Deferred Compensation Plan BOARD REPORT 15-02

Transcription

1 Deferred Cmpensatin Plan BOARD REPORT Date: January 9, 2015 T: Frm: Subject: Bard f Deferred Cmpensatin Administratin Staff DCP Mid-Cap, Small-Cap and Internatinal Fund Change Implementatin Plan Bard f Deferred Cmpensatin Administratin Eugene K. Canzan, Chairpersn Jhn R. Mumma, Vice-Chairpersn Cliff Cannn, First Prvisinal Chair Tm Mutes, Secnd Prvisinal Chair Michael Amerian, Third Prvisinal Chair Ray Ciranna Linda Le Wendy G. Macy Rbert Schnver Recmmendatin: That the Bard f Deferred Cmpensatin Administratin receive and file this update regarding implementatin plans fr recently adpted changes t underlying prviders fr the DCP Mid-Cap, Small-Cap and Internatinal Funds. Recmmendatin: The Bard previusly apprved the implementatin f a simplified, streamlined versin f the Plan s investment menu, featuring custm-designed funds branded by the Plan and by asset class. This was dne as a best practice f designing an investment menu prmting greater awareness amng participants relative t the asset class, risks and attributes f their investment chices. The Plan implemented these changes in part n April 20, 2012 with the creatin f the DCP Bnd, DCP Large-Cap, and DCP Mid-Cap Funds. At that time, participants were ntified that a secnd phase wuld include creatin f the DCP Small-Cap and DCP Internatinal Stck Funds. Selectins f the underlying active managers f the DCP Small-Cap, DCP Mid-Cap, and DCP Internatinal funds were als still pending. The final, streamlined cre investment menu wuld include these funds as well as the FDIC-Insured Bank Accunt, the DCP Stable Value Fund, the Plan s five risk-based asset allcatin funds, and the Self-Directed Brkerage Optin (SDBO). In its Nvember and December 2014 meetings, the Bard apprved selectins f underlying prviders fr the DCP Small-Cap, Mid-Cap and Internatinal Funds, thereby cmpleting its active fund manager searches. As such, the Plan is nw prepared t prceed with implementatin f the secnd and final phase f its investment menu implementatin. PLANNED FUND IMPLEMENTATION Implementatin f the recently apprved prviders within the Plan s investment menu structure will ccur in tw stages:

2 Stage 1: March 20, 2015 (a) Establish the DCP Small-Cap Fund with its new active grwth and active value managers, as well as its incumbent passive manager; and (b) Reallcate allcatins within the existing DCP Mid-Cap Fund by adding its new active grwth and active value managers t its incumbent passive manager. Stage 2: July 2015 (a) Establish the DCP Internatinal Fund with its new emerging markets, develped markets and internatinal small-cap managers. Implementatin f the DCP Internatinal Fund will require additinal time in rder t avid the applicatin f early redemptin fees applying t new cntributins nly t the Fidelity Diversified Internatinal Fund (meaning cntributins held less than 30 days) and ensure that Plan participants in that fund receive adequate ntice f the changes and transitin prcess. This early redemptin charge applies nly t new participant cntributins (thse made within the last 30 days) and is nt a new feature f this Fund. Internatinal funds ften apply shrt-term redemptin charges in rder t discurage market timing. The early redemptin charge wuld nt be applied t any amunts held lnger than 30 days. Fllwing are additinal details as well as an peratinal and cmmunicatins verview fr these changes (a summary timeline is als included as Attachment A). Stage I Timeline & Cmmunicatins Overview: DCP Mid-Cap And DCP Small-Cap On March 20, 2015, the Plan s investment menu ptins will be updated t include a revised DCP Mid-Cap Fund and the new DCP Small-Cap Fund. DCP Mid-Cap Fund The DCP Mid-Cap Fund was established n April 20, 2012, with 100% allcatin t the Vanguard Mid-Cap Index Fund. As f March 20, 2015, the underlying allcatin t Vanguard will be reduced t 50% and the allcatins t newly selected funds Vya and RidgeWrth will be established, as indicated belw: Vanguard Mid-Cap Index Fund* Institutinal Plus Shares * Incumbent prvider, hwever passive fund searches are anticipated t cnclude in early Fund and prvider may change at that time. Passive 50% Mid-Cap Grwth 25% Mid-Cap Value 25% RidgeWrth Mid-Cap Value Equity Fund** Share Class I Vya MidCap Opprtunities Fund** Class R6 Page 2

3 Participants will nt see any change in their statement as this ptin will cntinue t be listed n Plan materials and statements as the DCP Mid-Cap Fund. DCP Small-Cap Fund The DCP Small-Cap Fund will be established effective March 20, 2015 with the indicated underlying allcatins: DFA U.S. Small Cap Value Prtfli Small- Cap Value 33% Small- Cap Grwth 33% Hartfrd Small Cap Grwth HLS Fund Passive 34% SSgA Russell Small Cap Index Fund NL Series S * Incumbent prvider, hwever passive fund searches are anticipated t cnclude in spring Fund and prvider may change at that time. As f March 20 th, all SSgA Russell Small Cap Index Fund NL Series S assets will be mapped t the new DCP Small-Cap Fund. Participants will n lnger be able t invest directly in the SSgA fund. All elective deferrals t the SSgA fund will be changed t be directed t the new DCP Small-Cap Fund. Similar small-cap mutual fund prducts are available thrugh the self-directed brkerage windw ffered by Schwab. Cmmunicatins All Participants Newsletter Cmmunicatin Participants will be ntified f these updates in the 4 th Quarter newsletter, t mail in the last week f January Targeted Cmmunicatin Participants hlding assets in r directing electins t the SSgA fund will be sent a cmmunicatin via r U.S. mail t additinally ntify them f this upcming change. Ntice will be cmmunicated in late January r early February. Website Bulletin Infrmatin regarding the change and updated fund infrmatin will be made available thrugh the participant website. Page 3

4 Stage II Timeline & Cmmunicatins Overview: DCP Internatinal Fund The DCP Internatinal Fund will be established in July The fund will cntain the underlying allcatins indicated belw: MFS Institutinal Internatinal Equity Fund Int'l Emerging 18% DFA Emerging Markets Cre Equity Prtfli Institutinal Int'l Develped 65% Int'l Small- Cap 18% Brandes Internatinal Small Cap Equity Fund I Cncurrently, the Plan will be remving the current internatinal fund investment ptins the Fidelity Diversified Internatinal Fund and the Deutsche EAFE Equity Index Fund. Thugh these funds will be remved as standalne ptins, they will be available thrugh the self-directed brkerage. Fllwing the Bard s December 16, 2014 meeting, staff became aware f an additinal cmplexity needing t be addressed relative t creatin f the new DCP Internatinal Fund. A 1% redemptin fee is impsed by Fidelity n amunts redeemed frm shares held less than 30 days. Deutsche has a similar redemptin fee, but waives it when funds are mved due t Plan-level transactins. In rder t avid incurring the Fidelity redemptin fee, the Plan is intending t freeze cntributins, and any ther incming transfers, int this fund at least 30 days prir t the DCP Internatinal Fund implementatin. Implementing this change at a later date allws the Plan t prvide adequate time t develp and issue the apprpriate ntice t participants in these funds. Fllwing is the tentative verview fr implementatin f the Internatinal Fund: May 27, 2015: Last date fr paycheck deferrals directed t the Fidelity Diversified Internatinal Fund. N ther mney will be accepted int the fund beynd this date. Any elective deferral instructins fr Fidelity will temprarily be re-directed t the Deutsche fund. July 10, 2015: Establishment f the DCP Internatinal Fund. Fidelity and Deutsche assets will be mapped r transferred t the new DCP Internatinal Fund and its underlying prviders. The Prfile Prtfli funds will be updated t include the DCP Internatinal Fund (currently, Deutsche serves as the internatinal sleeve f the prfile funds). All elective deferrals t Fidelity r Deutsche will be updated t indicate elective deferrals t the DCP Internatinal Fund. Page 4

5 Participants wishing t cntinue investment in either the Fidelity r Deutsche funds can d s thrugh the Schwab brkerage windw. Cmmunicatins All Participants Newsletter Cmmunicatin Participants will first be ntified f impending changes in the 4 th Quarter Newsletter, t mail in the last week f January They will receive the fficial ntificatin as part f the 1 st Quarter 2015 newsletter that will be mailed the last week f April 2015 this cmmunicatin will als cntain ntice f the freezing/redirectin f deferrals int the Fidelity fund in rder t avid the 1% redemptin fee, and prvide ptins fr participants t vluntarily redirect their Fidelity cntributins r allw the Plan t default them if n actin is taken. Targeted Cmmunicatin Participants hlding assets in r directing electins t the Fidelity r Deutsche funds will be sent an additinal targeted cmmunicatin t prvide them the infrmatin nted abve apprximately 30 days prir t the freezing f cntributins. Website Bulletin Infrmatin regarding the change and updated fund infrmatin will be made available thrugh the participant website. Staff is in the prcess f addressing all details f the administrative and cmmunicatins respnsibilities related t these funds transitins with the assistance f the Plan Administratr and Plan Cnsultant. Shuld any adjustments t the planned implementatin schedule and prcess be required as a result f thse discussins, staff will prmptly advise the Bard. Submitted by: Esther Chang Apprved by: Steven Mntagna Page 5

6 2015 UPDATE: PART II 2015 UPDATE: PART I COMPLETED ATTACHMENT DCP Investment Menu Enhancements Timeline April 20, 2012 Implementatin f the DCP Bnd Fund, DCP Mid-Cap Fund, DCP Large-Cap Fund Late January/ Early Feb Ntificatin t participants in the 4 th Quarter 2015 newsletter, t be mailed the last week f January Targeted ntificatin t participants affected by the DCP Small-Cap Fund implementatin, t be cmmunicated in early February March 20, 2014 Creatin f the DCP Small-Cap Fund Late April/ Early May 2015 All SSgA assets and elective deferrals t the SSgA fund will be mapped t the new DCP Small-Cap Fund Eliminatin f SSgA as a standalne ptin Update t the underlying allcatin f the DCP Mid-Cap Fund Adding grwth and value managers t the existing passive prtin Ntificatin t participants in the 1 st Quarter 2015 newsletter, t be mailed the last week f April. Participants will have als received ntice in the 4 th Quarter newsletter mailed in January. Targeted ntificatin t participants affected by the DCP Internatinal Fund implementatin, t be cmmunicated in late April/early May. May 27, 2015 Last day fr paycheck cntributins, rllvers, transfers accepted int the Fidelity Diversified Internatinal Fund. June 10, 2015 June 24, 2015 Paycheck dates where any elective deferrals t Fidelity will instead be directed t the Duetsche EAFE Equity Index Fund July 10, 2015 Creatin f the DCP Internatinal Fund All Deutsche and Fidelity assets and elective deferrals will be mapped t the DCP Internatinal Fund Eliminatin f Deutsche and Fidelity as standalne ptin Page 6