Oklahoma State University and A&M System

TOTAL PLAN ASSETS/PARTICIPANTS: DC plans – $900 million/10,000 (combined total for the employer-paid DC plan and the voluntary DC plans; DB plans – $871.1 million/number of participants unavailable
PARTICIPATION RATE: 100% in employer-paid DC plan; 28% in 403(b); 5% in 457(b)
EMPLOYER CONTRIBUTION: 11.5% of pay into 401(a)

When Oklahoma State University and A&M System (OSU/A&M) had 10 recordkeepers serving its retirement plans, that brought challenges for the sponsor and participants. “Offering more than one recordkeeper creates an unnecessary level of complexity, inefficiency and liability for the university,” says Jamie Payne, chief human resources (HR) officer for the higher-education system, which has nine campuses statewide and its main location in Stillwater, Oklahoma.
 
“As a plan sponsor, the fiduciary responsibility of evaluating the investments, fees and advice practices for 10 different vendors is almost impossible. The participants also found the choice of multiple vendors overwhelming, and they often could not make a decision independently.”

So in 2015, the sponsor consolidated its multiple plans at one recordkeeper, TIAA. New employees now choose between two employer-funded plans, a defined benefit (DB) plan and a 401(a) defined contribution (DC) plan. All employees also may participate in one or both of the employee-funded voluntary plans: a 403(b) and a 457(b).
 
OSU/A&M started thinking about consolidating recordkeepers in 2011, “to streamline processes and create efficiencies during a downturn in the economy and state funding,” Payne says. OSU/A&M hired adviser Cammack Retirement Group Inc. in 2014 to help select a single recordkeeper.
 
The sponsor utilized a large matrix of data to evaluate responses to recordkeeper requests for proposals (RFPs), such as price transparency with administrative and investment fees, Payne says.
 
Cammack also conducted focus groups with OSU/A&M employees, which revealed their desire for more participant support through communications, education and advice, she says. TIAA’s winning request for proposals (RFP) response included a fee reduction; a commitment to on-site education and advice at all campus locations; and enhanced, customized participant communications, education and advice, she says.
 
The sponsor also had formed a retirement investment committee in 2014, and it updated the investment policy statement (IPS) “with the goal of simplifying investment choices for participants,” says Christa Louthan, OSU/A&M assistant chief human resources (HR) officer.
 
At Cammack’s suggestion, the committee adopted a three-tiered investment menu: This includes TIAA Lifecycle Funds in the first tier, 23 core mutual funds in the second tier and a self-directed brokerage window in the third tier.
 
In narrowing down the investment menu from more than 1,000 options to the current lineup, the committee “gave preference to investments that met best-in-class benchmarks and that already had large participant assets, to minimize disruption to participants,” Louthan says. The committee also decided to offer both an active and a passive option in some core asset classes, such as domestic equity and international equity.
 
The changes brought a 42% decline in recordkeeping fees and also reduced participants’ investment fees, Louthan says. Consolidating to one recordkeeper, and greatly reducing investment options, concentrated assets, which gave OSU/A&M more fee leverage with both its recordkeeper and investment managers, she says. Having more money in fewer investments allows the plan to gain access to lower-priced share classes. The plans also receive revenue-sharing payments for some investments, and any excess payments above recordkeeping costs is returned to participants invested in those funds, via a credit to their accounts, she says. —Judy Ward