As if the MNSCU Retirement Plan wasn't complicated enough they recently rolled out some updates, expanding from one to three account classes. What does this mean for you as an investor in the MNSCU retirement system? I'll lay out the changes in this post and address some of the questions you are probably wondering about.
1. What's with all the Extra Transactions in my TIAA CREF Accounts?
Ignore them. No really, there's not much going on here except TIAA and MNSCU are changing your class of account (explained below). To do this they need to transfer your investments from one account to the other. This could get confusing when you look at your next quarterly statement as there will most likely be a lot of additions and subtractions. The "Additions" are really just transfers into the new account classes and the "Reductions" are just transfers out of your old CREF account. Your balance should not change because of these changes unless you had other activity this quarter. I.e. actual additions and subtractions like contributions, withdrawals, or income. NOTE: not all accounts are transferring. Some accounts might be staying in the "R1" accounts (if your employer qualified for the plan). If this is the case you won't see these transfers only a re-labeling of your account to include the R1 designation.
2. So what are these new Account classifications?
TIAA-CREF had only one class of account. This means whether you were an individual investor or part of an employer sponsored plan the underlying expenses of each CREF Fund was the same. These investments expenses are really the only things changing. Basically there are now three class structures - R1, R2, and R3 and each one of these accounts has a different set of expense ratios. Note: regardless of which account class you are in TIAA-CREF has some very good investment options, including a lot of low-cost investments to choose from. Take a look back at our other MNSCU Retirement Plan article for our thoughts on the individual investments within the plan. The biggest take away here is that the underlying investments for all TIAA CREF account classes have not changed, only the expense ratios.
3. What account Class am I in?
I can't tell you that unless I take a look at your next quarterly statement. It depends on your employer and the type of account. You should be able to find this out for yourself by looking on your statement for R1, R2, or R3 next to each of your investments. You may even be invested in multiple accounts. E.g. you could see both R2 and R3 investments. Remember the investments are the same it's only the expenses that changed. Example: CREF Stock R1 and CREF Stock R3 are the exact same funds that hold the exact same investments. The difference is that the R1 fund has an expense ratio of 0.455% and the R3 fund has an expense ratio of 0.370%.
4. Do I need to do anything?
Nope. The changes are automatic. You should be aware of what's going on in your accounts but no action is required from you.
5. Is this a good thing?
Yes. You now might be paying lower fees than you were before. It's my understanding that no fees are increasing. So if you are still in an R1 investment, do not worry because you are still paying the same you were before.
If you still have question feel free to reach out. This is a complicated retirement plan but has a lot of advantages so make sure you are making the most of it.