How are Investments Handled by The BEST of AMERICA?

Question: Can you please explain exactly how my investments are handled in Nationwide's The BEST of AMERICA® Retirement Program? How often is my account revalued? How do expenses affect my investment performance? How can I make sure the Employer is making appropriate deposits into my account?

Answer: The most significant and attractive feature of this retirement program is that it provides participants access to some of the most recognizable names in the fund management industry. In other words, under the umbrella of one program, participants are given access to investment choices managed by fund management professionals from different fund management companies. Most other retirement plan arrangements serving the small plan marketplace give participants access to only one mutual fund family and in many cases access is limited to a small number of funds offered by that fund family.

Participants choose various funds to be the underlying investment options for their accounts. Nationwide then buys or sells shares in those funds on a daily basis in Nationwide's name (not in the participant's name). Nationwide's ownership in the fund is on behalf of all participants who have chosen that fund as one of their underlying investment options. The underlying investment fund being used does NOT set up accounts for the participants individually. Only Nationwide would have an account at the mutual fund. 

A participant can make sure the Employer is depositing money into their account by getting into their The BEST of AMERICA® account on the Internet and then viewing the transaction history. 30 days of transaction history are displayed initially, but the participant can get up to seven months of transaction history by specifying the beginning and ending dates desired. 

Nationwide performs participant accounting on its computers on a daily basis and makes participant account information available via a voice response unit (800#) and on the Internet. In addition to accounting for its deposits and withdrawals within the mutual fund, Nationwide also adjusts the participant accounts for investment gains and losses and for the reinvestment of capital gains and dividend payments of the mutual fund. 

When you directly own shares of a mutual fund, those shares change in their value (NAV) each day in accordance with what has happened to the value of the stocks or bonds in that mutual fund.When the mutual fund declares a dividend or an interest distribution, if it is reinvested (which it would be in a retirement plan), you are actually purchasing more shares. 

Nationwide is the one who actually owns the mutual funds shares in this program. They allocate their overall ownership of the mutual fund to all of the participants who have selected that fund. They do this daily participant accounting by converting their overall ownership of the various mutual funds into something called Units. These Units are adjusted in value each day for changes in the value of the mutual fund shares. The Units are also adjusted in value for reinvested dividends and interest.

Unfortunately there is a difference in how Shares and Share Values are calculated in a mutual fund you own and in how Units and Unit Values are calculated for your retirement account. In simple language, when dividends and interest distributions are made in a mutual fund, a person gets additional shares, but when dividends and interest distributions take place in a mutual fund that Nationwide owns on behalf of plan participants, Nationwide simply increases the value of the Units rather than issuing more Units. Because of this difference in how things are done, it is not possible to simply convert Units and Unit Values back into any kind of equivalent Shares and Share Values. In other words, we have no way of giving you the exact historical transactions you would need to feed data into Quicken or some other portfolio tracking system. Nationwide does provide an ability to download an electronic file of data for use in Quicken on your home computer, although this can certainly be a somewhat difficult task to accomplish and is generally not worth the time expended.

See our Frequently Asked Questions: Where Can I Get The Shares and Share Values and Transaction Histories? and How Can I Accomplish Portfolio Tracking? The Unit Values are also adjusted each day for contract expenses. Underlying Investment options in the program are classified into one of three categories: Primary Plus (+); Primary (p); or Optional (o). The contract charge can vary depending upon the classification. As the total assets in a plan reach certain breakpoints at the end of a contract year, the contract charges are decreased for the subsequent year. When choosing investment options, the contract charges for the various investment options are one small factor to consider. A participant's investment performance will be slightly lower than the performance figures for the underlying investment options as reported in the newspapers, magazines, and on the Internet because of the subtraction of the small contract charge. Participants should gain a significant advantage over the long-term by having access to fund managers from multiple fund families.

In summary, participants' accounts are calculated by Nationwide each day by keeping track of the number of units a participant has in each of the investment choices. Deposits and withdrawals and transfers are accounted for in units. Unit values fluctuate each day in accordance with the performance of the underlying mutual fund and the contract expenses. Participants do have the significant advantage of choosing fund managers from different fund management companies. The BEST of AMERICA® Group Pension Series is a very attractive choice for small and medium-sized companies. It is the program we choose to use here at Plan Design Consultants, Inc. for our own employees and we have been in the pension business for over 24 years. If you have questions about the above, please call Paul Carlson of Plan Design Consultants, Inc. at (650) 341-3322.