Higher Education Retirement Planning Program
Retirement planning for colleges and universities changed dramatically as a result of regulatory mandates. In the past it was not uncommon for colleges and universities to have multiple investment providers for their 403(b) plans that simply payroll deducted investment contributions. Colleges and universities were not required to review investments for returns and fees nor were they required to monitor these plans on an ongoing basis. As a result we see a large number of college plans that are very outdated, costly, and generally non-compliant. In addition, we see participants paying sales loads on mutual funds and potentially surrender charges on annuities that were sold by brokers and salespeople which have an impact on their returns and thus their retirement account balances.
With the new regulatory mandates, we see colleges and universities in need of updating their plans regardless if they have a sole investment provider like TIAA-CREF or multiple investment providers more commonly seen in community colleges. At Miller Financial Services it is important to note that we work with investment providers like TIAA-CREF and we are not in competition with them. Our goal is to provide independent and unbiased advice to both the plan and its participants. In the end this means a plan that meets every mandate required by the Department of Labor and for participants a plan that offers unbiased advice and investment choices to achieve a reasonable retirement.
With so many new regulations Miller Financial Services helps plans and their fiduciaries meet the new regulatory mandates by doing the following:
- Fiduciary and TPA Services-Our firm will sign-on as a co-fiduciary of the Plan with regards to investments which means we will sit on the same side of the regulatory table as the College or University. This can be done in a 3(21) or 3(38) capacity. In addition, for Plans that require the services of an outside TPA (Third Party Administration), we will help Plans choose the best TPA to fit their needs.
- Create an Investment Policy Statement (IPS)-The IPS is a document that establishes the Plans investment objectives, investment philosophy, investment selection criteria, and policies for the ongoing monitoring of the Plan's investments. Considered a component of fiduciary "Best Practices", we unfortunately see many plans operating without a valid Investment Policy Statement.
- Selecting Plan Investments-Many plans only offer proprietary funds from one provider (TIAA-CREF is an example) or they offer multiple vendors with multiple investment options. All too often, Plans have no objective selection criteria and thus have accepted what the current investment providers have offered. Furthermore, the college or university has no idea of the sales charges, costs, and surrender charges their participants are incurring. With the new regulations colleges are now subject to the same fiduciary standards as their private counterparts and are required to monitor plan investments. In addition, regulators prefer to see diversification of investments. To that end, we work with TIAA-CREF who now offers “open architecture” retirement plans allowing plans investment choices from thousands of mutual funds. Many times these investments can include options from Vanguard, T Rowe Price, and TIAA-CREF just to name a few all in one plan. With our guidance, we can help the Plan simplify the investment offerings by providing a wide variety of investment choices all with one investment provider and without sales or surrender charges associated with other investment platforms.
- Update Plan Document-A written plan document is a must for all 403(b) plans and most plan documents are outdated and need to be updated to remain in compliance with the new regulations. We see current plan documents missing things like Roth 403(b) contributions which were introduced a few years back. We also see plans that have a plan document yet in everyday practice the plan document is not being followed such as entry dates, matching formulas, and vesting schedules. We help identify these inconsistencies and work with the college or university to determine if the services of an outside Third-Party Administrator or legal counsel are required to update the document with the appropriate provisions and we will then help implement procedures to follow the document going forward.
- Ongoing Monitor and Managing of the Plan-Regulations also require ongoing monitoring of the plan. We monitor plan investments and recommend any changes on an annual basis. Our firm also makes sure that there are policies and procedures in place to follow the Investment Policy Statement and Plan Document.
With the new regulatory mandates we believe the challenge for colleges and universities on the participant or employee side is to make sure every type of investor has a chance to achieve a "reasonable retirement".
Regulations suggest plans should do the following:
- Allow every employee to achieve retirement success regardless of experience by providing portfolios that fit their risk tolerance and achieve benchmark returns.
- Offer unbiased advice/education to any willing employee.
- Recognize that current plan providers cannot be the unbiased source of education and advice to the employees.
The main challenge for plans when it comes to participant services is the fact that employees have various levels of investment knowledge. We believe plans do not effectively address this dichotomy of participants thus creating a plan that works only for some participants. Most participants are not satisfied with call centers, limited face to face meetings, or default investment options such as target date retirement funds. Furthermore, many plan participants do not have the time or desire to manage their retirement accounts on their own. Finally, many participants have more complicated financial situations outside of their employer-sponsored retirement plans that require a "hands on" approach by a professional advisor.
Miller Financial Services has identified this inconsistency with current plans and has set out to provide an independent, unbiased solution for participants. We believe that all advice and ongoing management must be personalized and specific to each client’s needs and objectives. This results in a fully comprehensive and integrated plan for each willing participant. This is important as we only provide the services to those employees that want personalized and independent advice. We do this in two types of services to employees who individually elect these on their own.
- Active Management-We will work with each employee individually to identify their risk tolerance. We then take over the management of their account and proactively manage the account on an ongoing basis making any changes automatically.
- Advice Only-This service allows employees to engage our firm on an hourly or flat fee basis. Normally employees make all of their own changes with this service.