Retirement Plan Simplification

Transcription

1 Retirement Plan Simplification Employee General Meetings Today s Agenda Introductions What is not changing What is changing New investment lineup What happens to current investment funds? Dates you need to know If you do not take action Fidelity investment education presentation TIAA-CREF annuity presentation Resources available for employees Your questions Jan 01 1

2 Reminder: What is not changing Age and service requirements for retirement eligibility RIT s matching contribution levels RIT s relationship with Fidelity Investments and TIAA-CREF RIT s commitment to help you plan for your retirement 3 Reminder: What is changing Merger of Basic and Voluntary Retirement Plans became RIT Retirement Savings Plan on January 1, 01 New oversight of investment fund performance and fees by Retirement Plan Investment Committee Simplified menu of investment funds Addition of self-directed brokerage account Opportunity for lower fees Added transparency in disclosure of fees 4 Jan 01

3 Why are changes being made? Historically 403(b) plans were individual arrangements between employees and recordkeepers Limited employer role 401(k) plans came later established as employer arrangements, trust accounts Employer required from beginning to play active role U.S. DOL lately focused on 403(b) plans Determined same rules should apply RIT as plan sponsor responsible for selecting fund offerings prudently Cannot monitor 00+ funds Cannot insure they are all highly rated 5 New Investment Lineup Available beginning February 1, 01 Recent mailings from RIT and Fidelity included detailed information on the options under the 4 new investment tiers: Tier 1 = Target retirement date funds Tier = Core mutual funds Tier 3 = Annuities Tier 4 = Brokerage account Funds recommended by our investment advisors 6 Jan 01 3

4 Tier 1: Target Retirement Date Funds Series of Vanguard Target Retirement Date funds Fidelity Freedom Funds and TIAA-CREF Lifecycle Funds no longer offered Designed for retirement around the date in the fund s title Professionally managed funds Investment allocation becomes more conservative as people move closer to retirement Plan s default is Tier 1 fund closest to participant s p 65 th birthday, or Vanguard Target Retirement Income Fund for those over age 65 Recordkeeper for Tier 1 is Fidelity Investments RIT Retirement Plan Investment Committee will monitor investment performance and fees for Tier 1 funds 7 Tier : Core Mutual Funds 15 highly hl rated mutual funds Represent key asset classes to help you achieve a diversified portfolio Passive/index vs. actively managed funds Recordkeeper for Tier is Fidelity Investments RIT Retirement Plan Investment Committee will monitor investment performance and fees for Tier funds 8 Jan 01 4

5 Tier Asset Class Fund Name Core Mutual Funds Passive/Index Intermediate Term Bond Large Cap Blend Small/Mid Cap Blend Non U.S. Equity Money Market Vanguard Total Bond Market Index Signal Vanguard 500 Index Signal Fidelity Spartan Extended Market Index Inv Vanguard International Stock Index Fund Vanguard Prime Money Market Fund Inv Core Mutual Funds Active Intermediate Term Bond PIMCO Total Return Fund Inst Inflation Protected Bond Large Cap Growth Large Cap Growth Large Cap Value Small Cap Growth Small Cap Value Non U.S. Equity Vanguard Inflation Protected Securities Fund Admiral Fidelity Contrafund K Calvert Equity Fund (a socially responsive fund) T. Rowe Price Large Cap Value Fund Lord Abbett Developing Growth Fund I Royce Opportunity Fund Inv Thornburg International Value Fund R5 Emerging Markets Equity Real Estate Aberdeen Emerging Markets Institutional Fund Cohen & Steers Institutional Realty Shares 9 Tier 3: Annuities Insurance contracts issued by an insurance company Accumulate money until retirement, at retirement convert to a lifetime income stream 3 annuities will be active 7 annuities will be frozen Recordkeeper for Tier 3 is TIAA-CREF RIT Retirement Plan Investment Committee will monitor investment performance and fees for Tier 3 funds 10 Jan 01 5

6 Tier 4 Brokerage Account Fidelity BrokerageLink available Over 9,500 mutual funds from many different fund families For sophisticated investors who: Have knowledge and expertise to research and evaluate large number of funds Want to take personal responsibility for monitoring performance and fees of elected funds Prefers greater choice than available under Tiers 1, and 3 Important: May have additional fees for investing in BrokerageLink Separate meetings regarding BrokerageLink RIT Retirement Plan Investment Committee is not responsible for monitoring investment performance or fees for mutual funds in Tier 4 11 What Happens to the Current Investment Funds? Active Funds that t will continue to be offered for future contributions, existing balances, and transfers in and out current Fidelity funds & 3 current TIAA-CREF annuities will be active Fidelity Contrafund (different share class) Fidelity Spartan Extended Market Index Fund TIAA Traditional CREF Stock CREF Money Market 1 Jan 01 6

7 What Happens to the Current Investment Funds, cont.? Frozen Funds that t will not be available for future contributions or transfers in, but existing balances may remain and be transferred out if you elect to do so 7 current TIAA-CREF annuities will be frozen CREF Bond Market CREF Equity Index CREF Global Equities CREF Growth CREF Inflation-Linked Bond CREF Social Choice TIAA Real Estate 13 What Happens to the Current Investment Funds, cont.? Eliminatedi - Funds that t will not be available for future contributions or existing balances Fidelity Freedom and TIAA-CREF Lifecycle Funds All other Fidelity funds that were not identified as active The following TIAA-CREF funds: International Equity Index Fund Large-Cap Value Index Fund Mid-Cap Growth Fund Mid-Cap Value Fund Small-Cap Blend Index Fund 14 Jan 01 7

8 What Happens to the Current Investment Funds, cont.? Future contributions Existing balances may remain Active (effective /1/01) A i F Eli i d Frozen (effective 3/1/01) Eliminated (effective 6/1/01) Yes No No Yes Yes No Transfers in Yes No No Transfers out Yes Yes No 15 Take Action! Determine whether you need to change investments for your future contributions ti Look at your current investment election Compare with list of funds in Tiers 1, and 3 If you have payroll contributions going to frozen or eliminated funds, you should change your election. Determine whether you need to transfer your existing balances Look at funds in which you have existing balances Compare with list of funds in Tiers 1, and 3 If you have existing balances in eliminated funds, you should consider transferring those balances. 16 Jan 01 8

9 Upcoming Key Dates to Make Changes February 1 New tiers, funds available May begin to make changes: elections for payroll contributions ti (and RIT matching contributions) and/or transfer existing balances to new funds March Automatic redirection of payroll contributions Contributions previously going to eliminated or frozen funds will be directed to the default fund, Tier 1 Vanguard Target Retirement Date Fund nearest your 65 th birthday Effective for March 15 semi-monthly and March 16 biweekly payrolls You cannot make changes to contributions into TIAA-CREF funds between March 1 16 more information coming on this in January mailing June 1 Automatic transfer of existing balances Existing balances in eliminated funds will be transferred to the default fund, Tier 1 Vanguard Target Retirement Date Fund nearest your 65 th birthday 17 If You Do Not Take Action If your current investments are eliminated or frozen,, and you did not choose a new fund(s) for your contributions, RIT will automatically begin directing them to the default fund, Tier 1 Vanguard Target Retirement Date Fund nearest your 65 th birthday, in March. If you did not choose a fund(s) for your existing balances that are in eliminated funds, RIT will automatically transfer those balances to the default fund, Tier 1 Vanguard Target Retirement Date Fund nearest your 65 th birthday, in June. Remember you have the right to change your contribution election and transfer account balances at anytime! 18 Jan 01 9

10 Fidelity Investment Education Presentation 19 The fundamentals of investing 0 Jan 01 10

11 The fundamentals of investing Workplace Education Series Investment types Short-term investments Bonds Stocks Money market, T-bills, CDs Relatively stable value Potential to pay interest Lower risk, lower potential return I.O.U. Debt securities issued by governments and corporations Potential to pay interest Moderate risk, moderate potential return Share of a company, equity Long-term growth potential Value can go up and down Higher risk, higher potential return 1 What is a mutual fund? A mutual fund is an investment that pools together multiple stocks, bonds, and other securities to perform as one investment. Mutual funds combine money from many investors and place the money in either stocks, bonds, other securities, or a combination of the three. They are managed by a professional portfolio manager who actively adjusts the funds' portfolio to try to increase their value. The fundamentals of investing Workplace Education Series Asset allocation + diversification = your investment t mix Reduce portfolio risk and volatility Match your investment strategy to your time horizon, financial situation, and risk tolerance Tap into market opportunities Avoid the pitfalls of market timing A Tool to Help: For much more on this topic, launch the online workshop Building a Portfolio for Any Weather at Neither diversification nor asset allocation ensures a profit or guarantees against loss. Jan 01 11

12 The fundamentals of investing Workplace Education Series Determining your investment mix It s about solving for these three factors: Time Risk Financial situation 3 The fundamentals of investing Workplace Education Series Building your investment portfolio The challenge is balancing risk and the potential for growth: How does your current investment mix align with your goals? Should you be more aggressive? More balanced? More conservative? A Tool to Help: Use Portfolio Review at to find your target asset mix or complete the Investor Profile Questionnaire. 4 Jan 01 1

13 The fundamentals of investing Workplace Education Series Your target asset mix Aggressive Growth May be appropriate for investors: Comfortable with wide fluctuation > 10 years until retirement goal Growth 15% May be 5% appropriate for investors: 5% 5% 60% 5% 60% 49% Comfortable with significant fluctuation 10% 1% > 5 years until retirement goal Balanced May be appropriate for investors: Comfortable with moderate fluctuation <5 years until retirement goal 40% 35% 10% 15% Conservative May be appropriate for investors: Looking to minimize fluctuation < 5 years until retirement goal 50% 14% 6% 30% Domestic Stock Foreign Stock Short-term Investments Bond 5 For illustrative purposes only. The purpose of the target asset mixes is to show how target asset mixes may be created with different risk and return characteristics to help meet a participant s goals. You should choose your own investments based on your particular objectives and situation. Remember, you may change how your account is invested. Be sure to review your decisions periodically to make sure they are still consistent with your goals. You should also consider any investments you may have outside the plan when making your investment choices. The target asset mixes presented in this publication were developed by Strategic Advisers, Inc., a registered investment adviser and Fidelity Investments company, based on the needs of a typical retirement plan participant. Strategic Advisoers, Inc., is adjusting its target asset mixes as of November 009 to increase the percentage of international equity to 30% of the overall equity portion of each target asset mix. Reviewing your plan s investment options 6 Jan 01 13

14 Reviewing your plan s investment options Workplace Education Series Hands-off Choosing your investments: hands-on or hands-off? Hands-on Do you want to make your own investment decisions? Are you comfortable building your own portfolio? Do you have the time to actively manage your investments? Hands-off Hands-on Target date funds* Provide an automatic investment tmix that t becomes continually more conservative as time goes on. Just pick the fund with the year that s closest to the year you plan to retire. Let us guide you Use our investment guidance tool, Portfolio Review**, to identify a target investment mix, receive a model portfolio suggestion, and easily implement your strategy. Do-it-yourself Access Fidelity s research resources, and utilize our fund selection tools to build your own portfolio. 7 *Target date funds are designed for investors expecting to retire around the year indicated in each fund s name. The investment risk of each target date fund changes over time as its asset allocation changes. Target date funds are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, smallcap, and foreign securities. Principal invested is not guaranteed at any time, including at or after their target dates. **Portfolio Review is an educational tool. Guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Workplace Education Series 8 Investment Spectrum Investment options to left have potentially more inflation risk and less investment risk Money Market (or Short Term Bond if not a reg. MM) Vanguard Prime Money Market Fund Investor Class Diversified PIMCO Total Return Fund Institutional Class Vanguard Total Bond Market Index Fund Signal Shares Inflation-Protected Vanguard Inflation- Protected Securities Fund Admiral Shares Large Value T. Rowe Price Institutional Large Cap Value Fund Small Value Royce Opportunity Fund Investment Class Domestic Equities Large Blend Vanguard 500 Index Fund Signal Class Investment options to right have potentially less inflation risk and more investment risk Large Growth Calvert Equity Portfolio Class A Fidelity Contrafund Class K Small Growth Lord Abbett Developing Growth Fund Class I International/ Global Equity Specialty Diversified Cohen & Steers Institutional Realty Thornburg Shares International Value Fund Class R5 Vanguard Total International Stock Index Fund Signal Shares Emerging Markets Aberdeen Emerging Markets Institutional Fund Institutional Class An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in these funds. This spectrum, with the exception of the Domestic Equity category, is based on Fidelity s analysis of the characteristics of the general investment categories and not on the actual investment options and their holdings, which can change frequently. Investment options in the Domestic Equity category are based on the options Morningstar categories as of November 30, 011. Morningstar categories are based on a fund s style as measured by its underlying portfolio holdings over the past three years and may change at any time. These style categorizations do not represent the investment options objectives and do not predict the investment options future styles. Investment options are listed in alphabetical order within each investment category. Risk associated with the investment options can vary significantly within each particular investment category, and the relative risk of categories may change under certain economic conditions. For a more complete discussion of risk associated with the mutual fund options, please read the prospectuses before making your investment decision. The spectrum does not represent actual or implied performance. Jan 01 14

15 Workplace Education Series Target Date Funds Investment options to the left have potentially more inflation risk and less investment risk Investment options to the right have potentially less inflation risk and more investment risk Risk Spectrum for Target Date Funds Vanguard Target Retirement Income Fund Investor Shares Vanguard Target Retirement 010 Fund Investor Shares Vanguard Target Retirement 015 Fund Investor Shares Vanguard Target Retirement 00 Fund Investor Shares Vanguard Target Retirement 05 Fund Investor Shares Vanguard Target Retirement 030 Fund Investor Shares Vanguard Target Retirement 035 Fund Investor Shares Vanguard Target Retirement 040 Fund Investor Shares Vanguard Target Retirement 045 Fund Investor Shares Vanguard Target Retirement 050 Fund Investor Shares Vanguard Target Retirement 055 Fund Investor Shares 9 Target date investments are represented on a separate spectrum because they are generally designed for investors expecting to retire around the year indicated in each investment's name. The investments are managed to gradually become more conservative over time. The investment risks of each target date investment change over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities. Principal invested is not guaranteed at any time, including at or after their target dates. Workplace Education Series We re here to help Visit NetBenefits Call your plan s toll-free number , to speak with a representative familiar with the features of your workplace savings plan Schedule a complimentary one-on-one guidance consultation Call: Online: Although consultations are one on one, guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. 3 0 Jan 01 15

16 Important Information Workplace Education Series Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, contact Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money. Foreign investments, especially those in emerging markets, involve greater risk and may offer greater potential returns than U.S. investments. This risk includes political and economic uncertainties of foreign countries, as well as the risk of currency fluctuation. Investments in mid-sized companies may involve greater risks than those in larger, more well known companies, but may be less volatile than investments in smaller companies. Investments in smaller companies may involve greater risks than those in larger, more well known companies. Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Because of their narrow focus, sector funds may be more volatile than funds that diversify across many sectors. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible FMR LLC. All rights reserved. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI TIAA-CREF Annuities Presentation 3 Jan 01 16

17 Annuities are insurance contracts issued by an insurance company that let you accumulate money until retirement and then receive a regular payment (often monthly) for your lifetime Two types of annuities Fixed - pays a fixed rate of interest on your investment dollars, which is adjusted periodically. Variable - pays an amount that will vary depending on the performance of the investment accounts you choose for the annuity. 33 When you re saving for retirement, mutual funds and annuities provide many of the same benefits: Your money is pooled with other investors into a fund or account that spreads the money among different asset classes. Both annuities and mutual funds offer a way to diversify your portfolio. Once you retire, mutual funds and annuities provide various ways to withdraw funds. With TIAA-CREF annuities, youcan simply convert your annuity accounts to lifetime income vs. buying an annuity from another source 34 Jan 01 17

18 TIAA-CREF annuity accounts offer broad diversification providing balance and the potential for growth in your retirement portfolio. The annuities in Tier 3 have been offered in the plan for many years. TIAA Traditional CREF Stock Money Market 35 The TIAA Traditional Annuity is a fixed annuity and is a guaranteed annuity account Guarantees your principal i and a contractually t specified interest t rate It also offers the opportunity for higher returns through additional amounts, which may be declared on a yearby-year basis by the TIAA Board of Trustees The TIAA Traditional Annuity offers a number of ways you can receive income. We provide a wide selection of choices because we know that individual goals and needs differ. Each of TIAA s income choices has its own features and conditions under which you can receive payments. These features are not available through mutual funds. 36 Jan 01 18

19 CREF Stock is a variable annuity The CREF Stock Account was developed by TIAA-CREF in 195 as a companion to fixed annuity income. It was America s first variable annuity. The CREF Stock Account seeks a favorable long-term rate of return through capital appreciation and investment income by investing primarily in a broadly diversified portfolio of common stocks. The portfolio is managed using a multi-strategy, multi- manager approach, combining management across domestic and international portfolio segments, including emerging markets, covering all sectors, styles and market caps in one variable annuity account. 37 CREF Money Market is a variable annuity The account seeks high current income consistent with maintaining liquidity and preserving capital. Invests in high h quality, short term instruments, t maturing in 397 days or less - base income is part principal, part earnings assumption percentage Invests primarily in commercial paper, bank obligations and U.S. government-issued securities that are classified as "firsttier securities, meaning that they are ranked in the highest category by at least two nationally recognized statistical rating organizations It can invest up to 30% of its assets in money market and debt instruments of foreign issuers denominated in U.S. dollars 38 Jan 01 19

20 TIAA-CREF will be the recordkeeper for Tier 3; this means that RIT employees will work directly with TIAA-CREF (by phone or online) for these funds. If your assets and contributions are invested exclusively in TIAA Traditional, CREF Stock and CREF Money Market, which h remain on the new investment t menu: evaluate your investment strategy and beneficiary designations you may leave your current assets and future contributions as is or you can elect to make a change If your assets and contributions are invested exclusively in TIAA-CREF mutual funds only OR if you are invested in both TIAA-CREF mutual funds and annuities: TIAA-CREF can provide guidance and help you redirect your mutual fund assets and contributions to similar asset classes or help you revise your investment strategy If you don t redirect your assets in eliminated funds and future contributions, they will be automatically invested in Tier 1 - the target retirement date fund closest to your 65th birthday (the default fund) as directed by RIT. 39 Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY.TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Add: "Investment products, insurance and annuity products: are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. Supplemental Retirement Annuity (SRA) TIAA Contract form series 100.8/CREF Certificate series 100.4; Group Supplemental Retirement Annuity (GSRA) TIAA Contract form series G150.1 (GSRAs are not available in all states)/cref Certificate series CG150.1; IRA Annuity TIAA Contract form series 180. or (not available in all states)/cref Certificate series C180. or C180.4; and Roth IRA Annuity TIAA Contract form series or (not available in all states)/cref Certificate series C180.3 or C180.5; Retirement Choice TIAA Contract form Series IGRS-01-5-ACC, IGRS ACC, and IGRS ACC; TIAA Certificate Series IGRS-CERT1-5-ACC, IGRS-CERT1-60-ACC, IGRS-CERT1-84-ACC; CREF Contract form series CIGRS; CREF Certificate series: CIGRS-CERT1; Retirement Choice Plus TIAA Contract form Series IGRSP-01-5-ACC, IGRSP ACC, IGRSP ACC; TIAA Certificate Series - IGRSP-CERT1-5-ACC, IGRSP-CERT1-60-ACC, IGRSP-CERT1-84-ACC; CREF Contract form series: CIGRSP; CREF Certificate series: CIGRSP-CERT Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY Jan 01 0

21 Resources for employees Communications sent to your home (November, December, January) HR Website Retirement Plan Simplification page: Copies of communications that are sent home Frequently Asked Questions (FAQs) section Section for employees to ask questions Dates and locations of meetings and how to sign up Definitions of commonly used investment terms, and much more Benefits Hot Line - (585) /v On-Line Video available in mid-january Presentations by Aon Hewitt, investment advisors to the RIT Retirement Plan Committee in Ingle Auditorium, Student Alumni Union Monday, January 3 * :30-3:45 p.m. Tuesday, January 4 * 7:00-8:15 a.m. and 1:00-1:15 p.m. Monday, January 30 * 7:00-8:15 p.m. Tuesday, January 31 * 8:30-9:45 a.m. and 1:00-:15 p.m. 41 Resources for employees, cont d Help Desk Assistance to help employees make changes to investment options in February, March and May On-site Fidelity and TIAA CREF representatives for one-on-one counseling beginning in January (dates and reservation information on HR website) 4 Jan 01 1

22 Fidelity and TIAA-CREF Resources Fidelity Information Website: Phone: (800) /v (800) /TTY To schedule an appointment, go to or call (800) /V and (800) /TTY For questions (contact by preferred): Bill Giesen Direct phone: (585) Paul Bolles Direct: ext 3130 TIAA-CREF Information Website: Phone: (800) /v (800) /TTY To schedule an appointment, go to or call (800) /V and (585) /TTY For questions: David Howe Direct phone: (585) Toll-free phone: (800) , ext Your Questions? 44 Jan 01