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Approved Changes to UWRP & VIP

Update

On March 20, 2012, Provost Cauce approved the Fund Review Committee’s recommendation and announced that Fidelity Investments is the apparent successful vendor to be the master recordkeeper for the UW Retirement Plan (UWRP) and Voluntary Investment Program (VIP). The Committee conducted a competitive request for proposal process in which several investment firms participated, and chose Fidelity based on a combination of the quality and depth of its experience, resources to support a plan as large as UW’s, and participant fee savings.

Other approved plan enhancements include aligning the UWRP and VIP plan structures, moving both plans to a four-tier investment structure that makes it easier for participants to select appropriate retirement funds, selection of a limited number of mutual fund options covering key asset classes spanning 11 active and eight indexed fund options (including two socially responsible funds), and adding a Roth 403(b) feature to the VIP.

Overview

The Fund Review Committee has recommended changes to the UWRP and VIP, which are intended to provide participants with:

The Fund Review Committee is a standing committee defined in the UWRP and VIP Plan Documents and authorized by the UW Board of Regents. The Committee was created by a subcommittee of the Faculty Council on Benefits & Retirement, working together with representatives of the Professional Staff Association, the Association of Librarians at the University of Washington, and the UW Benefits Office. Learn more about the Fund Review Committee.

Plan Review Process

In 2009, the Fund Review Committee identified the need for specialized investment consulting services to assist in its work reviewing the UWRP and VIP. The Fund Review Committee selected Hewitt EnnisKnupp, an Aon company, and began work in February 2010 to:

Throughout the consulting engagement, the Faculty Council on Benefits & Retirement, the Professional Staff Association, and the Association of Librarians at the University of Washington provided input to the process and received updates of the ongoing work.

Resulting Recommendations

The FRC has recommended the following changes to the UWRP and VIP:

Recommendation #1: Tier Structure

(This recommendation was approved by the Interim Provost in April 2011.)

Create a four-tier investment structure that makes it easier for participants to select appropriate funds for their retirement savings.

Tier 1 Target Date Retirement Funds
  • Simple packaged solution requires less time and expertise
  • Built-in asset allocation that gets more conservative as a person gets closer to retirement
  • Target date funds are the default if participant doesn't make their own selections
Tier 2 Core Funds
  • Limited number of mutual fund options covering key asset classes
  • Includes active and indexed fund options
  • Can include mutual fund and annuities
  • Requires asset allocation decision
Tier 3 Annuity Window
  • Assets in the TIAA-CREF annuities are not eligible for default mapping to new funds
  • Annuities have an important role in the plans
  • Fees for annuities are fixed, but the University will negotiate the best possible terms for plan participants
Tier 4 Self-Directed Brokerage Window
  • Includes all mutual funds available through recordkeeper's brokerage account
  • Participant has greater flexibility and takes full responsibility for directing his/her own investments

Recommendation #2: Number of Core Funds in Tier 2

Tier 2 funds to include 10 to 20 Core Funds plus the Target Retirement Date Funds from Tier 1. See list of Core Investment Options for Tier 2.

Recommendation #3: Conduct a Master Recordkeeper Search

(This recommendation was approved by the Interim Provost in April 2011. The Fund Review Committee has concluded its search and made a recommendation to the Provost and Executive Vice President.)

A master recordkeeper allows for more efficient and cost effective plan administration. Currently, separate recordkeeping functions are performed by each of the individual fund sponsors available in the UWPR and VIP—Calvert, Fidelity, TIAA-CREF, and Vanguard. Every plan participant pays administrative fees that are deducted from their retirement account by the fund sponsors. Because every fund sponsor performs these services separately and charges separate fees, there is an opportunity to reduce fees by selecting a master recordkeeper.

A master recordkeeper will also make it easier for plan participants to view and evaluate their retirement savings and provide the University more administrative oversight of the plans as required by the IRS and the Department of Labor.

The Fund Review Committee will have responsibility for monitoring the recordkeeper’s performance and the overall investment performance of the assets in the plans with assistance from the University's investment consultant, Hewitt EnnisKnupp.

Recommendation #4: Duplicate Investment Structure for UWRP and VIP

Apply the same investment structure to both the UWRP and VIP to focus participant purchasing power and obtain the lowest possible fees. This recommendation would increase the number of mutual fund choices available through the VIP.

Recommendation #5: Roth 403(b)

Add a Roth 403(b) feature to the VIP. With a Roth 403(b) feature added to the existing VIP, participants could choose whether to have their contributions taken before or after taxes are calculated. A Roth 403(b) allows after-tax contributions which grow tax-free and are withdrawn tax-free (subject to IRS restrictions on withdrawals).

Participant Feedback

The UW community was invited to attend one of five presentations on campus or to view a webcast presentation. Participants were given approximately one month to provide input and comments to the Provost about the proposed changes. Approximately 2,500 people attended a presentation or viewed the webcast, and the Provost’s office received approximately 80 mostly favorable comments.

The Provost considered input from key campus committees and participants in her decision-making process. Based on that input, the Provost requested that the Fund Review Committee review the number of index and socially conscious funds available in the Tier 2 “Core Fund” offering.

The Provost accepted the Committee’s revised recommendation that increases the number of index funds by replacing two broad-based index funds (Mid/Small Cap Stocks and Non-US Stocks) with those reflecting more specific market sectors and adding two additional funds. The final recommendation includes eight index funds and 11 actively managed funds covering more specific market segments. See a graphic overview of the core investment options that will be available in Tier 2. Selected TIAA-CREF annuities will be available through the Tier 3 – Annuity Window.

UWRP & VIP Plan Review Resources

Information Session Archive
The UW community was invited to attend one of five Information Sessions held between January 31 and February 1, 2012 at five locations: Seattle, Health Sciences, Harborview, Tacoma, and Bothell. View the archives from these sessions: