By beating out six competitors including BB&T – which has had the account since 1985 – Prudential won the right to administer $2.3 billion in state retirement assets, according to a Raleigh News & Observer report. The Winston-Salem based BB&T said it would have to slash about 40 jobs at its Raleigh trust division as a result of the significant business loss.
“We are deeply disappointed that [the state treasurer] has chosen to go out of state” for a plan administrator, BB&T spokesman Bob Denham told the newspaper. BB&T said it hopes to find other positions within the bank for the displaced workers before September, when Prudential begins administering the plan
The change will also mean less out of pocket expenses for the plan’s 175,000 participants. Currently, participants are required to pay annual fees to BB&T based on the amount of money they keep in their accounts. Prudential has promised to waive all account fees, resulting in $22.3 million in particpant savings over the next five years.
The state treasurer’s office, which organized the bidding, told the newspaper Prudential was chosen because it promised the highest level of service and the lowest fees among the seven competitors. However, Prudential’s large size may have given the company an advantage, Denham said. With $580 billion in assets under management, Prudential has the financial muscle to undercut its competitors on price, he said. “The pricing was cutthroat,” Denham told the News & Observer. “In our view, we could not have gone any lower without losing money” on the contract.
Prudential will also offer state employees guidance on how to allocate their 401(k) funds through a program called GoalMaker. The program lists a recommended mix of mutual funds based on a person’s age, family size and future retirement plans. BB&T did not have such an option, state officials said.