Retirement Plan Investment Oversight Committee - Northern Michigan University

Purpose:

The primary investment-related responsibilities of the Oversight Committee are:

A. Determine the overall number and types of options offered to participants of the Plans so that each participant has the opportunity to prudently diversify his/her investment circumstances;
B. Create and periodically review and monitor this Investment Policy Statement.
C. Review general adherence to this Investment Policy Statement.
D. Periodically review and evaluate investment options available under the Plans.
E. Remove, or place on a watch list, investment options not performing at acceptable levels. The Committee may also decide to take no action if agreed there is a reasonable basis for such a conclusion.
F. Recommend making changes to the asset class structure—including the elimination, replacement, and/or addition of new investment options (as stated in the Asset Class Guidelines section) and as it deems necessary or advisable to maintain the best interests of the Plans and its participants.
G. Periodically review and evaluate the number of investment plan administrators available in the Plans and reduce or increase the number of investment plan administrators as deemed appropriate.
H. Periodically review the Default Option (as stated in the Investment Menu Design section) to ensure it continues to be an appropriate default option.
I. Recommend the hiring and termination of investment consultants for the Plans.
J. Avoid prohibited transactions and conflicts of interest: All investment actions and decisions must be based solely in the interest of the Plans(s), and fiduciaries must provide full and fair disclosure to the Oversight Committee of all material facts regarding any potential conflicts of interests. Disclosures will be reflected in the meeting minutes.

Northern Michigan University
Defined Contribution Retirement Plans Investment Policy Statement
March 1, 2011

Table of Contents
Plan Information………………………. ................................................................................ 3
Purpose of the Investment Policy Statement…… ................................................................... 3
Statement of Objectives………. .............................................................................................. 3
Roles and Responsibilities…….. ............................................................................................. 4
Plan Sponsor ....................................................................................................................... 4
Oversight Committee .......................................................................................................... 4
Investment Consultant ........................................................................................................ 5
Investment Plan Administrator(s) ....................................................................................... 6
Participant ........................................................................................................................... 7
Asset Class Guidelines……… ................................................................................................. 7
Investment Menu Design…….. ............................................................................................... 7
Investment Selection Procedures…… ..................................................................................... 8
Responsibility for Periodic Review……….. ........................................................................... 9
Education .................................................................................................................................. 9
Adoption and Approval………. ............................................................................................. 10
Signature Page ........................................................................................................................ 11
Addendum A – Approved Investment Plan Administrators ................................................. 12

The Plan
Northern Michigan University (NMU) maintains the following defined contribution retirement plans: a 403(b) retirement annuity plan (employer and employee contributions for certain employee groups); and a 403(b) tax-deferred annuity plan (employee contributions); a 457(b) plan (employee contributions) for the benefit of its employees (herein collectively referred to as the ―Plans‖).

The Plans are intended to provide eligible employees with the opportunity to generate long-term accumulation of retirement savings through employer and employee contributions to individual participant accounts and the earnings thereon.
The Plans’ purpose is to provide a vehicle to accumulate assets to fund retirement needs on an individual basis for eligible employees. It is the intent of the Oversight Committee (the Committee) to provide a variety of vendor options that will enable participants to invest according to varying risk tolerances; savings time horizons, and other financial goals.
The Purpose of the Investment Policy Statement
The Investment Policy Statement (IPS) is intended to assist the Committee in effectively structuring an appropriate investment plan administrator line-up with diversified investment menus. This includes establishing a prudent process for selecting, monitoring and as necessary, replacing investment plan administrators and/or their funding options. Specifically, the IPS is intended to:

 Define investment objectives for the Plans.
 Define roles and responsibilities.
 Provide participants a range of diversified funding options along the risk return spectrum sufficient to create aggregate portfolios that will meet varying participant risk-return objectives.
 Describe the criteria and procedures the Plans will use in selecting investment plan administrators and funding options.
 Define the procedure for the ongoing monitoring of funding options.
This IPS shall be reviewed at least annually and, if appropriate, can be modified, in whole or in part, by the Committee at any point in time to reflect changes in the capital markets, Plans’ participant objectives, Plans’ demographics, legislative and regulatory changes, or other factors relevant to the Plans.
Statement of Plan Objectives
NMU encourages participants to take an active role in saving and selecting among funding options for their retirement. The Plans’ will:

 Provide those participants who would like to have a qualified default investment alternative, which will be a targeted retirement date investment, designed to provide varying degrees of long-term appreciation and capital preservation through a mix of equity and fixed income exposure based on the participant’s age and target retirement date, and which will otherwise meet the requirements of a ―qualified default investment alternative,‖ pursuant to regulations issued by the U.S. Department of Labor;
 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 diversification while also offering a program that is understandable to participants;
 Provide a long-term competitive rate of return for similar investment options; and
 Review and make available administrative, management, and participant costs.

Roles and Responsibilities

RESPONSIBILITIES -- PLAN SPONSOR
Northern Michigan University is the Sponsor of the Plans, with the input of the Oversight Committee, and with final approval by the Vice President for Finance & Administration, and is responsible for:

A. Establishing the Plans, selecting the terms and design features of the Plans, and terminating the Plans (if deemed appropriate);
B. Forwarding employee contributions that are deducted from payroll to the trust supporting the Plans, and funding employer contributions in accordance with the terms of the Plans; and
C. Such other responsibilities as may be specified in the Plans’ documents.

RESPONSIBILITIES – OVERSIGHT COMMITTEE
The primary investment-related responsibilities of the Oversight Committee are:
A. Determine the overall number and types of options offered to participants of the Plans so that each participant has the opportunity to prudently diversify his/her investment circumstances;
B. Create and periodically review and monitor this Investment Policy Statement.
C. Review general adherence to this Investment Policy Statement.
D. Periodically review and evaluate investment options available under the Plans.
E. Remove, or place on a watch list, investment options not performing at acceptable levels. The Committee may also decide to take no action if agreed there is a reasonable basis for such a conclusion.
F. Recommend making changes to the asset class structure—including the elimination, replacement, and/or addition of new investment options (as stated in the Asset Class Guidelines section) and as it deems necessary or advisable to maintain the best interests of the Plans and its participants.
G. Periodically review and evaluate the number of investment plan administrators available in the Plans and reduce or increase the number of investment plan administrators as deemed appropriate.
H. Periodically review the Default Option (as stated in the Investment Menu Design section) to ensure it continues to be an appropriate default option.
I. Recommend the hiring and termination of investment consultants for the Plans.
J. Avoid prohibited transactions and conflicts of interest: All investment actions and decisions must be based solely in the interest of the Plans(s), and fiduciaries must provide full and fair disclosure to the Oversight Committee of all material facts regarding any potential conflicts of interests. Disclosures will be reflected in the meeting minutes.

RESPONSIBILITIES -- INVESTMENT CONSULTANT
The Oversight Committee will retain an Investment Consultant to assume the following responsibilities:

A. Suggest amendments to this IPS to reflect changes in regulations or accepted ―best practice‖ procedures.
B. Make recommendations, when deemed advisable, as to changes in the objectives, guidelines, or standards, based upon material and sustained changes in the capital markets.
C. Adhere to all other contractual obligations.
D. In conjunction with the existing investment plan administrators, make recommendations, with supporting materials, as to the appropriate portfolio weightings among the various major asset classes (e.g., stocks, bonds, cash) for participant consideration.
E. Recommend the selection of investment plan administrators by identifying and screening candidates for appropriate portfolio and organizational characteristics. Attend formal presentations of finalists. Perform due diligence checks. Help quantify the trade-offs between expected returns and risks among various alternatives. Gather and submit information at the direction of the Committee.
F. A performance evaluation report of the Plans’ assets and its investment component parts will be conducted quarterly. The written report will cover five basic areas:

1. Returns. Total time-weighted returns over various periods.
2. Comparisons. Returns will be compared to appropriate benchmark indices and a statistical universe of similar funds.
3. Diagnostics. Measurement of risk-adjusted performance, analyses of risks, style characteristics, and return attribution.
4. Compliance. The report will aid in identification of compliance issues including the objectives, targets, and policy guidelines specified in this Investment Policy Statement.
5. Monitor risk-adjusted performance.

G. Assist in compensation negotiations with investment plan administrators, custodians, and other service providers.

RESPONSIBILITIES – INVESTMENT PLAN ADMINISTRATORS
Currently for NMU, the investment plan managers also execute Investment Plan Administrator responsibility. The Investment Plan Administrator must assume all legally required fiduciary duties which may include the following:

A. Hold the Plans’ assets in the appropriate accounts, and provide highly secure transmission and storage of data, such that there is an acceptably low level of risk due to disaster.
B. Arrange for timely and business-like settlement of all purchases and sales from participant contributions. Receive and document confirmation of mutual and pooled fund transactions.
C. Provide for receipt and prompt crediting of all dividend, interest and principal payments received as a result of the portfolio holdings or other activities. Monitor income receipts to ensure that income is received when due and institute investigative process to track and correct late or insufficient payments, including reimbursement for any interest lost due to tardiness or shortfall.
D. Provide regular reports showing individual asset holdings with sufficient descriptive detail to include units, unit price, cost, market value, CUSIP number (where available), and any other information requested by the Oversight Committee. Principal cash transactions, including dividends, interest and principal payments received, deposits and withdrawals, securities purchased, sold, and matured, and fee payments will also be listed. Keep adequate records for the Plans’ interest.
E. At the direction of the individuals specifically appointed by the Oversight Committee, expeditiously transfer funds into and out of specified accounts.
F. The Investment Plan Administrator shall promptly forward all proxy materials received to the appropriate parties.
See Addendum ―A‖ for NMU’s current Investment Plan Administrators.

RESPONSIBILITIES—PARTICIPANT
Participants are introduced to the Plans’ options during the hiring orientation period. At that time, Participants may select investment plan administrators and funding options according to their own retirement goals and risk strategies. Subsequently, Participants are responsible for periodic review and assessment of their Plan choices.

Asset Class Guidelines
The Plans shall provide each participant with the ability to diversify among an array of asset classes in order to construct individual portfolios consistent with their desired level of risk and return over their respective time horizons. The Plans will offer core funding options in a minimum of five primary asset classes:

 Guaranteed
 Money Market
 Fixed Income
 Real Estate
 Equities

Within these categories, and at the discretion of the participant, the types of options may include active or passive investment options, low- to high- risk options, and specialized styles of investment management.

The Plans’ may offer additional funding options in other sub-asset classes or market cap specific funding options.

Investment Menu Design
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 redundancy. At a minimum, the plans shall offer enough funding options to well represent the five major asset classes previously outlined in the Asset Class Guidelines section. With respect to the establishment of an upper limit on the number of funding options, the plans should not provide so many options as to create excessive redundancy in funding options, generate increased fund monitoring and/or administrative costs, or cause undue complexity in plan design.

Default Option
A Lifecycle Fund has been designated as the default funding option in the employer contribution 403(b) Plan. This default option will be utilized in situations where a participant does not make an active investment selection and is automatically enrolled in the Plan.

Investment Selection Procedures
When evaluating providers to offer funds/accounts under the Plans, the Committee will ensure that the investment plan administrator is a bank, insurance company, or investment management company.

Investment Plan Administrator Assessment
The Committee shall conduct an assessment of the company providing the asset management of a funding option. At a minimum, the assessment may include a review of the following:

 History of the firm
 Management and ownership structure
 Breadth of products offered
 Investment philosophy
 Any material pending or concluded legal or ethical violations
 Customer support and service to the Plans’ participants and NMU

Additional aspects of the Investment Plan Administrator may be reviewed at the discretion of the Committee.

General Selection Requirements for all Funding Options
All Plans’ funding options should maintain the following characteristics:

1. Diversification by Holdings: All funds shall maintain a sufficient number and breadth of holdings to provide an adequate representation of the primary characteristics of the benchmark index.
2. Competitive Fee Structure: The impact of fees on the long-term performance of the funding options within the plan shall be an important consideration. Overall expenses, including sales loads, 12b-1 fees, administrative charges, and mortality and expense charges (for annuity accounts) can significantly detract from long-term performance. The total expense ratio shall not be greater than the median expense level of the appropriate peer group. Every effort will be made to offer funds without front-end or back-end sales charges. All fee information should be adequately disclosed to participants.
3. Track Record of Funding Option: Each funding option should have a minimum track record of three years. The three-year requirement may be waived at the discretion of the Committee if the investment plan administrator has a proven track record of managing assets in the category under consideration, or if the fund is an ―index‖ strategy.

Responsibility for Periodic Review
The Committee and the Investment Consultant will monitor the investments on a periodic basis. While frequent change in funding options is neither expected nor desirable, monitoring the investment performance of the plan investments relative to specified guidelines is an on-going activity. The Committee will meet to review whether each investment option continues to conform pursuant to the criteria outlined below:

 Adherence to the original investment/account selection requirements, including long–term performance measures.
 Any material changes to the option’s organization, process, or portfolio manager or team.
 Any material litigation or regulatory action against the investment plan administrator that may impact future performance or the reputation of the investment plan administrator.
 Significant loss or growth of assets under management.
 The fund/account is sufficiently utilized by plan participants.

If an assessment of a funding option against the evaluation criteria does not identify any significant issues, no further action by the Committee is necessary. If a material issue is identified for a particular funding option against any of the criteria, then the Committee may decide, in its sole judgment, to (i) take no action if it concludes that it has reasonable basis for such a conclusion, (ii) place the option on a watch list for at least one year as a means of evaluating future progress in addressing the issue of concern or (iii) terminate as an active funding option under the Plan(s).

It is important to recognize that the IPS provides guidelines to assist the Committee in its decision to select, retain, or replace a funding option or investment plan administrator, but the final decision shall not be made based on the outlined IPS criteria in isolation. The final decision shall be based on the Committee’s confidence in the investment plan administrator’s ability to perform competitively in the future. Any final decision shall be an exercise of the Committee’s sole and exclusive judgment.

Education
A significant responsibility of the Committee is to oversee plan participant education and communication. Plan participant education can be achieved through a variety of channels including printed materials, websites, group meetings, and individual counseling. It will be communicated to participants that they are in control of their investments and that they have the ability to change allocations by contacting the appropriate investment plan administrator.

Adoption and Approval
The Committee and/or its appointed designees approve and adopt this Investment Policy Statement and reserve the right to amend or terminate it upon written recommendation from the assigned fiduciaries.

[A SIGNATURE PAGE FOLLOWS]

SIGNATURES OF THE OVERSIGHT COMMITTEE:
________________________________________________________ __________________
Kristen Bjorne, Assistant Director of Human Resources—Benefits Date
________________________________________________________ __________________
Jill Compton, Internal Auditor (Committee Chair) Date
________________________________________________________ __________________
Arthur Gischia, Associate VP Business/Auxiliary Services Date
________________________________________________________ __________________
Samuel Graci, Professor—College of Business Date
________________________________________________________ __________________
Sandra Haavisto, Controller Date
________________________________________________________ __________________
Martha Haynes, Executive Director—Advancement Date
________________________________________________________ __________________
R. Gavin Leach, Vice President for Finance and Administration Date
________________________________________________________ __________________
Ann Sherman, Director of Human Resources Date
________________________________________________________ __________________
Sherri Towers, Budget Director Date

ADDENDUM A
Northern Michigan University

Approved Investment Plan Administrators:

TIAA-CREF
VALIC
AMERIPRISE
FIDELITY
THRIVENT
WELLS FARGO

Approved investment plan administrators for established contracts only; new enrollments are not permitted:

AXA EQUITABLE
LIFE INSURANCE OF THE SOUTHWEST
PARADIGM (MEA FINANCIAL SERVICES)

March 1, 2011