vrs cov 457 plan overview - vbgov.com...jul 14, 2017 · vrs cov 457 plan overview kelly l. hiers,...
TRANSCRIPT
VRS COV 457 Plan Overview
Kelly L. Hiers, VRS DC Plans AdministratorJuly 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)
Agency and Plan Structure
4
VRS Agency Structure
VRSBoard of Trustees
DirectorTrish Bishop
DC Plans Administration
Chief Investment Officer
Ron Schmitz
DC Plans Investment Oversight
Internal Audit Director
Jennifer Schreck
Defined Contribution Plans
Advisory Committee (DCPAC)
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 developmento Employer websites o Participant websites o Focus newsletterso Various publications
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
7
Third-Party Record Keeper• Record keeping • Communications• Education• Record-keeping fees
Unbundled Services: Investment management and record keeping/administrative services covered under separate contracts
Plan Structure –Unbundled vs. Bundled
Plan Sponsor
Investment A(investment fee)
Investment B(investment fee)
Investment C(investment fee)
8
Provider Record keepingCommunicationsInvestmentEducationRecord-keeping and Investment Fees
Bundled Services: Investment Management and record-keeping and administrative services covered under one contract
Plan Structure –Unbundled vs. Bundled
Plan Sponsor
Assets, Accounts, and Adoptions
10
Assets and Accounts – All PlansNote: Unbundled plans only and includes forfeiture accounts
10* Includes reserve account. Reserve account balance may at times be $0.00.
Plan Name Balances - 03/31/2017 % of Plan Assets Number of AccountsSupplemental Retirement $117,321.85 0.00% 2401(a) Cash Match Beneficiary Plan $142,807.93 0.00% 26ORP School Superintendents $357,385.34 0.01% 3ORP Higher Education $442,218.75 0.01% 10457 Deferred Compensation Beneficiary Plan $2,280,434.02 0.08% 39ORP Political Appointees $14,287,502.11 0.48% 333Hybrid 457 Deferred Compensation Plan $38,370,941.19 1.30% 54,794Hybrid 401(a) $110,219,139.56 3.74% 83,111401(a) Cash Match $410,589,271.44 13.92% 70,165457 Deferred Compensation* $2,373,666,052.41 80.45% 77,508Total All VRS Plans $2,950,473,074.60 100.00% 285,991
0.00%0.00%
0.01% 0.01%
0.08%0.48%
1.30%
3.74%
13.92%
80.45%
Supplemental Retirement
401(a) Cash Match Beneficiary Plan
ORP School Superintendents
ORP Higher Education
457 Deferred Compensation Beneficiary Plan
ORP Political Appointees
Hybrid 457 Deferred Compensation Plan
Hybrid 401(a)
401(a) Cash Match
457 Deferred Compensation*
11
COV 457 Employer Adoptions - Summary
• 57 political subdivisions• 14 school divisions• 8 special authorities
• 2 asset transitions – 2014• 3 upcoming transitions - 2017
0
1
2
3
4
5
6
7
8
9
10
1980 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Employer Adoptions by Year – COV 457
COV 457 Assets Transitioned or in Process of Transitioning to 457
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 Accounts77,502
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
0%
10%
20%
30%
40%
50%
60%
70%
457 Participation Rates
Overall Participation Rate State Only
Higher Ed Only Local Employers Only
NAGDCA 2016 Perspectives in Practice SurveyData as of 12/31/2015
14
COV 457 – City of Virginia Beach
• Adopted in 2014, for Hybrid Retirement Plan members only
Fund Name % of AssetsBond 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%
Accounts - 46Assets - $424,527
Data as of 6/30/17
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
17
myVRS
18
myVRS – Retirement Income Planner
19
DCP Account Access
• Custom communications and targeted messaging• Retirement Income Projections
– Suggestions for increasing outcomes
20
Understanding Plan Fees
Fees may be implicit or explicit, variable (asset-based) or fixedInvestment Related
Investment management and other investment-related expenses – Implicit and variableAcquired fund fees and expenses – Implicit and variable (Stable Value Fund only) Mortality and expense risk feesLiquidity guarantee fees12-b-1 distribution feesShort-term Trading Redemption fees
Recordkeeping/Administration RelatedRecord-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.
21
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:
$656,195
1.00% increase in fees equals $201,873 less in account at age 65.
Examples provided by Mercer for illustrative purposes only.
Why Fees Matter - Fee Example
22
Publications & Resources - Samples
Coming Soon: DCP Mobile App
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 videoso Monthly Investment Option
Performance Reportso Annual Fee Disclosure
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
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.
FundExpense 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%
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.
FundExpense 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%
Expense ratios as of 5/31/2017. May change periodically.
28
Do-It-Myself Path
• 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
Self-Directed Brokerage Account
29
All Plans - Plan Assets by Fund
29
Fund Name Fund Balance 03/31/2017 % of Plan AssetsTarget Date 2060 Portfolio $6,272,286.48 0.21%VRS Investment Portfolio $31,459,899.23 1.07%High-Yield Bond Fund $32,566,184.93 1.10%Inflation-Protected Bond Fund $35,127,358.12 1.19%TD Ameritrade $36,843,272.06 1.25%Target Date 2050 Portfolio $47,760,443.96 1.62%Target Date 2055 Portfolio $48,397,195.54 1.64%Money Market Fund $53,134,129.74 1.80%Target Date 2045 Portfolio $55,661,512.37 1.89%Target Date 2040 Portfolio $68,748,451.39 2.33%Target Date 2035 Portfolio $85,252,647.73 2.89%Target Date 2030 Portfolio $96,122,472.50 3.26%Global Real Estate Fund $96,404,829.23 3.27%Bond Fund $119,375,034.49 4.05%Target Date 2025 Portfolio $124,222,382.43 4.21%International Stock Fund $137,729,851.28 4.67%Target Date 2020 Portfolio $149,247,144.83 5.06%Retirement Portfolio $158,879,308.40 5.38%Small/Mid-Cap Stock Fund $261,720,475.22 8.87%Stable Value Fund $491,603,589.30 16.66%Stock Fund $813,944,605.37 27.59%
Total $2,950,473,074.60 100.00%
0.21%1.07%
1.10% 1.19%
1.25%
1.62%
1.64% 1.80%1.89%
2.33%2.89%
3.26%3.27%
4.05%
4.21%
4.67%
5.06%5.38%
8.87%
16.66%
27.59%
Target Date 2060 Portfolio VRS Investment PortfolioHigh-Yield Bond Fund Inflation-Protected Bond FundTD Ameritrade Target Date 2050 PortfolioTarget Date 2055 Portfolio Money Market FundTarget Date 2045 Portfolio Target Date 2040 PortfolioTarget Date 2035 Portfolio Target Date 2030 PortfolioGlobal Real Estate Fund Bond FundTarget Date 2025 Portfolio International Stock FundTarget Date 2020 Portfolio Retirement PortfolioSmall/Mid-Cap Stock Fund Stable Value FundStock Fund
Employer Services
31
Employer Services
• 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
• Dedicated ICMA-RC Employer Support Team
• Dedicated Employer Resource Website
• Reporting available in EZLink
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
Participant Services
34
Participant Services
Questions
Meetings, Seminars, and One-on-One Counseling
Phone & E-mail Support
Publications• Investment Guide
Online Tools• Interactive calculators• Text Access
Participant Services
Engage, Build and Realize
35
Meetings, Seminars and One-on-One Counseling
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
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 2017 – 100% 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
38
Participant Contact Quality SurveyThrough May 2017
3.78 3.783.91 3.87 3.84
3.00
3.20
3.40
3.60
3.80
4.00
Satisfaction Informative Helpful Knowledgeable Professional
After Call Electronic Responses
YTD 2017 (n= 369)
38.19%
11.26%4.67% 9.07% 11.26% 4.40% 3.02%
18.13%
0.00%10.00%20.00%30.00%40.00%50.00%
Reason for Call
YTD 2017 (n=364)
92.4%
0.0%
100.0%
Yes
Recommendation Rate
YTD 2017 (n=236)
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.
Questions!
40
Appendix
41
NAGDCA 2016Perspectives 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– 66% Unbundled (administrative and investment providers are separately chosen)
– 34% Bundled (single provider of services and investment products)
457(b)65%
403(b)3%
401(k)14%
401(a)18%
Plan Type
Responses based on 12/31/2015 data.
42
NAGDCA 2016Perspectives in Practice - Investments
Mutualfunds
Collectivetrust funds
Separateaccounts
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%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Percentage of total plan assets(Excludes Brokerage Window)
12
22 22.519
0
5
10
15
20
25
Number of Investments
Number of investment options plan currently offers
(Excludes brokerage window)
COV 457*
All Plans
Assets > $500 and $2.5B
Plan Participants > 60,000
Responses based on 12/31/2015 data.
*Suite of target date portfolios are counted as one investment option
43
NAGDCA 2016Perspectives in Practice - Fees
$28.
40
$30.
50 $69.
50$115
.30
$76.
50
$178
.30
$109
.30
$59.
20
$159
.60
$84.
40
$39.
20
$145
.40
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
Investment Fees* Administrative Fees* Total Annual Cost
Average Annual Cost Per Participant
COV 457** All Plans Assets > $500M < $2.5B Plan Participants > 60K
Responses based on 12/31/2015 data.
*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.
44
NAGDCA 2016Perspectives in Practice - Services
COV 457 All Plans(% that provide)
Assets > $500M and < $2.5B(% that provide)
Plan Participants > 60,000(% that provide)
Call Center Yes 97% 90% 93%
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 – in-person
No 43% *8%
45%*0%
43%*0%
Investment Advice – online No 61%*24%
60%*16.7%
60%*11.1%
Investment Advice -telephone
No 54%*18.8%
50%*0%
53%*12.5%
* Plans that charge participants separately for use of service. Responses based on 12/31/2015 data.
45
NAGDCA 2016Perspectives in Practice – COV 457
$0.00$500.00
$1,000.00$1,500.00$2,000.00$2,500.00$3,000.00$3,500.00$4,000.00
Average Median
Annual Contributions
COV 457 All Plans
Multi-Employer Assets > $500M < $2.5B
Supplemental Plan Participants > 60K
0%10%20%30%40%50%60%70%
457 Participation Rates
Overall Participation Rate State Only
Higher Ed Only Local Employers Only
Responses based on 12/31/2015 data.