1 / 28

Boyce Thompson Institute

Boyce Thompson Institute. Retirement Plan. Background. BTI currently sponsors a combination of two retirement income plans: Defined Benefit Plan 403(b) Plan In the fall of 2005, BTI engaged BPA-Harbridge to: Examine the structure of benefits provided by its current retirement income program

presley
Télécharger la présentation

Boyce Thompson Institute

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Boyce Thompson Institute Retirement Plan

  2. Background • BTI currently sponsors a combination of two retirement income plans: • Defined Benefit Plan • 403(b) Plan • In the fall of 2005, BTI engaged BPA-Harbridge to: • Examine the structure of benefits provided by its current retirement income program • Survey other employers who are competitors for the pool of talent upon which BTI draws • Survey its employees regarding the appreciation and understanding of its benefits program • Guide the process regarding any potential redesign of the retirement program • What would the program be if starting from scratch? • How do we get there from here?

  3. Background • Number of defined benefit plans peaked in 1985 at 114,000…at end of 2005 there were approximately 30,000 • Most colleges and universities transitioned to a defined contribution plan only model (e.g. 403(b) plan) years ago • In the past two years many large corporations have frozen the benefits of their defined benefit plans • IBM • Sprint Nextel • GM • Delta • Hewlett-Packard • Verizon • Lockheed Martin • Motorola

  4. Summary of Current Retirement Plans • Defined Benefit Pension Plan • Benefit is larger of two amounts • Annuity payable at age 65 equal to 2% of high 36 month average compensation multiplied by years of service, capped at 33 years • Annuity that is actuarially equivalent to cash balance account balance • Account balance is credited with service credits (i.e. 7% of compensation) and interest credits (i.e. yield on 10-year Treasuries) • Benefits generally paid in the form of a life-time annuity • If the lump sum equivalent of the benefit is $50,000 or less it could be paid out as one-time lump sum • Lump sums can be rolled over to another qualified retirement plan or Individual Retirement Account or Annuity (IRA) • Vesting is 100% after three years of service

  5. Summary of Current Retirement Plans • 403(b) Plan • Employees can make contributions through pre-tax salary deferrals (In 2006, maximum is $15,000 plus $5,000 catch up contributions if over 50) • BTI matches contributions dollar for dollar up to 3% of compensation • Vesting on employer contributions is immediate

  6. The Process • Current Retirement Program is very competitive when compared to other employers • The 403(b) plan is well understood and appreciated by employees • The Defined Benefit Plan is not understood as well • BTI management and the Board concluded that if starting “from scratch” a 403(b)-only approach would likely be the design • That said, many current employees are in the middle of their careers and moving to 403(b)-only, at this juncture, was not considered appropriate • Management considered options, made recommendations to the Board which they subsequently discussed and approved

  7. New Retirement ProgramEffective January 1, 2007 • Combination of Cash Balance Plan and 403(b) Plan • Employees employed on September 30, 2006 will have a choice of being covered by current plan or new retirement program • For those deciding to stay under the current program, it’s as if nothing happened with the exception of the investment choices for new 403(b) contributions • BTI reserves the right to make changes to the current plan at any time in the future • All those hired on or after October 1, 2006 will be covered by the new program

  8. New Retirement ProgramEffective January 1, 2007 • Cash Balance Plan • Combination of benefit accrued as of December 31, 2006 plus cash balance account for 2007 and beyond • Cash balance plan benefit for 2007 and beyond will equal an account balance that is credited with service credits and interest credits • Service credits equal to 3% of compensation • Those with more than 33 years will still receive a service credit • Interest credits will equal yield on 10 year Treasuries • At termination of employment or retirement employee will have option of an annuity or a lump sum • Lump sum will equal the (1) actuarial equivalent of the benefit accrued at December 31, 2006 plus (2) the cash balance account balance • Lump sum will be offered regardless of the size • New death benefit available will be a one-time lump sum in lieu of an annuity

  9. New Retirement ProgramEffective January 1, 2007 • 403(b) Plan • Current matching contribution (100% of first 3% deferred) is unchanged • New employer contribution, regardless of how much the employee defers • This will be subject to a 3 year cliff vesting schedule • Investment direction by the employee • More details regarding the 403(b) plan will be provided in a presentation specific to that plan • No maximum service to receive the employer contribution

  10. Contribution Rates for those employed by BTI at Transition • Split annual employer credits between Cash Balance Plan and 403(b) Plan: Total Years of CB 403(b) Employer Credits/ ServicePlanPlan Contributions less than 5 3% 4% 7% 5-9 3% 6% 9% 10-14 3% 9% 12% 15-19 3% 11% 14% 20-24 3% 13% 16% 25-29 3% 15% 18% 30 or more 3% 17% 20% In addition, the 3% match in the 403(b) plan will be maintained Employer contribution to the 403(b) plan will be based on the service of the employee as of December 31 of the year the contribution is credited

  11. Contribution Rates for those hired after Transition • Split annual employer credits between Cash Balance Plan and 403(b) Plan: Total Years of CB 403(b) Employer Credits/ ServicePlanPlan Contributions less than 5 3% 4% 7% 5-9 3% 6% 9% 10 or more 3% 9% 12% In addition, the 3% match in the 403(b) plan will be maintained Employer contribution to the 403(b) plan will be based on the service of the employee as of December 31 of the year the contribution is credited

  12. “Choice” • The “choice” is a one-time election made by the employee to either continue to be covered by the current DB formula and 403(b) match or be covered under new DB formula and 403(b) contributions • Each employee will be given projections of benefits at various dates in the future (5 and 10 years out) as well as at various retirement ages (age 55, 62, and 65) • BTI wants all employees to complete an election form • Those not completing an election form will be covered by the new plan • In other words….if you want to continue to be covered by the current plan you must complete an election form

  13. Comparison of Current vs. New Plan • Current Plan • Most of the retirement benefits are provided through a defined benefit plan • The defined benefit plan pays most benefits in the form of a lifetime annuity • Only those with benefits worth less than $50,000 have the option of a lump sum • Death benefits are also generally paid as an annuity for retiree and spouse • New Plan • Most of the benefits accruing in the future will be provided in the 403(b) plan • All benefits will be able to be paid as a lump sum at termination of employment, retirement or to a beneficiary as a death benefit if you die before leaving BTI • Employee still retains ability to take benefits in the form of a lifetime annuity

  14. Sample Benefit Illustration

  15. Next Steps • Discuss 403(b) plan in more detail • Provide employees with Benefit Comparison Statements • We strongly suggest employees consult with a financial planner to discuss their “choice” • Employees elect whether to continue to be covered by current plan or to be covered by new plan

  16. Contact Information Vince Spina, ASA, MAAA President, Harbridge Consulting Group (315) 703-8999 vspina@bpah.com

  17. Boyce Thompson InstituteNew 403(b) Plan – Partners • Burke Group – Richard Burke • Alesco Advisors – Tim Tindall • Custodian – Fidelity Investments • Paying Agent – First Niagara Bank

  18. Boyce Thompson InstituteNew 403(b) Plan • All ongoing employee and employer contributions will go exclusively to this Plan. • Employee deferrals and employer contributions will cease going to other 403(b) plans (Fidelity, TIAA-CREF, and T. Rowe Price). • Balances in other plans can remain, or can be transferred, at any time, into the new 403(b) Plan at the employee’s discretion. • Immediate eligibility for new 403(b) Plan

  19. Boyce Thompson InstituteNew 403(b) Plan • Pre-tax deferral ($15,000 / $5,000 catch up) • Employer matching contributions (100% on first 3%) • New employer discretionary contribution • 100% vesting • Withdrawals for retirement, termination, and hardship • Daily account access and updates • Changes within your account at any time

  20. Boyce Thompson InstituteNew 403(b) Plan • Employer Discretionary Contributions • Hire date prior to 10/1/2006 • Hire date on or after 10/1/2006

  21. Boyce Thompson InstituteNew 403(b) Plan • Account Access • On-line access, updated daily • On-line enrollment (after 1/1/07) • Toll-free Call Center, M-F, 8 am – 5 pm, EST • Quarterly statements • Personalized Retirement Planning and Counseling • On-site, one-on-one meetings • Bring other 403(b) plan information • On-line interactive web tools • Demo Website • Go to www.worksitecommerce.com • Company Code: 287 • User ID: 111111111 • PIN Number: 1111

  22. Boyce Thompson InstituteNew 403(b) Plan – Next Steps • Financial Self-Assessment / Model Asset Allocations • Optional: Meet with Financial Advisor • Complete Election Form (new or old plan) by November 8 • Complete Enrollment Form (deferral and elections) and submit to Lucy by December 1 • Complete Beneficiary Form • Optional: Complete Rollover Form to transfer from another 403(b) Plan

  23. Boyce Thompson InstituteNew 403(b) Plan Advisor • Tim Tindall, Alesco Advisors - Rochester • Independent, fee-based, SEC registered investment advisor • Founded in January 2000 • $750 million under management/advisement • 120 clients: institutional and individuals • Institutional accounts include: endowments, foundations and retirement plans

  24. Boyce Thompson InstituteNew 403(b) Plan Advisor • Investment philosophy • Broad use of index investment strategies designed to match the returns of the capital markets • Benefits of Indexing 1. Strong historical performance relative to peer groups 2. Transparency & style purity 3. Low costs 4. Ability to build a well-diversified retirement portfolio

  25. Boyce Thompson InstituteNew 403(b) Plan Investment Options

  26. Boyce Thompson InstituteNew 403(b) Plan • Investing for Retirement • Long-term – Don’t focus on daily movements • Risk and Return • Higher returns = More risk (volatility) • Diversification • Spread out risk by owning different investments across a wide range of asset classes

  27. Boyce Thompson InstituteNew 403(b) Plan Investment Options Model Asset Allocations • Self-managed • Allocation guidelines available • Automatic – Target Date Funds • Use Target Date fund that most closely matches your retirement date • Mix of stocks, bonds and cash - routinely rebalanced to become more conservative over time

  28. Boyce Thompson InstituteNew 403(b) Plan BTI Retirement Plan Benefits • Meet Return Expectations • Lower Expenses – keep more of your return • Increased Diversification • Reduced Volatility • Eliminate “Manager Risk”

More Related