The passage of the Setting Every Community Up for Retirement Enhancement (SECURE)
Act advances a provision that provides small business owners a financial incentive
to offer their employees a retirement plan, thus increasing American workers’ access
to workplace retirement plans. You can see the whole act.
Nationwide® Retirement Solutions, Inc., offers a variety of
unregistered group variable annuity contracts and mutual fund platforms
(collectively referred to as “retirement products”). Those retirement products
are sold exclusively in the public sector retirement markets through NRS’s life
insurance and trust company affiliates (collectively referred to as the
“Nationwide companies”). The variable accounts, trust accounts or custodial
accounts (the “Accounts”) that accompany the retirement products offer
investment options, and purchase and sell shares of certain mutual funds in the
aggregate each day so that the performance of the investment options corresponds
to the performance of those mutual funds. When the Accounts aggregate these
transactions, the mutual fund does not incur the expense of processing
individual transactions that it would incur if it sold its shares to the public
directly. This expense is instead incurred by the Nationwide companies.
The Nationwide companies also incur the distribution costs associated with
selling the retirement products, which benefits the mutual funds by providing
contract owners and participants with investment options that correspond to the
underlying mutual funds.
An investment adviser or subadviser of a mutual fund or its affiliates may
provide the Nationwide companies with wholesaling services that assist in the
distribution of the retirement products and may pay to participate in
educational and/or marketing activities. These activities may provide the
adviser or subadviser (or their affiliates) with increased exposure to persons
involved in the distribution of the retirement products.
Types of payments the Nationwide companies receive
In light of the above, certain mutual funds or their affiliates make payments to
the Nationwide companies (the “payments”). The amount of these payments is
typically based on an agreed upon percentage times the amount of assets that the
Accounts invest in the mutual funds. These payments may be used for any
corporate purpose, which includes reducing the price of the retirement products,
paying expenses that the Nationwide companies incur in promoting, marketing, and
administering the retirement products, and achieving a profit.
The Nationwide companies receive the following types of payments:
Mutual fund 12b-1 fees, which are deducted from mutual fund assets;
Sub-transfer agent fees or fees pursuant to administrative service plans
adopted by the mutual fund, which may be deducted from mutual fund assets;
Payments by a mutual fund’s adviser or subadviser (or its affiliates). Such
payments may be derived, in whole or in part, from the advisory fee that is
deducted from mutual fund assets and reflected in the mutual fund charges.
Furthermore, the Nationwide companies benefit when assets are invested in
Nationwide’s affiliated mutual funds (i.e., Nationwide Variable Insurance Trust
and/or Nationwide Mutual Funds) because their affiliates also receive
compensation from the mutual funds for investment advisory, administrative,
transfer agency, distribution, and/or other services. Thus, the Nationwide
companies may receive more revenue with respect to affiliated mutual funds than
unaffiliated mutual funds.
The Nationwide companies took these anticipated payments into consideration in
determining the charges they impose under the retirement products (apart from
fees and expenses imposed by the mutual funds). Without these payments, the
Nationwide companies would have imposed higher charges on their retirement
Amount of payments the Nationwide companies receive
For the year ended December 31, 2010, for public sector retirement products, the
maximum payments that the Nationwide companies received from the mutual funds
and their affiliates (as a percentage of the average daily net assets of the
mutual funds attributable to the retirement products) and weighted average
Public sector retirement products*
* Excludes select public sector retirement plan assets where the Nationwide
companies either do not have agreements to receive any payments from the mutual
funds or do not retain payments from the mutual funds.
** Weighted averages are the product of amounts the Nationwide companies earned,
divided by annual average mutual fund assets (using quarter end average
balances). All mutual funds available in a line of business are included when
determining average mutual fund assets, regardless of whether the mutual funds
or their affiliates actually made any payments to the Nationwide companies
during the year, subject to the exclusion noted above.
Most mutual funds or their affiliates have agreed to make payments to the
Nationwide companies, although the amount of the payment may vary from mutual
fund to mutual fund. Some mutual funds may not make any payments at all.
The amount of the actual payments the Nationwide companies receive is based on an
agreed upon percentage times the amount of assets invested by the Accounts in
the mutual funds. As such, the Nationwide companies may receive higher payments
from mutual funds that pay a lower percentage than from mutual funds that pay a
higher percentage because of the level of assets invested by the Accounts.
Opportunities to participate in educational and/or marketing activities offered
by investment advisers or subadvisers of the mutual funds or their affiliates to
employees of the Nationwide companies are not taken into account in determining
the amount of payments received.
Identification of Mutual Funds Offered in Our Retirement
The Nationwide companies identify a menu of potential mutual funds that
correspond to the investment options for their retirement products. They may
consider several criteria when identifying those mutual funds, including some or
all of the following: investment objectives, investment process, investment
performance, risk characteristics, investment capabilities, experience and
resources, investment consistency, and fund expenses.
In some cases, the Nationwide companies identify mutual funds based on requests
and recommendations made by retirement plan sponsors and/or their advisers.
Another factor the Nationwide companies consider during this process is whether
the mutual fund’s adviser or subadviser is one of their affiliates or whether
the mutual fund, its adviser, its subadviser(s) or an affiliate will make
payments such as those described above.
You should consider all of the fees and charges of a retirement product in
relation to the features and benefits of that product when making your decision
to invest. The fees of the mutual funds being offered as part of the overall
retirement product should also be considered in your decision. Please note that
higher product and mutual fund fees and charges have a direct effect on the
investment performance of your retirement savings.
The Nationwide Group Retirement Series includes unregistered
group fixed and variable annuities and trust programs. The unregistered group
fixed and variable annuities are issued by Nationwide Life Insurance Company.
Trust programs and trust services are offered by Nationwide Trust Company, FSB,
a division of Nationwide Bank. Nationwide Investment Services Corporation,
member FINRA. Nationwide Mutual Insurance Company and Affiliated Companies, Home
Office: Columbus, OH 43215-2220.