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Business Officer Magazine

Business Intel

A roundup of short news articles and useful resources for business officers

Emerging Trends Support Retirement Readiness

Market volatility in recent years has greatly distressed retirement plan participants, including those in higher education. In many cases, people have delayed retirement because of insufficient resources and lack of confidence in the economy. While the markets have shown signs of recovery, Fidelity's recent “Education Generational Survey” of approximately  600 higher education participants indicates that more than 6 in 10 (63 percent) are concerned that they will not be able to live comfortably in retirement.

Fast Fact

“The only three true job interview questions are: (1) Can you do the job? (2) Will you love the job? (3) Can we tolerate working with you? Each question may be asked using different words, but every question, however phrased, is just a variation on one of these topics: strengths, motivation, and fit.”

-George Bradt, Forbes archive, April 27, 2011

Participants recognize that retirement readiness is directly linked to prudent investment decisions, and many are asking for better information and new ways to help them manage their retirement savings. Similarly, business officers are seeking cost-effective solutions that assist participants in setting retirement goals; understanding their investment options and related risks; and becoming more prepared financially for retirement—without increasing institutional fiduciary risk.

Fortunately, regulatory changes in 403(b) administration and oversight are facilitating improved participant access to professional, independent investment advisory services. The service delivery and open architecture trends described in “Mastering the 403(b) Universe,” starting on page 27, enhance plan sponsors' ability to (1) provide better access to resources and expertise, and (2) achieve smart outsourcing of some of their fiduciary duties.

A Chance for Better Choices

The Pension Protection Act of 2006, and subsequent Department of Labor interpretation, makes possible new service delivery models by permitting plan sponsors to offer participants access to investment advisory services when certain relatively simple safeguards exist. Retirement plan providers such as TIAA-CREF and Fidelity, for example, are facilitating direct relationships between independent investment advisers and participants.

This service model allows participants to choose an investment advice option, which they can pay for on a favorable pretax basis (as a fee deduction from the retirement account). An individual fiduciary, whose name the participant knows and with whom he or she works regularly, helps support successful retirement outcomes.

William Peace University, Raleigh, North Carolina, relies on investment advisers to provide its employees with assistance in managing their retirement accounts. Amber Kimball, assistant vice president for human resources, says, “Due to the nature of my position, I must refrain from providing investment guidance; however, the independent investment adviser is equipped to provide information on setting, managing, and monitoring retirement goals for our employees. It is a great benefit to our faculty and staff.”

Innovative Open Architecture Investment Platforms

Ongoing portfolio management services can also be coupled with open architecture investment platforms, providing both adviser and participant with access to a robust menu of additional mutual fund options. Kimball says, “We are excited to see more choices in investment options available to our employees under our new open architecture design.” This added value at William Peace came about through collaboration with TIAA-CREF and Verity Asset Management, a Durham, North Carolina-based registered investment adviser experienced in 403(b) plans.

Fast Fact

One quarter of students who transferred did so more than once, and the greatest number of moves (37 percent) took place in a student's second year.

-National Student Clearinghouse study, “Transfer and Mobility: A National Review of Pre-Degree Student Movement in Post-Secondary Institutions,” released Feb.  28, 2012

Some independent investment advisers are tailoring economical turnkey models that fill other higher education 403(b) needs. For example, advisers may collaborate with the college or university to provide training to human resources staff, to ensure that employees fully understand their institution's fiduciary obligations to participants as well as changes and nuances in the regulations. To enhance plan participants' financial literacy, training is customized using concise, jargon-free language. These offerings are a significant advantage, sparing institutions the need to create materials from scratch, often at greater expense.

These new elements in retirement planning cost-effectively address the higher education employer's ability and obligation to help participants achieve sufficient asset accumulation to allow a timely retirement. In doing so, colleges and universities also gain the valuable benefit of creating the necessary job turnover that ultimately helps them attract and hire faculty and staff with the skills to maintain the vibrancy of the institution's mission.

SUBMITTED BY Nancy D. Suttenfield, director of higher education services, Verity Asset Management, Durham, North Carolina, and former vice chancellor for finance and administration, University of North Carolina, Chapel Hill; with Rocky Yearwood, vice president for administration and chief financial officer, William Peace University, Raleigh, North Carolina

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Quick Clicks

Check Out NACUA'S New Online Compliance Resource

In collaboration with 20 other higher education associations, the National Association of College and University Attorneys (NACUA) spearheaded and recently launched the Higher Education Compliance Alliance. Aggregating compliance news and resources from participating associations, government agencies, and other sites such as Catholic University's Campus Legal Information Clearinghouse, NACUA's compliance site is designed to be a continuously updated resource for administrators and others on campus seeking to understand their compliance obligations.

Faculty Salaries Are Looking Up

Findings of CUPA-HR's recently released 2011-12 National Faculty Salary Survey indicate that the median increase in faculty base salary in 2011 was 1.9 percent, up slightly from 1.1 percent in 2010. According to the Bureau of Labor Statistics, the annual consumer price index for all urban consumers in 2011 was 3.2 percent higher than in 2010, making the median salary increase less than inflation for faculty in all institutions combined, and also in public and private institutions when considered separately.

Aging Leadership, Upcoming Diversity Opportunities

The most notable change in the presidential profile, reported in the American College President 2012 study, is the continued aging of college and university presidents. The report, released at the American Council on Education's annual meeting in mid-March, showed that the share of presidents who were 50 or younger increased slightly from 2006 to 10 percent, but the percentage of those who were 61 or older increased by 58 percent. This shift suggests there will be significant turnover in top leadership because of upcoming retirement. On the positive side, notes Bryan J. Cook, director of ACE's Center for Policy Analysis, “It also presents a unique opportunity to diversify the leadership of American higher education.”

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Community College Opens New Building on UC Davis Campus

The Sacramento City College (SCC) Davis Center at the University of California-Davis opened its doors in mid-January to more than 2,000 students. The community college extension is the first to be built on a UC campus. The project marks a new direction of collaboration among higher education institutions in California.

In fall 2011, 160 students transferred from SCC to UC Davis. SCC President Kathryn Jeffrey sees increased transfer possibilities with the opening of the Davis campus: “Our new center enhances educational opportunities for SCC students and creates a stronger likelihood that they will move more seamlessly into UC Davis or another four-year university.”

Located in UC Davis West Village, this initial phase of the SCC Davis Center spans 20,000 square feet and includes a learning resource center, computer lab, classrooms, and space for administrative and student services. West Village is the largest planned zero net energy community in the country, designed to generate as much energy as it consumes during the course of the year. Construction for the $7.4 million center was funded by the Los Rios Community College District, using bond proceeds as approved by district voters in 2002.

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