The Independent Benefits Council along with consultant Gallagher Benefit Services selected five “Best in Class” investment companies to participate in the Model Plan, including AIG, AXA Equitable, and American Century Investments. A press release said the five providers signed Letters of Commitment in which they promise to lower fees to all school district employees, regardless of the size of the district that employs them.
Through these five providers, employees will have access to more than 600 high-quality, diverse investment products, the press release said. Steve Banks, Chief Administrative Officer at PSA Consulting Group, explained during the teleconference that in searching for the Best in Class providers the groups asked about providers’ fees, investment options, participant services, company experience in the marketplace, plan conversion processes, and administrative services offered. The groups also asked for full fee disclosure and disclosure of any legal actions pending against the providers.
Banks said the chosen providers agreed to guarantee expense rates for at least three years and to automatically upgrade plans when applicable and when newer, more enhanced products become available. According to Banks, in coming weeks the model plan will be introduced to school systems.
William J. “Bill” Montford, III, the CEO of the Florida Association of School Districts said there is flexibility in the plan for systems to add providers but they must meet the model plan’s compliance criteria. In addition, he said districts who adopt the model plan will contribute $12 per employee per year to cover the cost of administration.
Banks added that districts can adopt the model plan as their entire 403(b) program or as part of their 403(b) program.
Representatives in the teleconference revealed that the main drivers for development for the model 403(b) plan were the new IRS regulations that generally go into effect January 1, 2009, plan fees for K-12 employees – which they said were the highest in the nation, and the results of a survey in which K-12 employees expressed concern that they will not have enough savings to last through retirement.
IBC spokesperson Tom Herndon, former executive director of the Florida State Board of Administration, said employees can expect to accrue one-third more assets under the model plan than with their current contracts.
“We believe it is a national model and already have a lot of interest in that regard,” IBC representative Kristin Heilman said in the teleconference.
IBC is a not-for profit formed by the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association, and the Florida Association of District School Superintendents.