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TIAA-CREF Asset Management Save now. Save more. Save right. SM Re-enrollment implementation handbook Practice Management | Value-Add Programs

Transcript of TIAA-CREF Asset Management Save now. Save more. Save right · TIAA-CREF Asset Management Save now....

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TIAA-CREF Asset Management

Save now. Save more. Save right.SM

Re-enrollment implementation handbook

Practice Management | Value-Add Programs

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Retirement Re-enrollment Implementation Plan Framework The major considerations in the retirement plan re-enrollment implementation process are defined in the graphic below, with further details inside.

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Preplanning

Assess organizational and employee benefit strategy

Post plan

Define and measure success based on effectiveness metrics

3 months before 2 months before 1 month before

Undergo advance preparation and planning

Find missing participants

Analyze plan design and participant behavior

Assess regulatory and fiduciary responsibilities

Identify investment options, including QDIA

Define type of plan re-enrollment program

Define operational implications

Conduct fee impact and assessment

Create participant communications

Plan Re-enrollment: Steps in the ProcessNow that you’ve made the important decision to help plan participants Save now. Save more. Save right.SM we can help you plan and execute a successful process.

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1. Undergo advance preparation and planning

Meet with advisor, recordkeeper and key internal staff W Review plan re-enrollment options

Identify roles, strategic milestones, deliverables and timelines W Include the firm and all other involved partners

Build a high-level strategic re-enrollment plan, calendar and timeline that incorporates the following:

W Plan assessment and checkup

W Type of plan re-enrollment

W Targeted audiences

W Plan investment options communications

W Plan fees

W Platform considerations

W Plan participant communications

Gather all necessary plan documentation for a detailed plan assessment: W Plan documents and amendments (including related collective bargaining agreements)

W Service/recordkeeping agreements

W Trust agreements

W Investment documents

W Investment management agreements

W Investment Policy Statement (IPS)

W Insurance contracts

W Loan policies

W Trust agreements for collective trusts

W Other contracts related to investments

W Summary plan description (SPD)communications

W Summary of material modifications (SMM)

W IRS determination letter and submission materials

W Most recently filed Forms 5500

W Most recent trustee/financial report

W Employee census information

W Written notice of any pending IRS or DOL audits

W Qualified Domestic Relations Order (QDRO) proceedings or documents

W Voluntary Correction Program (VCR) or similar IRS filings

W Voluntary Fiduciary Correction (VFC)Program

W VFC or similar DOL filings

W Most recently completed non-discrimination testing results

2. Analyze plan design and participant behavior

Review specific data on current employee and participants:

W Employees eligible for the plan(s)

W Active plan participants communications

W Terminated or retired participants

W Employees ineligible for the plan(s)

Evaluate data about the types of asset allocation and fund selection decisions all plan participants make. Consider:

W Overall degree of portfolio risk taken (equity exposure)

W Single-stock risk

W Stable value fund risk communications

W Extreme asset allocations (excessively aggressive or conservative)

W Extended forms of diversification (such as use of international or small-capitalization stocks or bonds for diversification purposes)

Consider the impact of plan re-enrollment W Overall participant diversification, return potential and risk levels

Review the availability and utilization of strategic plan features:

W Auto enrollment: number and percent participation

W Auto deferral: number and percent participation

W Employer match parameters communications

W QDIA option

W Vesting schedule

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Guiding you through The decision to implement a retirement plan re-enrollment program begins by assessing the organizational and employee benefit strategy. It’s essential to ensure that re-enrollment provides the required support for those strategies.

Additionally, be sure to take the time to define what success will look like, and measure it, based on effectiveness measures. Get agreement on what the key performance indicators will be, and check in on the plan regularly. 3

monthsbefore

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2. Analyze plan design and participant behavior (continued)

Evaluate current plan contribution types: W Participant contributions

– Before tax

– After tax

– Roth 401(k)

– Rollovers

– Catch-up

– Other

W Employer contributions

W Other profit-sharing or stock bonus plan contributions

W Money purchase pension plans/contributions

W Leveraged ESOP obligations

W Accrued but unpaid contributions

W Profit-sharing/matching contributions

W Compliance with minimum funding rules

W IRS funding waivers granted or requested

Evaluate current plan features: W Overall participation rates

W Participant investing/diversification concerns

W Overall plan results to date

Highlight any areas of concern W Regarding enrollment/participation or deferral trends or issues regarding investment choices

Review and familiarize yourself/team with PPA and DOL provisions W Examine adding plan services and making plan investment changes, including the QDIA

Evaluate results and consider/decide whether best practice design changes are needed:

W For example, would a plan re-enrollment, increase plan effectiveness?

Build a plan, calendar and timeline that incorporates the following strategic components:

W Plan assessment and checkup

W Type of plan re-enrollment

W Targeted audiences

W Plan Investment options communications

W Plan fees

W Platform considerations

W Plan participant communications

3. Assess regulatory and fiduciary responsibilities

Ensure plan is in compliance : W Check against the Internal Revenue Code and ERISA requirements

Gather copies of non-discrimination tests to determine compliance with: W 401(k) and 401(m)

W Annual additions (415): public employers

W Top-heavy coverage

Determine if contributions are limited: W This will be based on prior year test results

Ensure ERISA 404(c) compliance

Complete up-to-date IRS Form 5500

Complete the IRS Fiduciary Checklist. Ensure firm is: W Acting solely in the interest of the participants and their beneficiaries

W Acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan

W Carrying out duties with the care, skill, prudence and diligence of a prudent person familiar with the matters

W Following the plan documents

W Diversifying plan investments

Make regulatory plan amendments if required

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Re-enrollment options are driven by specific concerns, actions or objectives, including:

W Review of investment choice and participation diversification concerns/Improving participant diversification and plan outcomes

W Making a menu change/adding new investment options to the current plan

W Converting to a new plan provider

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4. Identify investment options, including qualified default investment alternative (QDIA)

Assess the overall plan asset allocation and investment selections

If required, do your due diligence on potential new investment options: W This should include new QDIA for the plan

Assess proposed plan investments:

W Compare current investment lineup with new investment offerings

W Obtain offering circulars, prospectuses, contracts, insurance policies, tickers, and CUSIPs

W Conduct research on managers, investment styles and performance

W Verify status of investments (open or closed, liquid or illiquid)

W Determine if any investments have restrictions that would prevent them from being in the new lineup

Consider investments from a plan fiduciary perspective:

W Fund fees

W Investments with termination fees or penalties (for example, guaranteed investment contracts, annuities)

W Real estate investment trusts (REITs)

W Illiquid investments

W Termination notification requirements (For example, disposition of stable value)

W Redemption fees

W Sales charges

Assess effect of changes in investment fund lineup and QDIA W Look at stable value, company stock and self-directed brokerage holdings (if applicable)

Compare fiduciary exposure for different plan conversion strategies:

W Automatic investment with default investments such as target-date funds

W “Like-fund” mapping if there is a change in investment lineup or conversion to new plan

W Review ramifications on investment policy

W Consider disposition of stable value and company stock (timing, manner)

Review the plan’s investment options W Ensure that participants have appropriate investment options

Select and add new investment options

Draft a new Investment Policy Statement (IPS) as required

Secure Investment Policy Committee approval on all investment changes/decisions

Finalize targeted employee or participant groups W Entire employee population

W Targeted group of participants

5. Determine type of plan re-enrollment program

Identify anticipated re-enrollment approach:

W Targeted: specific participants: opt-in

W Partial: specific participants: opt out

W Global

– All participants: opt out

– All employees: opt out

Finalize QDIA and opt in/out decision

6. Conduct fee impact and assessment

Consider specific differences in fees W Evaluate whether to proceed with a re-enrollment strategy; satisfy duty as plan fiduciary in determining that fees are reasonable for services provided to the plan

Assess how, if at all, changing the investment mix of the plan affects the asset-based, redemption and sales fees paid to the service and investment providers:

W For example, a shift from higher-cost investment options to a lower-cost QDIA could lead to the service provider requiring additional fee income to replace the reduction in asset-based recordkeeping fees

Review and quantify the amount of any such fees: W What would be charged if all holdings were liquidated and placed into the plan’s QDIA

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3monthsbefore

Reminder:

Employees need to have a clear, uncluttered investment lineup. Making changes is the plan sponsor’s prerogative. Consider adding target-date funds if they are not available in your plan and ensure your default investment meets QDIA requirements

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7. Define operational implications

Investment Managers W Because of the potential asset transfers that will occur upon re-enrollment, careful coordination between money managers is needed to ensure an orderly transition and minimal impact to the investment portfolios

Custodians and Recordkeepers Check, update and test information systems integration and processing of plan and payroll data, including:

W Enhanced enrollment forms and investment choices

W QDIA opt in and opt out enhancements

W Updated plan enrollment data feeds

W Integrated new plan elements with payroll system

W Addressing any administrative and/or fee implications

8. Create participant communications

Build a plan re-enrollment participant communications strategy that addresses the following elements:

Channels

W Given the nature of the change, best practices employ a multichannel, multi-touch approach to re-enrollment education to reinforce the changes that are coming and to inform them of their ability to “opt out” of any changes

Messaging

W Participant educational materials that describe the investment options, decisions and actions that must be made by participants and important dates and should be clear and plan specific

Timing

W Plan sponsors undergoing re-enrollment should provide participants with a minimum of 30 days advance notice prior to defaulting into the QDIA; most firms begin the communications process well in advance of this time frame, often up to 90 days

Contact the plan advisor or recordkeeper for access to communications materials and customization; they can provide guidance on a rage of messaging and media, including:

W Emails

W Letters

W Voicemail scripts

W Intranet notices

W Company newsletter article

W Materials for in-person meetings

W Copy for flyers

Communication 1: Initial Participant Re-enrollment Announcement:

W This is a high-level communication to let employees know that a change is coming and introduce to new employees

W Include specifics about the process and all key dates

W Distribute the notice to all plan participants (active and terminated) and all eligible participants (not yet participating) via mail or email and post on intranet

W Mail notifications 10 to 12 weeks prior to the conversion

Communications 2a and 2b: 90-Day Retirement Plan Re-enrollment Program Announcement letter and email

W This communication informs employees of the specifics of the enrollment event, including changes that will be made, key actions that must be taken and critical dates

Communication 3: Short Employee Retirement Plan Re-enrollment Program PowerPoint for in person meetings

W Supports face-to-face meetings with employees to explain changes, rationale and how to take action

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3monthsbefore

Build a high-level detailed calendar and timeline for all participant communications.

You’ll find additional communications in the 2-month and 1-month sections of this handbook.

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1. Conduct fee impact and assessment

Ensure the plan’s participant fee disclosure for any new fees are in DOL compliance: W Plan sponsors must ensure compliance with DOL regulations outlining obligations of plan sponsors and service providers to disclose plan fee information

W Changes in plan fees or new fees as a result of the re-enrollment should be disclosed by the service provider to the plan sponsor and may need to be disclosed to plan participants

2. Create participant communications

Communication 4: Detailed Participant Re-enrollment Communication W This is a follow-up communication with specific details about re-enrollment

W It may include any legally required notices

W Mail six to eight weeks prior to the blackout

W This communication includes important plan features and benefits as well as blackout dates, investment choices/information, employee meeting dates, plan enrollment time frames and specific steps the employee or participant should take

Communications 5a and 5b: 60-Day Retirement Plan Re-enrollment Program Announcement letter and email

W This communication informs employees of the specifics of the re-enrollment event, including changes that will be made, key actions that must be taken and critical dates

Communication 6: Retirement Plan Re-enrollment Program Company Newsletter Article

W Provides general information, critical dates and rationale for plan changes

W Directs employees to website/phone to take action

Communication 7: Retirement Plan Re-enrollment Program Flyer Copy W Provides general information on changes coming and where to go to get more information

1. Create participant communications

Communication 8a and 8b: 30-Day Retirement Plan Re-enrollment Program Announcement letter and email

W Includes specific re-enrollment information and required notifications highlighting information on procedures, key dates and the “opt out” process for making investment decisions

Communication 9a and 9b: 7-Day FINAL Retirement Plan Re-enrollment Program Announcement letter and email

W Reminds participants that the time to make decisions regarding plan re-enrollment is soon ending

W Many firms utilize educational meetings at this stage as the final reminder and to reinforce key re-enrollment messages

Communication 10: Senior Executive Retirement Plan Re-enrollment Program Voicemail Script

W Final reminder to employees of plan changes to come

W Provides rationale and steps to take

Communication 11: Retirement Plan Re-enrollment Program Intranet Notice W Provides general information, critical dates and rationale for plan changes

W Directs employees to website/phone to take action

Repeat Communication 2: On-Site or Virtual Employee Retirement Plan Re-enrollment Program Meeting Announcement

W Presents specific plan re-enrollment changes, reminds participants that the plan re-enrollment window is closing and to provides answers on any investment-related questions for employees

W These meetings frequently include firm representatives as well as representatives from the plan record keeper and the advisor

Repeat Communication 6: Retirement Plan Re-enrollment Program Company Newsletter Article

W Provides general information, critical dates and rationale for plan changes

W Directs employees to site/phone to take action

Repeat Communication 7: Repeat Retirement Plan Re-enrollment Program Flyer Copy W Provides general information on changes coming and where to get more information

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Reach out multiple times across different channels.

2monthsbefore

1monthbefore

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Key resourcesVisit our website or call us today!To locate the resources below, please visit our website at TIAA.org/saveright or contact us at 888 842-5433, press 2 for any of these helpful items.

W Guidebook: Explains the “Save now. Save more. Save right.” concept and discusses the importance of re-enrollment.

W Legal paper: A paper by Fred Reish of Drinker Biddle & Reath LLP on the importance of re-enrollment for fiduciary protections

W Quick plan sponsor assessment: Self-reflective exercise to assess the need for additional action

W Preapproved participant communications: Pass-along materials for advisors to implement with a plan sponsor and/or recordkeeper.

W Financial Literacy Pass-along Workshop: Participant-level workshop

2. Find missing participants

Plan sponsors must ensure that all plan participants receive re-enrollment communications; especially those requiring a QDIA notice:

W Including those who have failed to provide a current address and cannot be located

Resources that plan sponsors can utilize to assist in locating and notifying these participants include the following:

W The Department of Labor Field Assistance Bulletin 2004-02 (FAB 2004-02) describes methods that may be used including certified mail, checking other plan-related records and using the IRS or Social Security for assistance

W Internet search tools and credit reporting agencies can also be used

Ultimately, if a participant still cannot be located, the plan sponsor needs to document the efforts made to locate the individual and subsequently provide notice if the participant is later found.

1monthbefore

Visit TIAA.org/saveright or call 888 842-5433, press 2.

Learn more

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460820_590005A15245 (03/16)

For financial advisor use only. Not for use with or distribution to the public.

Certain products and services may not be available to all entities or persons.

You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877 518-9161 or log in to TIAA.org for product and fund prospectuses that contain this and other information. Please read the prospectuses carefully before investing.TIAA Global Asset Management provides investment advice and portfolio management services through Teachers Insurance and Annuity Association and affiliated registered investment advisors, including Teachers Advisors, Inc., TIAA-CREF Alternatives Advisors, LLC and Nuveen Asset management, LLC.

Nuveen Securities, LLC, TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investor Services, LLC. distribute securities products.

Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own financial condition and contractual obligations.

©2016 Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY 10017.

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