This page was last updated on: April 15, 2011
Q. What are the goals of the current effort to make changes to the deferred compensation and other retirement savings programs for State employees?A. The Retirement & Benefit Services Division of the State Comptroller's Office is issuing a Request For Proposals (RFP) seeking to :
Q. Why do this now? Didn't we make changes several years ago?
A. The financial services industry has undergone a number of important changes in the past several years. Regulators and plan sponsors are taking a much closer look at hidden fees and other costs born by plan participants. New technology and new agreements among the major financial services companies now make it possible to give participants access to all investment options in a plan-not just those offered by one company. These changes make it possible now to offer State employees a better plan with improved service and lower fees.
Q. How will I pay less in fees?
A. The goal of the RFP is to provide central plan administration so that the asset-based fees that you now pay to support the administration and sales forces of the companies in the current plan will be dramatically reduced. In addition, those 403(b) plan participants who pay a monthly administration fee will no longer be charged this fee. The Retirement & Benefit Services Division of the State Comptroller's Office estimates that the average participant will save hundreds of dollars each year in reduced fees. These dollars will stay in your accounts to grow to help you meet your retirement income needs.
Q. How will investment choices be better?
A. The RFP calls for all bidders to first screen all of the investment options offered by a third-party fiduciary advisory service. The RFP is also asking companies to offer investments in all of the categories currently offered by the plans plus a family of very low cost index mutual funds and a family of life-style or asset allocation funds. The index funds will be for participants who want to pay the lowest fees and do not want to pay extra for active fund management. The life-style or asset allocation funds are for participants who do not want to make decisions about where to invest their money but who seek higher returns than will likely be found in a guaranteed fixed account.
Q. How else will central administration help participants?
A. In addition to lowering fees and improving administration and services to participants, the new plan structure will ensure that the plan is in compliance with IRS and other regulations. As tax-favored programs, all three plans must strictly comply with IRS regulations regarding contribution amounts, eligibility and many other rules. Failure of the plans to comply can result in participants losing the tax benefits of these programs and may even result in participants paying tax penalties.
Q. I have had most of my money invested in the fixed account with my current insurance company. Will I have to do anything to protect my investment?
A. No. You will be able to keep your money invested in a guaranteed fixed account. The Retirement & Benefit Services Division of the State Comptroller's Office will ask all insurance companies providing guaranteed fixed accounts in the current plans to continue to manage the assets in those accounts for the new plans-regardless of which company is awarded the contract to administer the plans.
Q. Do these changes mean that I will only get service from an out-of-state 800-line call center or via the Internet?
A. No. The new plans will be able to provide more counseling, financial education, and retirement planning services. Currently, with three financial services companies in the deferred compensation plan and six financial services companies in the 403(b) plan, seminars and other educational services are difficult to schedule at the agencies. With a unified team of plan representatives, the new plans will be able schedule many more seminars and educational sessions to help participants. In addition, the new team will utilize Laptop PC and other technology help you integrate your investment strategy in your deferred compensation and 403(b) plans with benefits from the State Employees Retirement System The Alternate Retirement Plan, or other State pension plans. Internet technology will be utilized to enhance these other services.
Q. Who will select the Third Party Administrator for the plans?
A. A review committee made up of labor and management members of the Connecticut State Employees Retirement Commission has been established to review all proposals from financial service organizations and third party plan administration firms.
Q. What is the timetable for plan changes?
A. Current plans call for the selection of a new Third Party Plan Administrator by March 1, 2005. The first plan to be improved will be the Deferred Compensation Plan, with a scheduled start date of July 1, 2005. Plan participants will begin to receive information about the improvements and the new investment choices in April. The 403(b) and Alternate Retirement Plan will be improved effective January 1, 2006. Plan participants will receive information about plan improvements and new investment choices in the fall so they will have plenty of time to take advantage of the changes.