Investment funds will be offered to satisfy three different approaches to investment decision-making. Investment options will be categorized in a manner that guides employees through the investment decision-making process. Employees first select a path that is appropriate for them given their:
- Investment knowledge
- Time for managing their own investment portfolios
- Tolerance for risk
Investment options are then tailored to meet employees' needs. For example, an investor who lacks the time for managing their own investment portfolios or a novice investor who is uncomfortable making asset allocation decisions and selecting funds, may select a fund comprised of a pre-mixed asset allocation.
Referred to as
, participants choose from "Target date" funds that are professionally managed to invest according to the employee's anticipated retirement date. The communication materials will assist the employee in selecting the appropriate Target-date fund based primarily on their time horizon to retirement and/or risk tolerance.Tier 2
participants who prefer the option to select specific funds "a la carte" from the plan's core fund menu, build an investment portfolio to meet their specific investment objectives. By limiting the number of funds available to employees in the core investment menu, the CMU Retirement Investment Advisory Committee will be better able to monitor the funds to ensure their continued viability and integrity, increasing the likelihood that employees will earn better long-term performance.Tier 3
participants prefer the option to access a Self-Directed Brokerage Option (SDBO), which provides access to a universe of thousands of mutual funds from hundreds of mutual fund companies. This feature will appeal to employees who want the flexibility to invest in, and responsibility to monitor, funds not available on the plan's core fund menu.
Employees may decide to select funds from any or all of the tiers, though it is hoped the tiered approach guides employees toward investments that best meet their needs.