As part of a total compensation package, Penn offers retirement savings plans to eligible faculty and staff. Effective April 2021, the University’s retirement savings plans will undergo a major change.
“We are excited to bring these retirement program enhancements to the University community,” says Jack Heuer, vice president of the Division of Human Resources (HR).
The change was announced in January in a mailing to participating faculty and staff. They each received a detailed transition guide, which is also available online.
Over the past several years, the technology platforms used by 403(b) retirement plan providers have improved so that plans like Penn’s no longer need to have multiple vendors in order to make multiple fund families available to plan participants, according to Sue Sproat, HR’s executive director of benefits.
“At the University of Pennsylvania, we’re committed to offering a retirement savings program that helps you plan for—and build—long-term financial security,” says Sproat.
“We’re confident the changes will benefit participants by ensuring that they continue to have an investment menu that allows them to build a well-diversified investment portfolio, while further reducing the fees associated with the plans’ investments and administration,” she says.
As a result of a multiyear plan review, Penn will be making changes to the administration of the University of Pennsylvania Basic, Matching, and Supplemental Retirement Annuity Plans (the Plans). What is not changing is the structure of the University Plans or the level of University contribution to the Basic and Matching Plans.
“We believe these changes will improve participants’ user experience, while continuing to emphasize the high-quality and low-cost investment choices that are a cornerstone of Penn’s retirement program,” Heuer says.
The effective date of these changes will be in April of 2021.
The changes will benefit participants by:
• Consolidating plan services to a single record keeper (TIAA), leading to lower administration fees for Plan participants
• Increasing access to investment education and retirement planning advice
• Providing consolidated retirement information and investment advice services, and a single statement for participants who have investments from more than one company (brokerage accounts will still have a separate statement)
• Providing a streamlined investment menu that may make it easier to construct a diversified portfolio aligned with your retirement goals
A single record keeper
Effective April 2021, the plans’ fund lineup will change, and TIAA will be the only record keeper. Vanguard funds will still be offered in the Plans’ fund lineup, but they will be hosted on TIAA’s platform.
“A record keeper is the service provider for the retirement plans and is responsible for maintaining participant accounts, processing investment transactions, and providing participants with account-related information, such as statements and online access,” says Sproat.
For participants currently using Vanguard as the record keeper, new accounts will automatically be created at TIAA. The new investment menu—including Vanguard funds and select TIAA annuities—will be available through your new account on the TIAA platform.
“As a result of these enhancements, participants will be able to access all of the retirement program’s investment choices through a single point of contact (TIAA), and these investment choices will continue to emphasize high-quality and lost-cost Vanguard investment choices,” Heuer says.
All plan participants, regardless of which provider they use currently, will be impacted. All participants will have a new account established on the TIAA platform by Feb. 16. After Feb. 16, all Penn participants can select from the new fund lineup based on how they wish to invest their current account balances and future contributions after the change to single record keeper. The fund lineup has been reduced to a carefully selected group of Vanguard and BlackRock mutual funds, as well as select TIAA annuities. Participants can select investments from the new lineup or they can let their current retirement savings and future contribution go the Plans’ pre-chosen investment (the age-based Vanguard Institutional Target Retirement Fund).
“The investments that we are offering were carefully curated, while considering multiple criteria, such as past performance, fees, and asset class. We consider the investments selected to be a best-in-class fund lineup,” says Sproat.
If participants do not select investment choices from the new menu before March 31, their current mutual fund balances and future contributions will be directed to an age-based Vanguard Institutional Target Retirement Fund.
Plan participants will need to name a beneficiary for their new account. Existing beneficiary designations will not be transferred. Make sure this important information is up-to-date in the new account. “It is extremely important for someone to designate a beneficiary of their choice,” says Sproat. “Even if you want to keep your existing beneficiaries, you will be required to re-enter your information into the new system.”
Starting Feb. 16, participants can log in to their new account on the TIAA platform and update their beneficiary information to ensure their designations reflect their current situation.
There is a default, explains Sproat, if participants don’t update the designation themselves. “Fifty percent of your account balance will go to your spouse and 50% to your estate. If there is no spouse, 100% goes to your estate,” she says. “So, it is very important for you to select who you want your beneficiary to be.”
Some important dates
• Beginning Feb. 16—All Penn participants can select investment options for all future Plan contributions beginning in April, and all current mutual fund balances at TIAA and Vanguard that will transfer.
• Week of April 5—Existing mutual fund balances at TIAA transfer to the new accounts. Existing annuity account balances at TIAA will remain in legacy contracts.
• April 6 at 4 p.m.—Plan account balances at Vanguard will experience short blackout period to enable the transfer to TIAA.
• April 12 at 1 p.m.—Plan balances records kept at Vanguard transfer to your new account on the TIAA platform. Blackout ends by April 23.
• July—Final quarterly statement from Vanguard.
Sproat understands that all of the changes might be challenging, and says that is why help is available.
“You can meet one-on-one with a TIAA financial consultant to build a personal plan for your future,” she says. “Visit http://www.tiaa.org/schedulenow-upenn or call 800-732-8353 Monday—Friday 8 a.m. to 8 p.m. ET, to schedule a session to meet virtually or by phone. Counseling sessions are available to you as a participant of the Plan at no additional cost. You can also attend webinars.”
The next webinar is Friday, Feb. 26.
Things remaining the same
• The University’s employer contribution levels
• Eligibility and vesting requirements
• Contribution types (pretax and Roth)
• Voluntary contribution levels
• Loan, withdrawal, and distribution availability
• The University’s commitment to help faculty and staff plan and save for retirement