Important Changes to Ball State’s Retirement Plan

No. The University is not adjusting the benefit levels that are currently in place for the Ball State retirement plans. For example, none of the following benefit levels will be changing:

• Terms of eligibility
• Level of employer contributions

The comprehensive review and request for proposal (RFP) process included the following Ball State retirement plans:

• Alternative Pension Plan (APP)
• Tax Deferred Account (TDA)
• 457(b) Deferred Compensation Plan

It is important to note that the comprehensive review and RFP process did not include the following plans:

• Public Employees' Retirement Fund (PERF)
• Teachers’ Retirement Fund (TRF)

The University's Retirement Plan Advisory Committee initiated a comprehensive review of the Ball State retirement plans. These findings gave the Committee reason to believe that certain plan enhancements could be made that would benefit participants. As a result, the Committee initiated a competitive procurement process. The Committee initiated the request for proposal (RFP) process for the following reasons:

• To maximize retirement benefits by lowering the costs/fees incurred by participants and simplifying the administrative recordkeeping experience.
• To reduce investment overlap and offer investment options through a streamlined investment menu.
• To ensure that the Ball State retirement plans continue to meet industry best standards in a changing environment.
• To provide world-class retirement planning solutions to all employees, including Roth contributions, rollovers, and consistent education and communication materials.

The Retirement Plan Advisory Committee is generally responsible for oversight of the Ball State retirement plans, including the selection and monitoring of the investment options offered under the plans. The Committee's responsibilities include the following:

• Recommend, evaluate, and monitor the performance and compliance of all third-party service providers to the plans;
• Evaluate and select the types of investments to be made available under each plan, including the default investment under each plan, that reflect a blend of investment options that offer adequate diversification with respect to the plans;
• Monitor the investment performance of plan assets against selected benchmarks not less frequently than quarterly, and determine whether any changes should be made with respect to the investment options available under the plans;
• Develop, implement, and review periodically an investment policy statement for the plans;
• Review and monitor the costs associated with the retirement plans.

The University engaged the services of a third-party independent consultant to help manage the strategic review and request for proposal (RFP) process. Working with an organization that knows and understands the many challenges and significant opportunities facing the higher education marketplace and that does not represent any particular investment company adds important perspective and expertise to the process.

The University chose Mercer Investments to assist with the strategic review and RFP process. Mercer’s first assignment was to review the Ball State retirement plans, compare them to industry best practices, and identify potential areas for improvement.

Recognizing not everyone has the same investment objectives, knowledge, retirement time horizon, or tolerance for risk, the Committee, with the assistance of Mercer, identified enhancements to the Ball State retirement plans that will benefit all participants by:

• Simplifying the recordkeeping process to help ensure compliance with Internal Revenue Service and Department of Labor requirements;
• Leveraging the value of the University's combined retirement plan assets to lower administrative, recordkeeping, and investment management costs that plan participants pay;
• Encouraging participation by simplifying the investment process and offering an investment menu with a wide variety of competitively priced options;
• Providing access to robust educational resources and retirement planning tools that will help participants build long-term financial security;
• Providing separation of administrative recordkeeping fees from investment management fees.

A "provider of recordkeeping services" is the vendor responsible for completing the day-to-day administrative functions of a retirement plan. For example, a provider of recordkeeping services maintains the contribution, investment, and distribution records for all participants. A provider of recordkeeping services also provides regular investment statements and communications to participants and maintains the websites and call centers required to support both participant and plan sponsor activities.

We will be consolidating recordkeeping service providers to lower administration fees, simplify plan administration, reduce the risk of operational failures, and improve the overall participant experience.

The Committee prepared and distributed a request for proposal (RFP) to the two largest current providers of recordkeeping services for the Ball State retirement plans (Fidelity and TIAA), as well as one other prominent company in the retirement marketplace. The RFP contained an extensive list of questions on topics such as client service, compliance monitoring and reporting, service capabilities, technology offerings, investment flexibility, fees, investment tools and services, communication programs, and quality standards.

Mercer assisted the Retirement Plan Advisory Committee in analyzing the responses to the RFP based on goals and criteria established by the Committee. The Committee reviewed the results of this analysis and discussed the critical issues that were identified. The Committee selected two firms as "finalists" based on both the scores and the Committee's consideration of the critical issues.

The Committee invited the finalists to present. Each finalist had the opportunity to demonstrate why Ball State should select it as the retirement plans' provider of recordkeeping services. The finalists also answered the Committee's outstanding questions. The provider of recordkeeping services was selected based on the presentations and deliberations and a unanimous recommendation from the Committee.

Fidelity has completed several similar transitions with higher education institutions. Examples include Indiana University, Purdue University, California State University, Massachusetts Institute of Technology, University of Notre Dame, University of California, and Vanderbilt University.

The new investment menu will have four tiers, based on the style of the investment options offered:

• Tier 1 – Age-based target date retirement funds
• Tier 2 – Passively managed funds
• Tier 3 – Actively managed funds
• Tier 4 – BrokerageLink®, a self-directed brokerage account that will allow participants to invest in additional mutual fund options

We carefully selected the investment options under Tiers 1, 2, and 3 to allow participants to construct well-diversified portfolios. These are referred to as the "core" investment options. The Retirement Plan Advisory Committee will regularly monitor the core investment options for their continued performance and integrity.

Yes. The Ball State retirement plans currently have more than 400 investment options between the six current recordkeeping service providers (Fidelity, TIAA, Voya, Lincoln, One America, and AXA). There are four primary reasons why we decided to streamline the number of investment options in the Ball State retirement plans:

1. Research has shown that excessive choice in a retirement plan causes many participants to make poor investment choices or postpone decision making regarding their investments;
2. By consolidating contributions into fewer investment options with less redundancy and overlapping investment styles, the University can increase its purchasing power and obtain institutional pricing, which will lower overall fees for the benefit of all participants;
3. The Committee can better meet its fiduciary responsibility to monitor funds on an ongoing basis to ensure that they remain prudent investments for the Ball State retirement plans; and
4. A streamlined investment menu allows the University to implement a more effective and targeted communication strategy.

The new tiered investment structure will provide participants with a broad range of distinct investment options, but not so many that, when faced with choices, they will have a difficult time structuring an investment portfolio. The tiered investment structure will categorize investment options in a manner that will guide participants through the investment decision-making process. Participants will first select a path that is appropriate for them given their:

• Investment knowledge
• Time for managing their own investment portfolios
• Tolerance for risk
• Interest in making asset allocation decisions and selecting investment options

We tailored the investment options to meet participants' needs. For example, an investor who lacks the time and interest for managing his or her own investment portfolio, or a novice investor who is uncomfortable making his or her own fund selection and asset allocation decisions, may choose to select a pre-mixed asset allocation fund in Tier 1. Directed education materials will then assist the investor in selecting the target date retirement fund based primarily on their time horizon and/or risk tolerance.

Fidelity BrokerageLink® is a self-directed brokerage account that gives participants who want to actively manage their investments access to an expanded selection of mutual fund investment options. Unlike the investment options available through the core investment menu, the investment options available through BrokerageLink were not selected by or monitored by the Retirement Plan Advisory Committee.

Participants will have a period of time to select how their future contributions will be invested in the new investment menu. The investment choices you make during this time will be effective for your future contributions beginning on or after the week of November 23, 2020.

If you do not make an investment selection, your future contributions will be invested in a target date fund (based on the date closest to when you turn age 65) at Fidelity. More details on how to make this election will follow in October.

If you do not take any action, your current balances at Fidelity, TIAA, Voya, Lincoln, AXA, and One America will not change.

As of November 2, 2020, any future contributions will be directed to Fidelity Investments and invested in a target date fund (based on the date closest to when you turn age 65).

Fidelity will assign a default beneficiary to your account based on the rules of the plan(s) in which you participate.

This transition will not impact your current balances at Fidelity, TIAA, Voya, Lincoln, AXA, or One America. The existing investment options will be frozen, which means you will not be able to direct any future contributions or move money into these investments. You may leave your current balances in the frozen funds.

Your current investment balances at TIAA, Voya, Lincoln, AXA, and One America will not be transferred to Fidelity unless you voluntarily choose to move them to the new investment menu. You can choose to transfer these investments to Fidelity at any time. Whether or not you move these investments is entirely your decision. It is important to note that some investments may have withdrawal restrictions based on the investments you selected. There won’t be any restrictions as a result of the University moving to a single recordkeeping service provider.

The new investment menu will offer a broad range of choices to allow participants to form well-diversified portfolios. However, for those participants who want an investment fund that is not on the new investment menu, Fidelity BrokerageLink will provide access to thousands of additional mutual fund options from hundreds of mutual fund companies.

Participants can make or update their beneficiary designations beginning November 2, 2020, when you log on to Fidelity’s NetBenefits® website. Current Fidelity participants can change or add beneficiaries at any time through the Fidelity NetBenefits® website.

Please note that the University does not maintain beneficiary information for the Ball State retirement plans. Participants with balances at TIAA, Voya, Lincoln, AXA, and One America should make or update their beneficiary designations directly with their retirement provider.

No, the University will not see any savings in this new arrangement. All benefits are intended to accrue to you—the plan participants.

One of the enhancements with these changes is a new, more transparent fee structure. Currently, plan recordkeeping costs are not deducted directly from your account. They are paid through fees associated with certain investment options in the plans. Payment of recordkeeping costs through investment option fees is often referred to as “revenue sharing” and is a common approach. The payment of the plans’ recordkeeping costs through revenue sharing is not reflected on your quarterly account statement as a separate line item.

Effective November 2, 2020, administrative recordkeeping fees will be charged as a quarterly flat dollar amount on a per participant, per plan basis, providing more fee transparency.

By eliminating redundant and overlapping investment options and consolidating assets into a streamlined investment menu of what Ball State believes to be best-in-class options, the Ball State retirement plans can take advantage of share classes that result in lower investment management expenses for most participants.

Research has shown that a multi-recordkeeper structure negatively impacts participant communication, as any education that occurs is often a by-product of a sales pitch from recordkeeping service providers competing for participant accounts. The new sole provider of recordkeeping services structure enables the University to focus on employee engagement and retirement planning and education. Moreover, streamlining the investment menu and organizing the investment options in a way that helps participants identify the types of investments that work best for them will help the University better meet the needs of employees and ensure their retirement readiness.

This transition will not impact your current balances, if any. The existing investment options will be frozen, which means you may leave your current balances in the frozen funds if you choose; however, you will not be able to move additional money into these investments.

Your current investments at TIAA, Voya, Lincoln, AXA, and One America, if any, will not be transferred to Fidelity unless you voluntarily choose to move them. It is important to note that some investments may have withdrawal restrictions based on the investments you select. There won’t be any restrictions as a result of the University moving to a single recordkeeping service provider.

Retirees, former employees, and beneficiaries have the following options for their account balance in a Ball State retirement plan:

• Leave your retirement savings in a Ball State retirement plan;
• Rollover all or a portion of your vested account balance into an Individual Retirement Account (IRA) or another employer's retirement plan (if allowed by new employer); or
• Request a taxable distribution of all or a portion of your vested account balance.

It is important to note that distributions other than a direct rollover are taxed as ordinary income. IRS penalties may apply on distributions if you are younger than age 59½.