ITHACA, N.Y. - Cornell University has embarked on a ground-breaking approach to retirement and employee benefits programs, starting with the expansion of the investment options available in its two 403(b) plans that total $18 million.
Like many colleges and universities, Cornell had been getting a clear message from faculty and staff: more investment choices for retirement assets beyond the offerings of the Teachers Insurance and Annuity Association-College Retirement Equities Fund. TIAA-CREF, New York, is the primary 403(b) service provider for educational institutions.
"Our faculty is not at all shy about expressing their opinions," said Jean Samuelson, director of benefit services. For part of its retirement program, Cornell has been at the front of the trend to add outside mutual funds to the TIAA-CREF fund lineup (Pensions & Investments, June 27).
Cornell has two 403(b) plans, one for the non-matching, automatic 10% employer contribution Cornell supplies for only endowed employees (paid with private college funds) and one for voluntary employee contributions from both endowed and statutory (paid with state university funds) employees.
Since 1984, the latter fund, called the Tax Deferred Retirement Savings Plan, has allowed the 1,700 participating employees to invest in more than 100 mutual funds in the family managed by Fidelity Investments, Boston, through Fidelity Investments Tax-Exempt Services Co. Funds from UNUM Corp., Portland, Maine funds were added in 1984 and the socially conscious investment fund, the Third Century Fund, managed by Dreyfus Corp., New York, was added in 1986. However, the employer contribution plan - called the Cornell University Retirement Program -continued to offer only TIAA-CREF options.
In July 1993, Cornell liberalized the investment choices in the University Retirement Program, adding access to 25 core Fidelity funds. At the same time, the Dreyfus and UNUM funds in the voluntary plan were closed to new investments for lack of use, said William Douglas, Cornell's retirement counselor.
Beth I. Warren, associate vice president for human resources, said the university was very careful when it modernized the university plan to set up TIAA-CREF and Fidelity as "strategic partners." The two companies had long relationships with the university through their joint management of the voluntary savings program, Ms. Warren said.
Many 403(b) plans give service providers free rein to market directly, and competitively, to plan participants. Cornell took a different approach.
"We simply would not tolerate a situation where there was a huge competition for assets between the two vendors," said Ms. Warren.
Adding options to the voluntary plan increased internal administrative functions. Because the internal human resources staff handles enrollment and transfers between vendors, the staff has to cope with the transfer activity of 5,000 employees from the university plan and 1,700 employees in the voluntary plan. Employees can change allocations to funds of the same vendor via telephone voice-response systems and can check daily account balances.
Ms. Samuelson said adding 25 more Fidelity funds to the eight TIAA-CREF investment options in the university plan required a lot more individual counseling by human resources staff.
Mr. Douglas said there has been "a substantial transfer of existing assets from TIAA-CREF options to Fidelity options" although he was unable to quantify the dollar amount. More than 10% of participants now direct university contributions to Fidelity options in the university plan. The voluntary plan has seen a 65% increase in the number of employees directing their own contributions to Fidelity during the past year.
Retirement planning and the 403(b) plans are just one part of an overall employee benefits program Cornell is developing. The life work consortium employee benefits program combines all types of employee benefits - pension savings, health and life insurance, career counseling and development - into a program organized around ages of employees. Workshops are tailored to individual workforce populations.
The retirement planning workshops, for example, contain different core options, depending on an employee's age. Elective workshops take employees further into asset allocation and more advanced investment theory and are conducted by university staff and Fidelity and TIAA-CREF personnel.
