CU announces changes to modernize employee retirement plans

Research-based approach expected to improve retirement preparedness


Have questions about what changes to CU’s retirement plans mean for you? Attend one of the Transition Workshops held on your campus running from March 6 to April 17.

These sessions will walk you through the changes, explain why they are happening, and specify the actions you’ll need to take between now and the transition in mid-July.

Can’t make one of these dates? A series of videos covering the information presented at each workshop will be posted on the transition website.

See the full schedule at:

The University of Colorado on Tuesday announced it will modernize its retirement plan lineup, providing employees best-in-class investment options, lower fees, enhanced advising and streamlined investment choices. These changes will go into effect in July 2015.

The university, acting on recommendations from a committee consisting of faculty, staff and Denver-based investment consulting company, Innovest Portfolio Solutions, LLC, selected a lineup of best-in-class investment funds for its 401(a) Retirement Plan and its 403(b) Voluntary Retirement Plan, and it named TIAA-CREF as its sole service provider for those Plans.

The committee recommended plan improvements based on best practices and the latest research on effective retirement plans. Retirement plan offerings have changed significantly since CU’s last major plan overhaul.

“The committee’s work will result in an investment lineup that helps CU faculty and staff to more effectively meet their retirement goals,” said Lisa Landis, associate vice president of Employee Services and chief human resources officer. “This change will mean lower participant fees, better choices and more support for CU’s workforce.”

TIAA-CREF will track investments, withdrawals, allocations and other administrative tasks, such as financial education and guidance for CU’s employees. The single service provider model will give CU employees a comprehensive view of all of the assets in their retirement plans, which gives employees the ability to make better decisions regarding their investment mix, risk level and portfolio allocation.

Streamlining to a single service provider improves CU’s negotiating and buying power as it selected its new investment options, resulting in significantly lower fees for employees.

Initial estimates show CU faculty and staff will save up to $3 million a year in fees for the CU 401(a) and up to $1.5 million a year for the CU 403(b). At the individual level, a CU 401(a) Plan participant with a $100,000 balance will pay $300 in fees with the new lineup, compared to $470 with the current one — a savings of 35 percent. A 403(b) Plan participant with a $100,000 balance will stand to save 40 percent in fees, with an average of $360 in the new lineup, compared to $600 with the current one.

Simpler choices equal higher participation

CU’s current slate of retirement choices includes three vendors for the CU 401(a) Plan, offering more than 300 investment choices, and eight vendors for the CU 403(b) Plan, offering 552 different options. The 800-plus investment choices included many duplicate funds.
The committee found that while people liked the idea of more choices, in practice, too many choices overwhelmed people. It led to making no choices at all or choosing safe funds that wouldn’t help people meet their retirement goals.

The new lineup contains 18 funds – a number based on industry best practices – selected for their track record of top performance, low fees and good management.

These funds are organized into a three-tier structure that encourages CU faculty and staff to make their selections based on their investment style. They may choose funds from one tier or a mix of them.

  • Tier 1 – Target date funds: These professionally managed mutual funds are designed for investors who want a simple yet diversified approach to investing. For example, a participant selects the fund that’s closest to his or her expected retirement date and fund managers will adjust the investment mix from more aggressive to more conservative as his or her target retirement date approaches.
  • Tier 2 – Core Investment Menu: For those comfortable with investing, this tier provides a tool for building and managing an investment mix. Participants may build a diversified portfolio by allocating contributions across 18 investment options.
  • Tier 3 – Self-Directed Brokerage Option: This option allows experienced investors to take an active responsibility in selecting and managing their investments. Note that neither CU nor TIAA-CREF oversees or provides recommendations on these options.

As part of its role as service provider, TIAA-CREF will dedicate five financial educators to provide professional guidance to CU faculty and staff. Plus, employees will no longer receive sales and marketing materials for products or services not directly related to CU’s retirement plans, just unbiased advice based on their situation, Landis said.