Saint Louis University has transformed its retirement plans with nearly $1 billion in assets without hiring consultants and without issuing RFPs.
Changes include reducing the number of investment options by more than 90%, reducing the number of record keepers by 75% and saving what the university anticipates will be $540,000 in plan costs annually.
The university began offering its new investment lineup in early December under the sole administration of TIAA-CREF, New York.
Now, the university's $593.7 million 403(b) plan and its $404.9 million 401(a) plan have 27 investment options instead of the 360 that school official say were far too many for participants to evaluate.
“Our employees were overwhelmed with choices,” said Elisabeth King, benefits manager. The investment choices are identical for both plans, which have a total of 16,398 participants.
The university's new lineup keeps some of the old investment choices, although many of the funds that have been retained are now available in lower-fee versions. The plans have some new institutionally priced fund shares, and they have dropped many little-used or overlapping investments.
Also for the first time, the university is offering a self-directed brokerage window containing more than 5,000 mutual funds. “The brokerage window was a strong selling point because employees could get access to funds from many providers, including Fidelity,” which was a former record keeper, Ms. King said.
Ms. King acknowledged that brokerage windows attract relatively small percentages of participants and plan assets but said the new lineup “would have been a harder sell” without it.
Although the university was motivated by a desire to reduce costs and simplify choices, it also acted because of changes in Internal Revenue Service regulations, most of which took effect in 2009. The rules require sponsors to exercise greater fiduciary responsibilities, including preparation of more comprehensive plan documents and greater attention to loans and hardship withdrawals. Many 403(b) plans have consolidated record keepers and simplified investment lineups to facilitate complying with the IRS rules.
Saint Louis University in 2008 started what became a two-step process for consolidating record keeping and revising its investment lineup. Before the revision there were four record keepers for the two defined contribution plans — TIAA-CREF, which provided services for 80% of participants; Fidelity Investments, Boston, which covered 15% of participants; and T. Rowe Price Group, Baltimore, and DWS Investments, Kansas City, Mo., which held a combined 5%.
University officials decided that administrative expenses for T. Rowe Price and DWS weren't justified by their slim share, so the university dropped them at the end of 2010, Ms. King said.
The university acted without a consultant. The decision was made by the university's retirement committee, comprising the vice president of business and finance, the general counsel, the vice president of human resources, the president of the faculty senate and the chair of the staff advisory committee, she said.