September 2014 DC Update
Save with Confidence
Upcoming Seminars
Ongoing education is a crucial part of any financial plan. Luckily, as a state of Missouri employee you have access to FREE training and one-on-one consultations with our education specialists. Situated throughout the state, these representatives are dedicated to helping state of Missouri employees get the most out of the deferred compensation plan benefit. Visit the education specialists' page on the plan website to see who represents your area and to register online for one of these upcoming seminars in your neck of the woods.
St. Joseph
September 9, 2014 at 11:30 am
Completing the Retirement Income Puzzle
Location: State of Mo. Office Building
St. Charles
September 18, 2014 at 10 am and 1 pm
Retirement Basics
Location: Child Support Enforcement
Chillicothe
September 24, 2014 at 11:30 am
Completing the Retirement Income Puzzle
Location: State of Missouri Office Building
Kirksville
September 24, 2014
at 1 pm
Completing the Retirement Income Puzzle
Location: Department of Conservation
Columbia
September 25, 2014 at 9 and 10:15 am
Completing the Retirement Income Puzzle
Location: Central Missouri Regional Center
Cape Girardeau
September 25, 2014 at 10:30 am
Completing the Retirement Income Puzzle
Location: Nature Center
Jefferson City (EVENING SESSIONS)
September 25, 2014 at 5:30 pm and 6:45 pm
Completing the Retirement Income Puzzle
Location: Runge Nature Center
Adding It Up: Saving with Confidence
A recent article on Bloomberg.com shed light on the practice of private brokers luring federal employees out of their low-cost, employer-sponsored retirement savings plans into more expensive individual retirement accounts. While some may argue that rolling money over to a financial professional provides peace of mind, it’s important to understand just how costly such a rollover could be.
Why can rollovers to broker recommended products be costly? Because sometimes these arrangements are far more expensive than those offered in employer-sponsored plans, and, unfortunately, brokers might charge additional account fees and recommend products with excessive front-end load fees. What does that mean on paper?
The Missouri Target Date Funds are the default investment option within the deferred compensation plan. The average expense ratio on these funds is .23%, or twenty-three basis points. Put another way, it will cost an investor $2.30 for every $1,000 dollars invested in a Missouri Target Date Fund. In addition, the deferred compensation plan’s administration fee is $1 per month (or $12 annually).
For comparison’s sake, according to Morningstar's 2014 Target-Date Series Research Paper, the national asset-weighted average on target date fund expense ratios is .84%, or eighty-four basis points. An expense ratio of .84% means the average target date fund investor will pay an $8.40 fee for every $1,000 invested. That's $6 more per thousand dollars invested than what you pay for a Missouri Target Date Fund. And remember, these costs don't include any front-end load fees that may also accompany a rollover and initial investment into a new fund. Simply put, a front-end load is an upfront fee or commission that is sometimes charged when you purchase an investment option. Front-end loads vary, but a common amount is 5%. This means if a saver with an account balance of $100,000 were to roll money to a broker offering an investment option that charges a 5% front-end load, he or she would be paying $5,000 up front just to start investing in the new plan. That would automatically knock the investor's retirement balance down to $95,000, before he or she even gets started. And remember, the front-end load doesn't even include the previously mentioned expense ratios tied to the investment options within the new plan or administrative fees that may be charged to simply participate in the plan.
While the decision to rollover your account is yours, it's extremely important to do your homework before considering this option. Luckily the deferred compensation plan's Considering a Rollover? Questions you should ask flyer can help you ask the right questions and identify any red flags that may exist with a rollover transaction. The bottom line is that if a financial professional suggests that you transfer your account balance to another fund or IRA, there is one simple question you should ask yourself: "Are they acting in my best interests or their own?"
Now That’s a Great Question
Each month we like to highlight popular participant questions in a segment we call “Now That’s a Great Question”. This month’s great question is: “I started saving for retirement late in my career, what can I do to catch up?"
While it's certainly advantageous to put time on your side and start saving when you are younger, we understand that doesn't always happen. Fortunately there are a number of Plan features designed to help late-career employees make up some ground on their savings prior to retirement. The Age 50 and Over Catch-up Provision allows employees age 50 and over to make additional catch-up contributions during the tax year. For 2014, the catch-up contribution is $5,500 if you contribute the maximum of $17,500. That means in this tax year you can save a total of $23,000 to your Plan account.
Another option is the Pre-Retirement Catch-up Provision. With this provision, if you are within three years prior to the year of your retirement, you may be able to double the normal annual contribution limit. In other words, for 2014 you could contribute a total of $35,000 to the Plan. Please note, you cannot contribute to the Pre-Retirement Catch-Up and the Age 50 and Over Catch-Up provision during the same tax year.
To take advantage of one of these Plan features, simply give a participant service representative a call at 800-392-0925. And for more answers to popular questions, be sure to visit our FAQ section. If you can't find what you're looking for there, don't hesitate to give the Plan a call.
Auto Enrollment Report
This update contains cumulative auto enrollment statistics by department as of August 1 of 2014.
Please note: Detailed data for agencies with 10 or fewer hires is omitted in this report.
| Department |
Total AE
|
Opt out
|
Net AE
|
Automatic Enrollment Success Rate
|
| State Auditor |
21
|
0
|
21
|
100.0%
|
| Office of Administration |
185
|
11
|
174
|
94.1%
|
| Dept of Corrections |
1,969
|
171
|
1,798
|
91.3%
|
| Dept of Social Services |
1,537
|
144
|
1,393
|
90.6%
|
| Dept of Agriculture |
40
|
4
|
36
|
90.0%
|
| Dept of Elem & Sec Ed |
208
|
21
|
187
|
89.9%
|
| Dept of Revenue |
226
|
24
|
202
|
89.4%
|
| Dept of Transportation |
512
|
64
|
448
|
87.5%
|
| Dept of Conservation |
71
|
9
|
62
|
87.3%
|
| Dept of Health & Senior Services |
257
|
33
|
224
|
87.2%
|
| Dept of Natural Resources |
144
|
19
|
125
|
86.8%
|
| Dept of Ins, Fin Inst, Prof Reg |
58
|
8
|
50
|
86.2%
|
| Dept of Labor & Industrial Relations |
57
|
8
|
49
|
86.0%
|
| Judiciary |
496
|
72
|
424
|
85.5%
|
| Public Safety |
877
|
129
|
748
|
85.3%
|
| Dept of Mental Health |
1650
|
269
|
1381
|
83.7%
|
| Secretary of State |
37
|
7
|
30
|
81.1%
|
| State Public Defender |
128
|
26
|
102
|
79.7%
|
| Attorney General |
80
|
18
|
62
|
77.5%
|
| Dept of Econ Development |
69
|
18
|
51
|
73.9%
|
| Legislature |
114
|
31
|
83
|
72.8%
|
| Dept of Higher Education |
-
|
-
|
-
|
-
|
| Governor's Office |
-
|
-
|
-
|
-
|
| Highway & Highway Patrol |
-
|
-
|
-
|
-
|
| Housing Development Commission |
-
|
-
|
-
|
-
|
| Lt. Governor |
-
|
-
|
-
|
-
|
| Missouri Consolidated Healthcare |
-
|
-
|
-
|
-
|
| MOSERS |
-
|
-
|
-
|
-
|
| State Treasurer |
-
|
-
|
-
|
-
|
| Totals |
8,773
|
1,093
|
7,680
|
87.5%
|
Stay Connected with the Plan on Facebook, Twitter, LinkedIn and YouTube
If you haven't done so already, please be sure to join your coworkers who have found the Plan online at Facebook, Twitter, LinkedIn or YouTube. Connecting with the Plan on social media is the best way to receive the latest Plan news, important savings tips and much more. Until next month, this has been Casey Fick from the State of Missouri Deferred Compensation Plan, your smart, simple savings solution.