 0.052% 0.052% John 0.10% (0.048)% 0.052% Suzanne 0.24% (0.188)% 0.052% Please note, if your account balance is $0 on the date that a fee is to be assessed, no fee will be charged. For information on fees and expenses, please refer to the enclosed investment table. You may also view the expense ratios, rates of return and other fees and expenses at TIAA.org/psu or in the prospectuses at TIAA.org/performance. 2
Frequently Asked Questions (FAQs) 1. Why am I seeing a recordkeeping fee now? I was never charged in the past. There was always a cost associated with recordkeeping and administering the retirement plans. However, as a result of enhancements in TIAA s recordkeeping technology, we have moved toward a more transparent way of assessing and collecting fees. This new method is considered an industry best practice, and also provides a more equitable method of covering costs associated with administering the retirement plans. 2. How was the cost of the plan covered in the past? Up to this point, Penn State has utilized the most common approach in the industry, revenue sharing, to cover costs associated with administering the retirement plans. All investment funds carry expense ratios, meaning the associated cost to invest in a particular fund. For many funds, a portion of that cost-to-invest was credited back to the plan to help offset some of the expenses mentioned above. Not all mutual funds contain revenue sharing. 3. Can I pay the fee separately or does it have to be deducted from my retirement savings? All fees for recordkeeping and other plan services must be deducted from your retirement plan accounts. 4. Why do I have a plan service credit? When the investments you ve selected share revenue greater than the overall plan administrative expense, a credit is provided. 5. Why was I charged a plan service fee? A fee is assessed if the investment s revenue share is less than the total administrative cost. Have additional questions? Online: To learn more about investment options, go to TIAA.org. You can then enter the name or ticker symbol of the investment options in the search field. To learn more about your plan and to update your retirement portfolio online, log in to the secure website at TIAA.org/psu, where you can change the direction of future contributions, transfer existing assets and review your beneficiary election. Phone: If you prefer, you can update your retirement portfolio by calling TIAA at 800-842-2252, weekdays, 8 a.m. to 10 p.m., or Saturday, 9 a.m. to 6 p.m. (ET). In person: To schedule an individual one-on-one session, call 800-732-8353, weekdays, 8 a.m. to 8 p.m. (ET). You can also schedule a meeting online at TIAA.org/schedulenow-pennstate. 3
Due to international securities laws, TIAA may be restricted from processing certain mutual fund transactions on your behalf. If you have a legitimate U.S. mailing address, including an address in Puerto Rico, or an Army Post Office (APO), Diplomatic Post Office (DPO) or Fleet Post Office (FPO) box, these restrictions may not apply to you. Please contact TIAA for assistance at 800-842-2252. 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 TIAA.org/psu for details. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877-518-9161 or go to TIAA.org/psu 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. 2018 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017 MT 223143 475498 949301-1147300 (04/18)
Investment Options for The Pennsylvania State University Retirement Plans The following table details each investment option in the plans and any associated TIAA Plan Servicing Fee and/or Credit. The Total Administrative Fee equals the Revenue Share plus the TIAA Plan Servicing Fee/(Credit). Account or Fund Tier 1: Target-Date Funds 1 Ticker Investment s Gross Net Plan Servicing Fee/(Credit) Calculations (A + B = C) A. Revenue Sharing 3 % B. Plan Servicing Fee/ (Credits) 4 % C. Total Administrative Fee % TIAA-CREF Lifecycle Index 2010 Institutional 5 TLTIX 0.27 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2015 Institutional 5 TLFIX 0.25 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2020 Institutional 5 TLWIX 0.22 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2025 Institutional 5 TLQIX 0.22 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2030 Institutional 5 TLHIX 0.21 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2035 Institutional 5 TLYIX 0.21 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2040 Institutional 5 TLZIX 0.20 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2045 Institutional 5 TLXIX 0.22 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2050 Institutional 5 TLLIX 0.23 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2055 Institutional 5 TTIIX 0.40 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index 2060 Institutional 5 TVIIX 1.27 0.10 0.00 0.052 0.052 TIAA-CREF Lifecycle Index Ret Inc Institutional 5 TRILX 0.41 0.10 0.00 0.052 0.052 Tier 2: Core Index Investment Strategy TIAA-CREF International Equity Index Institutional 5 TCIEX 0.06 0.06 0.00 0.052 0.052 Vanguard Emerging Markets Stock Index Institutional VEMIX 0.11 0.11 0.00 0.052 0.052 Vanguard Extended Market Index Institutional Plus VEMPX 0.05 0.05 0.00 0.052 0.052 Vanguard Institutional Index Institutional Plus VIIIX 0.02 0.02 0.00 0.052 0.052 Vanguard REIT Index Institutional VGSNX 0.10 0.10 0.00 0.052 0.052 Vanguard Total Bond Market Index Institutional VBTIX 0.04 0.04 0.00 0.052 0.052 Tier 2: Core Active Investment Strategy American Funds EuroPacific Growth R6 RERGX 0.50 0.50 0.00 0.052 0.052 BlackRock High Yield Bond K BRHYX 0.54 0.53 0.00 0.052 0.052 BlackRock Inflation Protected Bond K BPLBX 0.46 0.30 0.00 0.052 0.052 DFA US Targeted Value Institutional Class DFFVX 0.37 0.37 0.00 0.052 0.052 Federated MDT Small-Cap Growth R6 QLSGX 1.54 0.88 0.00 0.052 0.052 JPMorgan Limited Duration Bond R6 JUSUX 0.39 0.25 0.00 0.052 0.052 Metropolitan West Total Return Bond Plan MWTSX 0.38 0.38 0.00 0.052 0.052 TIAA-CREF Money Market Institutional TCIXX 0.14 0.14 0.00 0.052 0.052 T. Rowe Price Institutional Large-Cap Growth TRLGX 0.56 0.56 0.00 0.052 0.052 T. Rowe Price Institutional Large-Cap Value TILCX 0.57 0.57 0.00 0.052 0.052 Templeton Global Bond Class R6 FBNRX 0.58 0.52 0.00 0.052 0.052 Vanguard Inflation Protected Securities Institutional VIPIX 0.07 0.07 0.00 0.052 0.052 Voya Global Real Estate R6 VGRQX 0.87 0.87 0.00 0.052 0.052 continued
Account or Fund Tier 3: Lifetime Income Investment Strategies (Annuities) Ticker Investment s Gross Net Plan Servicing Fee/(Credit) Calculations (A + B = C) A. Revenue Sharing 3 % B. Plan Servicing Fee/ (Credits) 4 % C. Total Administrative Fee % CREF Bond Market R3 Account (Variable Annuity)* QCBMIX 0.29 0.29 0.10 (0.048) 0.052 CREF Equity Index R3 Account (Variable Annuity)* QCEQIX 0.23 0.23 0.10 (0.048) 0.052 CREF Global Equities R3 Account (Variable Annuity) QCGLIX 0.33 0.33 0.10 (0.048) 0.052 CREF Growth R3 Account (Variable Annuity)* QCGRIX 0.27 0.27 0.10 (0.048) 0.052 CREF Inflation-Linked Bond R3 Account (Variable Annuity)* QCILIX 0.24 0.24 0.10 (0.048) 0.052 CREF Money Market R3 Account (Variable Annuity) QCMMIX 0.23 0.23 0.10 (0.048) 0.052 CREF Social Choice R3 Account (Variable Annuity) QCSCIX 0.27 0.27 0.10 (0.048) 0.052 CREF Stock R3 Account (Variable Annuity) QCSTIX 0.32 0.32 0.10 (0.048) 0.052 TIAA Real Estate Account (Variable Annuity) QREARX 0.85 0.85 0.24 (0.188) 0.052 TIAA Traditional Annuity 6 N/A 0.00 0.00 0.15 (0.098) 0.052 You can also view the expense ratios, rates of return and other fees and expenses at TIAA.org/psu or in the prospectuses at TIAA.org/performance. 1 Target-date 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 target-date funds, there is exposure to the fees and expenses associated with the underlying mutual funds as well. 2 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. 3 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, TIAA Stable Value and all CREF Annuity accounts do not have a revenue sharing, rather they have a plan services offset that is applied to your plan s administrative and recordkeeping costs. 4 Plan Servicing Fee/Credit is determined by subtracting the amount of revenue share provided by each investment option you choose from 0.052%, the plan s cost for administrative services. If you choose an investment with revenue sharing of more than 0.052%, you ll receive a credit for the difference. 5 A contractual or voluntary fee waiver may apply. See fund prospectus for details. 6 TIAA Traditional Annuity is a guaranteed insurance contract and not an investment for federal securities law purposes. Any guarantees under annuities issued by TIAA are subject to TIAA s 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. * This annuity is restricted for new contributions. However, this annuity will continue support of the overall cost of the retirement plan. MT 182509 949301-1147400 (04/18)