Employee Ruckus Stops Change in 457 Plan Provider

February 11, 2014 (PLANSPONSOR.com) – The Village of Forest Park, Illinois, has retreated from moving employee 457 retirement plan accounts to a new provider.

The village council voted in December to move the accounts from longtime oversight by Nationwide Retirement Solutions to a new provider, AXA Equitable, according to the Forest Park Review. Forty-seven different Nationwide funds were slotted to disappear and be replaced with AXA funds with similar characteristics.

However, employees became upset when the new arrangement was announced in late January. Employees complained about the suddenness of the change and that the procedure for selecting a new provider was sloppy. The news report says 81 current employees invest in the funds, as well as 34 retirees.

When asked in December about whether a bid process was used to select AXA for the turnover contract, Gillian said in an email: “The gentleman from AXA advisors made a presentation and on the benefits of the firm he represents over that of our current advisor. We reviewed his proposal and believe that AXA will provide more information and lower fees to those employees who use the service.”

According to the news report, Nationwide agent Brent Harpster said he’s gotten phone calls from angry employees asking if they could privately retain their accounts, some of which had been with Nationwide since June of 1980. The contract with AXA says the company will charge no asset charges, withdrawal charges or administrative charges for the first year. “If AXA has better investment returns, a higher fixed interest rate, and lower fees [than Nationwide], the employees will benefit by this change,” Harpster said.

Mayor Anthony Calderone also said he had been receiving complaints from employees about the switch. Calderone told the Review “the village is not making any change from Nationwide.” He also said the village “at this time” would not be adding AXA as a second provider.

However, the village still has a contract with AXA passed as an ordinance in December and signed by the mayor, giving AXA control of all 457 accounts except for the firefighters. It is unclear whether the village can cancel the contract or is on the hook to switch funds.