University of Virginia Best Plan 2014 Asset Allocation Recommendation

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Is this the BEST?

The University of Virginia Physicians Group offers among their benefits a retirement contribution plan often referred to as the “BEST” plan. Here is a quote from one of their documents describing the benefits:

GROUP VARIABLE UNIVERSAL LIFE INSURANCE (BEST PLAN)

The UVA Physicians Group provides life insurance coverage through MetLife, for five (5) times your annual salary to a maximum benefit of $3,000,000. You may purchase an additional 1, 2, or 3 times your salary up to a total maximum benefit of $3 million. This Benefit Enhancement Strategy plan (BEST) offers an array of investment choices as well as loans against or withdrawals from the cash surrender value of your policy. The premium is paid by the UVA Physicians Group, but considered taxable income to the employee. You may also purchase life insurance coverage for your spouse and children. You may elect a minimum of $20,000 of life insurance coverage for your spouse on a guaranteed issue basis, and purchase additional increments of $10,000, up to a total coverage amount of $250,000, with submission of a simplified health questionnaire and approval by Met Life Insurance Company. Child coverage of $10,000 is also available on a guaranteed issue basis.

RETIREMENT CONTRIBUTIONS: THE BEST PLAN

UVA Physicians Group contributes 10.4% of your salary to a side fund associated with the BEST life insurance policy. Various investment options are available through the American Insurance Fund Series, Fidelity and MFS.

The BEST plan investment choices are insurance products and as such they are laden with high expense ratios. We could not find a bond fund which we thought justified the high fees and expenses. The following asset allocation recommendation is 100% stocks, and has been created mostly by eliminating the funds we could not recommend because of their high fees and expenses:

MetLife University of Virginia Physicians Group

  • 25% Fidelity VIP Equity Income Portfolio (012)
  • 18% Fidelity VIP Mid Cap Portfolio (015)
  • 25% American Funds International Fund (007)
  • 17% American Funds New World Fund (011)
  • 15% American Funds Global Small Capitalization Fund (010)

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)