WPU: New President Finds a Match for Employee Contributions
When she became president of William Peace University (WPU), Raleigh, North Carolina, in 2010, Debra M. Townsley began a transformation that continues today. In 2009, the university had ceased its match for employee retirement plan contributions due to budget constraints resulting from the economic recession. Prompted by new ERISA fee disclosure requirements and Townsley's desire to reinstate the match provision in 2012, WPU recently completed a comprehensive review of its plan and its compliance with ERISA.
WPU has 113 eligible participants and two staff who handle benefits along with other human resource responsibilities. One of the main functions of a plan fiduciary is to provide participants with reasonably priced investment options that allow proper portfolio diversification based on personal risk tolerance and time horizon. ERISA fiduciary duties are the same for all employers, regardless of the size of the retirement plan. They create a variety of administrative challenges for all employers, but are especially burdensome to smaller employers.
Call In the Experts
In contrast to UNC's approach, WPU chose an outside firm, Verity Asset Management, to provide investment management advice to employees. Since WPU is a small institution without extensive ERISA expertise among staff members, it made sense to work with outside experts to conduct a review, reform its defined contribution plan, and assume a share of its fiduciary responsibilities.
To meet new ERISA obligations, WPU and Verity took the following steps:
- Created a charter for establishing and educating an investment committee for the plan.
- Developed and wrote an investment policy statement.
- Evaluated the fund options available to participants, and the associated fees.
- Implemented a new plan with open architecture (i.e., it provides access to a larger menu of investment options than the basic investment menu of a single vendor) to meet the diverse retirement goals of individual employees.
- Established best practice management processes for effective plan decision making, documentation, and benchmarking of participant fees.
The primary reason that WPU engaged an outside firm was to provide needed services for faculty and staff, but it also needed support for regulatory compliance; the firm serves as an extension of WPU's staff and works closely with the selected vendor, TIAA-CREF, to provide materials and presentations for communication, education, and advice for participants.
ERISA fiduciary duties are the same for all employers, regardless of the size of the retirement plan.
Externally provided advice for employees combined with expertise and infrastructure for fiduciary compliance (regarding investment policy, fund choices, investment performance, participant fees, and documentation processes for decisions) has resulted in a comprehensive and cost-effective solution to increase the probability of retirement readiness—at a fraction of the cost of adding one or more staff members.
WPU's service provider also accepts cofiduciary responsibility and liability at a very attractive cost/benefit ratio. When compared to the potential risks and costs of DOL investigations or adverse rulings by a court, this partnered risk-management and cost-avoidance approach is an excellent way for business officers to mitigate fiduciary liability, especially for small and midsize institutions with limited capital to self-insure this risk.
Committee Becomes Go-To Resource
To assist its small human resources staff in communicating plan changes and available sources of help and advice, WPU created a committee of faculty and staff volunteers who serve as a "go-to" source of referrals for internal or external help. Members were recruited for their expertise, demonstrated personal interest, and/or finance background. After being trained intensively and cautioned against giving personal advice, per ERISA and DOL regulations, the committee is both visible and accessible to the campus as one of its internal retirement readiness resources. To keep their knowledge up-to-date, committee members attend regular workshops conducted by the university's service partner.
To encourage increased participation, the human resources office provides regular updates for the campus and schedules the service partner's representatives to meet for one-on-one retirement planning and investment discussions with employees. Such easy access to professionals on campus encourages participants to periodically review their investment allocations in relation to their retirement goals and risk tolerance. Human resources staff also point out any changes to the limitations on annual maximum contributions.
The institution's expanded communication, education, and advice offerings appear to be paying off. According to Amber Kimball, assistant vice president for human resources, "As of November 2012, 69 percent of eligible employees participated in the WPU retirement program, compared to 55 percent in September 2011." In addition, 68 percent of participants are investing a higher percentage than the minimum required to receive the employer match. "WPU employees are becoming well educated on the importance of maximizing their retirement and using the resources we are providing as a way to reach their goals," says Kimball.
Emily Richardson, human resources generalist, adds: "It's been great to see plan participation improve since the match has been reinstated. The participant information delivered by TIAA-CREF and Verity has been a huge help to us in communicating with our faculty and staff."