Benefits Plans - Retirement Savings Plans: fund fees and expenses

Overview

Investing for retirement is an important way to plan for your future.  However, fees and expenses assessed by investment carriers will reduce your retirement savings, and can have a noticeable effect when compounded over several years. 

Investment carriers pay for operational expenses, portfolio management, record keeping, general administration, and customer service by assessing fees on its investment funds.  The fees are subtracted from the investment returns or earnings of those funds, with the net return being credited to participant accounts.

The prospectus of each fund summarizes its various fees.  The combination of these fees will generally equal a fund’s expense ratio.  The expense ratio is reported as a percent of assets under management and is measured in basis points (bps), with 100 points being equal to 1%.  The fee is subtracted from the revenue generated from the performance of the underlying investments.  This reduces the net earnings credited to participants.

Fund Fees and the U-M Plans

There are no sales charges or loads on any fund offered by TIAA-CREF or Fidelity Investments through the university retirement savings and 457(b) plans, and all transaction fees have been waived.  In addition, U-M does not pay any fees to TIAA-CREF or Fidelity Investments.  Please refer to a fund’s prospectus for information on fees and expenses associated with that fund.

All TIAA-CREF mutual funds and the Fidelity Freedom Index Funds available through the University of Michigan plans are offered at the lowest cost share class available.  Low fees mean more of your money remains in your account, working toward your financial future, and your retirement account balances have more earning potential. 

The ticker symbols and expense ratios for the U-M designated default investment funds, TIAA-CREF Lifecycle Index and Fidelity Freedom Index, are listed below. Details about all of the other fund choices are available from the each investment company's micro site developed exclusively for the University of Michigan.

TIAA-CREF

Fidelity Investments


TIAA-CREF Lifecycle Index Funds

Fund Name

Ticker Symbol

Expense Ratio

TIAA-CREF Lifecycle Index Retirement Income

TRILX

0.21%

TIAA-CREF Lifecycle Index 2010

TLTIX

0.20%

TIAA-CREF Lifecycle Index 2015

TLFIX

0.19%

TIAA-CREF Lifecycle Index 2020

TLWIX

0.20%

TIAA-CREF Lifecycle Index 2025

TLQIX

0.19%

TIAA-CREF Lifecycle Index 2030

TLHIX

0.19%

TIAA-CREF Lifecycle Index 2035

TLYIX

0.19%

TIAA-CREF Lifecycle Index 2040

TLZIX

0.19%

TIAA-CREF Lifecycle Index 2045

TLXIX

0.19%

TIAA-CREF Lifecycle Index 2050

TLLIX

0.19%

 

Fidelity Freedom Index Funds: Class W

Fund Name

Ticker Symbol

Expense Ratio

Fidelity Freedom Index Income: Class W

FIKFX

0.19%

Fidelity Freedom Index 2010: Class W

FKIFX

0.19%

Fidelity Freedom Index 2015: Class W

FLIFX

0.19%

Fidelity Freedom Index 2020: Class W

FPIFX

0.19%

Fidelity Freedom Index 2025: Class W

FQIFX

0.19%

Fidelity Freedom Index 2030: Class W

FXIFX

0.19%

Fidelity Freedom Index 2035: Class W

FIHFX

0.19%

Fidelity Freedom Index 2040: Class W

FBIFX

0.19%

Fidelity Freedom Index 2045: Class W

FIOFX

0.19%

Fidelity Freedom Index 2050: Class W

FIPFX

0.19%

Where to Find More Information
Information and a breakdown of the fees assessed by TIAA-CREF and Fidelity Investments for its funds may be found in each fund’s prospectus.  A fund prospectus may be requested by phone or downloaded from each carrier’s website.

Information on a fund’s current and historical investment performance, as well as benchmarks, may also be found online at TIAA-CREF and Fidelity Investments.

In addition, you may also provide direction on your investment choices by calling TIAA-CREF and Fidelity Investments at the phone numbers listed below or through their secure websites.

TIAA-CREF
www.tiaa-cref.org
1-800-842-2776

Fidelity Investments
www.fidelity.com
1-800-343-0860

Types of Fees

The following are common fees and expenses assessed by investment carriers.  Please refer to a fund’s prospectus for information on fees and expenses associated with that fund. 

Investment Management
This covers the cost of professionally managing the portfolio holdings. The fee varies by the investment style of the fund (indexing vs. active management) and type of investment.  Sector funds that specialize in a particular segment of the economy (gold, financial services, etc.) usually have higher fees than general equity funds. International equity funds generally have higher fees than comparable domestic funds.  Bond and money market funds are generally the least expensive to manage.

Administrative Services
This covers a wide range of functions such as record keeping, legal and trust services, tax reporting, processing transactions, producing quarterly statements, communications to plan participants, staffing a telephone service center, and providing financial planning services to participants.

Mortality & Expense Risk
Annuities offered by insurance companies charge this fee to offset the expense and risk assumed to provide contractual guarantees, such as guaranteed lifetime income.  This fee does not apply to mutual funds. 

12b-1
This fee pays for marketing and distribution to grow a fund’s assets.  As a fund’s assets increase, economies of scale serve to decrease overall fund expenses and benefit all fund shareholders.  

Short-Term Trading
Many carriers impose a fee on participants who sell fund shares shortly after purchasing them as a means to discourage market timing.  A participant who repeatedly purchases and redeems fund shares to take advantage of short-term fluctuations in a fund’s share price will drive up expenses for all fund participants due to the associated costs of having to buy and sell the portfolio holdings and also reduces investment returns.

Fees Not Assessed in the U-M Plan

The following types of fees are not assessed or have been waived by TIAA-CREF and Fidelity Investments for its funds offered through the University of Michigan retirement savings and 457(b) plans:

Transaction
This is a fixed-dollar fee subtracted from a participant’s account for transactions such as taking a loan or cash withdrawal.

Wrap
Wrap fees are charged as a percent of a fund’s assets and pay for various services not covered by the investment management and 12b-1 fees. 

Account Maintenance
Carriers sometimes charge a fixed-dollar account maintenance fee, typically for accounts or plans with small balances.  

Loads and Charges
Loads and charges can be assessed when shares in a fund are purchased, sold, or a combination of both.  This fee is paid to the broker that sells the mutual fund and typically is assessed as a percent of the fund price.  A fund may charge a fee for redemptions and exchanges for other funds offered by the same investment carrier in lieu of loads.

Purchase, Redemption, and Exchange
Some investment carriers charge a fee when a person buys shares of a fund, sells those shares, or exchanges those shares for those of another fund within the carrier.  Unlike sales loads and charges, these fees are paid to the fund and not a broker.  

Fees Outside the U-M Plan

Several types of fees have been waived by TIAA-CREF and Fidelity Investments for the University of Michigan.  You may incur these and other fees if you rollover accumulations out of the U-M plans and into an investment carrier through another employer’s retirement plan or through an IRA. Check with any investment carrier with whom you intend to rollover accumulations to determine the types of fees you will pay and the expense ratios you will be assessed on the investment funds you choose.

 

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Limitations
The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend or terminate them.