Present: Russ Stanton (IFO), Cheryl Avenel-Navara (MSCF), Dave Kesler, Michael Wilson, Jeanne Cornish, Barbara Prince, Janet Tauer, Linda Erickson, Shawn Bjerke, Jerry Mefford, Lisa Stitzel, and Gary Janikowski
New Members. Michael Wilson and Dave Kesler, new IFO representatives were welcomed to the committee. Additionally, Janet Tauer (representing unclassified MMA) was also appointed to another term. All will serve two year terms.
Micro-website visits. Lisa Stitzel reviewed quarterly statistics for the MnSCU micro-website visits. Since its inception in July, 2006, the site has had over 4,000 visits. Most of those visiting the website were reviewing investment options in the programs, the enrollment page for the Supplemental Retirement Program (SRP), Plan details and model portfolios, etc. The site most typically gets used on Tuesdays and Wednesdays from 10:00 a.m. until 5:00 p.m.. The site can also be used to review participation dates for each pay cycle. TIAA-CREF’s standard is to process payroll contributions within three days of receipt “in good order”; once the money is processed internally, it gets posted retroactively to the trade date, or participation date, which has typically been the payroll date.
Pension Protection Act of 2006. Lisa reviewed the various provisions of the Pension Protection Act of 2006, which was signed into law on August 17. While many of the provisions affected defined benefit retirement programs, there were several provisions which have a major impact on defined contribution programs. The Act removed the sunset provision for the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. Among other things, EGTRRA repealed the onerous Maximum Exclusion Allowance (MEA) calculation for the TSA program; made permanent the increased contribution limits for the TSA and Deferred Compensation programs; and allowed rollover IRAs for non-spouse beneficiaries. The Act also loosened up fiduciary responsibilities for providing investment advice where an advisor is advising on its own or affiliated funds.
Additionally, since EGTRRA was made permanent, it may now be more attractive for Plan sponsors to pursue the inclusion of after-tax Roth features in TSA programs. Unlike Roth IRAs, Roth products in a TSA program are not subject to a family’s income limit, but are subject to the $15,000 ($20,000 if age 50 or over) TSA deferral limit. Based on committee discussion, there is interest in pursuing a Roth product in our TSA program. Gary and Lisa will pursue first internally, and then with the Department of Finance.
Additionally, Lisa announced that the new TSA/Deferred Comp limits for calendar 2007 went from $15,000 to $15,500 for those under age 50. For those age 50 and over, the limits will go from $20,000 to $20,500.
MnSCU Call Center Volume. The MnSCU Call Centers are located in Charlotte, NC and Denver, CO. Both centers employ 25 representatives, each of whom is trained specifically in the MnSCU retirement products. There were approximately 3,000 calls placed to the Centers through the month of September. Service levels are measured by how fast calls are answered. Through the month of August, 80% of Call Center calls were answered within 30 seconds. The goal it to have more than 90% of the calls answered within that timeframe. The toll-free number for the call centers is 800/682-8969, and the centers are staffed from 8:00 a.m. until 5:00 p.m. CT, Monday through Friday.
Most of the calls are related to the number of contracts that were issued by TIAA-CREF; change in beneficiaries; investment advice; and problems with the DOF self-service website for TSA enrollment/changes.
Fall Campus Meetings Report. Lisa reported that a total of 29 campuses were visited during the fall for a total of 60 days of visits and 403 individual appointments, with 23 group meetings.
Update on RFP for Investment Analysis. As part of the program re-design, the DCR committee recommended that we provide objective fund analysis for the funds in our Plans from an entity that does not offer or have other relationships with investment funds. The statutory language provides that the SBI provide a “periodic review” of the funds in our program at least every three years. The SBI is not willing to do a quarterly review and monitoring of our funds, which is required by the Investment Guidelines.
We have contracted with Segal Advisors for this service. Segal’s past experience in working with the SBI and the DCR Advisory committee in the selection and evaluation project, including contract and fee negotiations, give them a strong understanding of our Plans. And, they are an independent consulting firm with no affiliations with investment managers, brokerage firms, or financial organizations. Their first review of funds will be for the quarter ending December 31, 2006.
Review of TIAA-CREF participant quarterly statement. Lisa reviewed the layout and look of the current quarterly statements. In the next quarter, we should be receiving information with a new, improved look and format that will include labels for our IRAP, SRP, and TSA programs. The new statements will also include a space for MnSCU-specific messages, and will include Personal Rate of Return. As is currently the case, participants can obtain their statements electronically if they prefer.
Expense Reduction for Two Mutual Funds. As of December 1, the Vanguard Developed Markets fund will have fees reduced from 29 basis points to 13 basis points and the Vanguard Total Bond Market fund will see a reduction from 11 basis points to 7 basis points. Both funds are moving from the Institutional Class shares to the Admiral Class shares, based on the amount of assets in each fund. Participants will be sent a notification of this change.
Asset Allocation Opportunities for our Funds. Shawn Bjerke presented a proposal to the committee which would promote the addition of a large- and small-cap value stock class to the fund array. Over the period 1964 through 2005, value stocks have outperformed large-cap and small-cap funds. It was suggested that further discussion on this topic be tabled until the January meeting, when our fund array and analysis will be reviewed by Segal Advisors. Also, there may be additional administrative cost associated with adding funds to the array, since TIAA-CREF’s bid was for the 23 funds as selected by SBI. Lisa will do some checking as to the potential cost impact of adding two funds to the array.
Next meeting. The next meeting of the DCR Advisory Committee will be held on Tuesday, January 23, 2007