City and Borough of (CBJ) Deferred Compensation (457 Plan) Review and Request for Proposal (RFP) Process Frequently Asked Questions December 31, 2013 – CBJ initiated three 457 Plans in the 1980s. The governance documents and investment options have not been updated to meet the current industry standards for fiduciary duties. In most instances the fees paid for program administration and investing participants’ money is higher than currently available options. CBJ undertook a total Plan review to better understand the cost, investment structure and service offerings available in the marketplace as well as to review best practices for retirement plans. We have conducted a competitive proposal to determine if we can improve our existing program. The goal is to deliver a product that will be good for all participants. Consolidation to one recordkeeping vendor may be the outcome of the RFP process. Regardless of the final plan structure, however, we expect this process to lead towards beneficial outcomes and additional value for participants. Below are some questions we have received and our answers. Question: I retired from CBJ in 2006. I have reached the age where am receiving IRS Mandatory Required Distributions (MRD). Should my current provider not be selected as a CBJ provider, I ask that retired employees already receiving MRD’s be allowed to continue their existing provider rather than transfer assets to a new or different provider. Answer: If the CBJ selects a new provider(s), participants that are in distribution, including using a mandatory required distribution protocol, will continue to receive payments according to their prior arrangement, without missing payments. Question: Why is it beneficial to have fewer investment options? Answer: Over the past 20 years a series of studies have been done on the impact of offering a large number of investment options in a voluntary defined contribution plan, like the CBJ’s 457 Plan. These studies have consistently shown that increasing the number of investment options beyond 25-30 can lead to decreasing plan participation and confusion; the more funds to choose from, the fewer employees participate. Surveys and focus groups have revealed that many potential participants are overwhelmed or intimidated with all of the choices, and simply do not enroll, or struggle to make investment allocation decisions once enrolled in the Plan.
City and Borough of (CBJ) Deferred Compensation (457 Plan) Review and Request for Proposal (RFP) Process Frequently Asked Questions – December 31, 2013 CBJ initiated three 457 Plans in the 1980s. The governance documents and investment options have not been updated to meet the current industry standards for fiduciary duties. In most instances the fees paid for program administration and investing participants’ money is higher than currently available options. CBJ undertook a total Plan review to better understand the cost, investment structure and service offerings available in the marketplace as well as to review best practices for retirement plans. We have conducted a competitive proposal to determine if we can improve our existing program. The goal is to deliver a product that will be good for all participants. Consolidation to one recordkeeping vendor may be the outcome of the RFP process. Regardless of the final plan structure, however, we expect this process to lead towards beneficial outcomes and additional value for participants. Below are some questions we have received and our answers. Question: I retired from CBJ in 2006. I have reached the age where am receiving IRS Mandatory Required Distributions (MRD). Should my current provider not be selected as a CBJ provider, I ask that retired employees already receiving MRD’s be allowed to continue their existing provider rather than transfer assets to a new or different provider. Answer: If the CBJ selects a new provider(s), participants that are in distribution, including using a mandatory required distribution protocol, will continue to receive payments according to their prior arrangement, without missing payments. Question: Why is it beneficial to have fewer investment options? Answer: Over the past 20 years a series of studies have been done on the impact of offering a large number of investment options in a voluntary defined contribution plan, like the CBJ’s 457 Plan. These studies have consistently shown that increasing the number of investment options beyond 25-30 can lead to decreasing plan participation and confusion; the more funds to choose from, the fewer employees participate. Surveys and focus groups have revealed that many potential participants are overwhelmed or intimidated with all of the choices, and simply do not enroll, or struggle to make investment allocation decisions once enrolled in the Plan.
DeferredCompFAQsFinal.docx