Worcester Polytechnic Institute

Worcester Polytechnic Institute (WPI) wants to give every employee a chance to retire with confidence. “We really want to make sure that everything we do is for the benefit of all employees and it’s fair and just and equitable across all salaries,” says Jeff Solomon, executive vice president and chief financial officer (CFO) of WPI.

The research university, in Worcester, Massachusetts, has a workforce with varied levels of investment knowledge and incomes. To ensure everyone is saving for the future, WPI’s 403(b) retirement plan requires a mandatory 5% employee contribution, which is coupled with an 11% university contribution. The flat 11% contribution across all salary ranges ensures that lower-paid eligible employees get their fair share, too, Solomon explains.

Because of this high contribution rate, average account balances have grown over 12% in the past four years, from $176,000 to $198,000. The average deferral rate is 10%, including the 5% mandatory employee contribution and an additional 5% voluntary contribution. Other plan features are available, too, including Roth 403(b) contributions and in-plan annuities.

The school also has its eye on participant fee equality, with ongoing benchmarking done. Over the past five years, the retirement plan committee has looked for ways to reduce fees and ensure participants pay an equitable share. These have included an annual benchmarking of fees that resulted in negotiations and a 57% reduction in overall recordkeeper costs and a request for information (RFI) that the university issued to existing and outside recordkeepers last year. The competition between the two existing recordkeepers, Fidelity and TIAA, resulted in lowered fees.

With help from adviser Cammack Retirement Group, WPI performed a fee allocation analysis and ultimately decided to implement a levelized fee arrangement. Now every participant, regardless of his investment allocation, pays the same [ITAL]pro rata[END ITAL] share of fees, explains Jennifer Stevens, senior consultant at Cammack. The plan-weighted recordkeeping fees across TIAA and Fidelity are approximately 0.06%.

“This idea of leveling fees goes back again to wanting to make sure we’re doing the right thing,” Solomon says. “We don’t mind a little more education to explain this.”

During the fee analysis, the adviser and retirement plan committee found that the share class with the lowest expense ratio was often not the option with the lowest net investment fee. They decided to select the share class for each option with the lowest net fee, which was the true cost to participants.

Stevens says they will continue benchmarking plan fees each year, analyzing whether each selected share class continues to reflect the new policy. “The fees will continue to be a conversation,” she says.

Fee mindfulness is something that is vital to the long-term success of the plan, Solomon says.

“This is something so important to the institution, to be able to provide a plan that has fabulous benefits,” Solomon says. “We feel really good about what we’ve been able to accomplish here.”

—Corie Hengst