Retirement Investment Policy
Defined Contribution Retirement Plan
Purdue University (University) maintains the following defined contribution retirement plans: a 403(b) plan (including employer and employee contributions); 401 (a) Plan; and a 457(b) plan (herein collectively referred to as the "Plans") for the benefit of its employees. The Plans are intended to provide eligible employees with long-term accumulation of retirement savings through a combination of employer and employee contributions to individual participant accounts.
The Retirement Plans will provide a range of funding options that will enable participants to invest according to varying risk tolerances, savings time horizons, and other financial goals. The Plans will provide a mechanism for participants to accumulate assets for retirement during their years of employment; encourage participants to save assets through employee contributions; and assist eligible participants in accumulating assets by providing for employer contributions.
Investments alternatives will be selected for the sole interest of the Plans' participants and beneficiaries; and participants will be provided the opportunity to obtain sufficient information to make informed decisions with regard to the investment alternatives available under the Plans. Assets of the Plans shall be maintained in compliance with all applicable laws governing the operation of the Plans. This policy will be effective until modified by the Board of Trustees.
Investment Objectives, Options and Tiers
The objective of the Plan is to offer a sufficient range of investment options to allow participants to diversify their balances and construct portfolios that reasonably span the risk/return spectrum. The Plans will encourage participants to take an active role in saving and selecting among funding options for their retirement by providing education and information so that they can make informed decisions about their participation and funding option selections.
The investment options that are to be made available under the Plans will include mutual funds and annuity contracts. The Committee will examine each investment option to ensure that the investment style and other relevant investment criteria are acceptable, given the purpose of each investment option. The Plans' investment options will be selected so as to:
- Provide those participants who wish to direct their own investments with a diverse set of investment options in various asset classes so as to encourage and facilitate participant diversification while also offering a program that is understandable to participants;
- Provide a long-term competitive rate of return for similar investment options
- Control administrative, management, and participant costs.
Investment Option Tiers
While offering a variety of funding options is important, efforts will be made to keep the total number to a prudent level that balances the benefits of broad diversification with the disadvantages of too much choice. At a minimum, the Plans shall offer sufficient investment options so that participants can construct an investment program appropriate for their respective risk tolerances. The retirement Plan will offer participants investments options in four Tier Categories.
- Tier I Category - This Tier will include Target Date Retirement Funds. Target Date Retirement Funds are offered as "specialized" balanced funds and are the Plans qualified default investment alternative. Target Date Retirement Funds are offered to provide an alternative for participants who want a higher level of professional guidance consistent with the age of the participant.
- Tier II Category - This Tier will only include Index Funds. Index funds are offered to provide a low-cost vehicle for investing in the financial markets.
- Tier III Category - This tier will provide participant access to a select list of actively managed individual asset class investment options.
- Tier IV Category - This tier will provide a Self-Directed Window ("SDW") as an Investment Option that allows a Participant to establish an account with a designated broker-dealer. The goal of offering the SDW option is to give participants access to a wider range of investments. Under the SDW, a participant may elect to invest in any mutual fund(s) offered by the broker-dealer.
Notwithstanding the foregoing, a participant may not invest in the following through the SDW: individual stocks and bonds, options, exchanged traded funds, collectibles, futures, commodities, precious metals or currencies.
Roles and Responsibilities
Retirement Plan Committee
The Retirement Plan Committee will assist with guidance and oversight to allow a sufficient range of investment options so participants can diversify their accumulated balances and construct portfolios that reasonably span the risk/return spectrum. The Committee will be responsible for advising the Assistant Treasurer on all matters relating to the investment options of the Plans that may include, but are not limited to:
- The Retirement Plan Committee will consist of the Assistant Treasurer of Purdue University as Chairman, the Vice President for Human Resources, the Senior Vice President and Treasurer of the Purdue Research Foundation, the Chief Investment Officer, a Regional Campus Vice Chancellor, the Faculty Senate Representative, an Administrative and Professional Staff Advisory Committee (APSAC) Representative and a Clerical and Service Staff Advisory Committee (CSSAC) Representative. The Director of Staff Benefits and the Director of Investment Research and Analysis will serve as ex officio members.
- The Retirement Plan Committee responsibilities include the development of the Retirement Plan Investment Policies, selection and termination of the master trustee/custodian, selection and termination of investment consultants and investment options, monitoring performance of investment options so as to be reasonably assured of their compliance with the Retirement Plan Investment Policies.
- Recommend the overall number and types of options offered to participants of the Plans including default options for participants who fail to make investment elections.
- Periodically review the Investment Policy Statement and recommend modifications.
- The Committee will meet periodically to review performance of each investment option.
- Review and monitor the costs associated with the Plans at least annually.
- The Trustee(s) and/or Custodian(s) of the Plans will be responsible for holding and investing the Plans' assets in accordance with the terms of the Trust/Custodial Agreement.
Investment Consultant Responsibilities
The Retirement Plan Committee may recommend to the Treasurer or his designee the use of outside consultants and other professionals. The services of consultants and other professionals may include, but are not limited to:
- Providing formal reviews of the performance of the investment options. Such reviews shall be based on established criteria and shall include recommendations for changes where appropriate;
- Advising the Committee of any recommended modifications to the investment structure of the Plans;
- Advising the Committee as to the appropriate performance benchmarks for the investment options, including the creation and revision of any custom benchmarks used for the Target Date Retirement Funds offered under the Plans; and
- Providing updates on topical issues or events that relate to best practices and new products and services available.
The Plans' participants have different investment objectives, time horizons, and risk tolerances. To meet these varying investment needs, participants will be able to direct their account balances among a range of investment options which span the risk/return spectrum. Participants bear the investment risk and reap the rewards in respect to the returns credited to their investment options.
Participants of the Plans will be responsible for:
- Educating themselves regarding the various aspects of saving and investing; and
- Selecting and monitoring their investments.