KEY INSIGHT
NFP identified unintended risks and inefficiencies that existed in a $149M 403(b) plan.
Solving for these issues, NFP provided custom solutions to position participant balances for more money, more income, and less risk while reducing plan recordkeeping and investment fees.
Solving for unintended risks and inefficiencies while reducing plan fees and improving investment quality.
A private university with around 1,000 faculty and staff had been working with NFP for benefits brokerage services before they discovered NFP’s retirement plan advisory offerings.
NFP’s 403(b) specialists met with the chief financial officer (CFO) and vice president of human resources (VPHR) of the university. The CFO and VPHR agreed to let NFP conduct a complimentary evaluation of their 403(b) plan.
The Problem: Unintended Risks & High Fees
After a full review, NFP’s team found that:
- Unintended investment risks and inefficiencies existed in the structure of the plan’s use of an off-the-shelf target date fund.
- The university was left open to significant legal risk with regard to the plan’s legacy annuity contracts, and the existing advisor had not done anything to help participants move from higher-cost, underperforming legacy annuity options to the plan’s best-in-class, institutionally priced choices in the new contract.
- The university’s existing advisor had very little experience with their current plan and created a compensation structure for themselves that left the university on the hook for the portion of their fee that couldn’t be covered by the plan.
The Solution: Repricing & Customization
The NFP Investment Advisory team presented these findings to the CFO and VPHR of the university and proposed a series of enhancements to improve the plan’s overall cost and quality. This included:
- Implementing custom investment solutions (custom target date portfolios) to solve for the unintended risks and inefficiencies caused by off-the-shelf target date funds and reducing overall target date fund investment fees by approximately 67%.
- Negotiating a 17% fee reduction with the plan’s recordkeeper.
- Implementing an exclusive-to-NFP contract transition service to simplify the process for participants to move their balances from the higher-cost, underperforming investment options in the old contract to the plan’s best-in-class, institutionally priced choices in the new contract.
Contact our expert for a complimentary assessment of your organization’s 401(k) or 403(b) plan.
