Retirement Investments and Fees - Human Resources at Ohio State

Understanding the investments available to you and the fees associated with your retirement account is an important step in your financial planning.

The university offers an array of retirement options, overseen by the Retirement Oversight Committee (ROC), to help you meet your financial goals. While OPERS and STRS manage investment offerings for the state retirement plans, the ROC makes recommendations to the chief human resources officer on administrative and investment decisions for university-sponsored plans.

The following information on investments and fees relates to the university-sponsored retirement plans.

On this page…

• Investment Options
• Retirement Fees

You have a range of investments available to you within the plans. The investment options are separated into three tiers to help you choose a strategy that works best for you.

The investments in Tiers 1 and 2 were carefully chosen by the ROC and are regularly monitored for their ongoing viability. Neither Ohio State nor the ROC monitors the investment options offered in Tier 3.

Things you should know:

• You can choose funds in as many or as few tiers as you wish.
  • You could invest in a single target date fund or create your own diversified investment portfolio from the core investment options or through a self-directed brokerage account.
• You may change your investment elections/tiers at any time.
• Except for the fixed annuity options, the investment options available in Tiers 1 and 2 are the same across each of the providers and plans.
• You are responsible for selecting and monitoring your investments in Tier 3.

Investment Performance Reports

When selecting investments, it is helpful to review and understand how the funds have performed historically.

• View the recent Tier 1 and 2 investment performance reports
• Learn how to read an investment performance report

You may also want to review the benchmark descriptions which describe what the investment returns are compared to in order to measure performance.

Please contact your provider for information on the performance of the investment options available through Tier 3.

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Understanding your fees can help you monitor and control your costs. This is important as the fees you pay play an important part in how your account may look at retirement. To learn more on how fees can impact your account growth, review the SEC article How Fees and Expenses Affect Your Investment Portfolio.

Participants in the plans have two categories of plan-related charges:

• Record-keeping fees
• Investment management fees

Note: Additional fees may apply for specific transactions.

Record-keeping Fees

The annual record-keeping fee covers numerous services that are necessary for the day-to-day operation of the plans by your provider. This includes provider administrative duties, participant advice, quarterly statements, participant communications and customer service.

The plans’ record-keeping fees vary by plan and provider and will be deducted from your account(s) automatically. The annual fee will be deducted on a quarterly basis.

Things you should know:

• These record-keeping fees are in addition to investment management fees described in the next section
• You will be assessed a record-keeping fee for each account where you have a balance. For example, if you have a 403(b) balance with two providers, a record-keeping fee will be deducted by each provider. To avoid multiple fees, consider consolidating your accounts.

Investment Management Fees

Every investment has a cost. Investment management fees are determined using an “expense ratio,” which is the percentage of assets an investment manager charges each year to cover the fund’s annual operating expenses.

The expense ratio covers operational costs such as investment management fees, compliance, distributions, marketing, shareholder services and other expenses associated with the fund management. The expense ratio is deducted from investment returns before given to investors.  Your total return is net of these expenses. The higher the expense ratio, the more the fund needs to perform in order to overcome these costs.

An expense ratio is expressed in basis points. One basis point is equal to .01%. Therefore, an expense ratio of 0.09% means that for every $10,000 you have invested, the fund will collect $9 annually from your account to cover its costs.

Each of the investment options within the plans has an expense ratio. The expense ratios are different for each investment option.

Portfolio Value from Investing $100,000 over 20 years

The line graph above shows that in 20 years, a 0.5% expense ratio reduces the portfolio value by $10,000 (dashed gray line) compared to a portfolio with a 0.25% expense ratio (solid black line). In 20 years, a 1.0% expense ratio reduces the portfolio value by nearly $30,000 (dotted red line) compared to a portfolio with a 0.25% expense ratio (black line).

Investment costs might not seem like a big deal, but they add up, compounding along with your investment returns. In other words, you don’t just lose the tiny amount of fees you pay, you also lose all the growth that money might have had for years into the future.

Note: If you invest in Tier 3 through the self-directed brokerage window there will likely be higher investment management fees or other additional charges.

Transaction Fees

These fees are charged when a participant engages in a specific action. Transaction fees vary by provider.

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